ANNUAL FINANCIAL REPORT Board of Regents of the University System of Georgia For the Year Ended June 30, 2004 "Creating A More Educated Georgia" ANNUAL FINANCIAL REPORT Welcome to the CD version of the Fiscal Year 2004 Annual Financial Report of the University System of Georgia Fiscal Year 2004 Annual Financial Report PDF format requires the free AdobeAcrobat Reader A Publication of the Office of Internal Audit 2004 Board of Regents of the University System of Georgia [ home] ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA For the Year Ended June 30, 2004 INDEX Links Consolidated Annual Financial Report 1.9Mb Institution Annual Financial Reports Georgia Institute of Technology ............................................................................................... Georgia State University........................................................................................................... Medical College of Georgia ...................................................................................................... University of Georgia ................................................................................................................. Georgia Southern University................................................................................................... Valdosta State University.......................................................................................................... Albany State University............................................................................................................. Armstrong Atlantic State University........................................................................................ Augusta State University........................................................................................................... Clayton College and State University..................................................................................... Columbus State University....................................................................................................... Fort Valley State University..................................................................................................... Georgia College and State University..................................................................................... Georgia Southwestern State University................................................................................. Kennesaw State University...................................................................................................... North Georgia College and State University......................................................................... Savannah State University....................................................................................................... Southern Polytechnic State University................................................................................... State University of West Georgia............................................................................................. Dalton State College.................................................................................................................. Macon State College.................................................................................................................. Abraham Baldwin Agricultural College................................................................................. Atlanta Metropolitan College.................................................................................................. Bainbridge College................................................................................................................... Coastal Georgia Community College................................................................................... Darton College......................................................................................................................... East Georgia College............................................................................................................... Floyd College............................................................................................................................ 2.3Mb 609k 309k 527k 372k 317k 267k 337k 391k 348k 358k 270k 535k 332k 341k 302k 259k 1.9Mb 355k 305k 319k 332k 308k 346k 312k 334k 313k 324k Gainesville College................................................................................................................. Georgia Perimeter College..................................................................................................... Gordon College......................................................................................................................... Middle Georgia College........................................................................................................... South Georgia College............................................................................................................ Waycross College..................................................................................................................... Skidaway Institute of Oceanography..................................................................................... University System Office......................................................................................................... 380k 306k 341k 328k 284k 290k 276k 292k ANNUAL FINANCIAL REPORT Board of Regents of The University System of Georgia For the Year Ended June 30, 2004 "Creating a More Educated Georgia" Board of Regents of The University System of Georgia Annual Financial Report June 30, 2004 Table of Contents Members of the Board of Regents .................................................................................... 1 Letter of Transmittal ....................................................................................................... 2 Map of Institutions ........................................................................................................... 3 Institutions of the University System of Georgia ........................................................... 4 State Resources ............................................................................................................... 5 Management's Discussion and Analysis ...................................................................... 6 Financial Statements Statement of Net Assets .................................................................................................... 13 Statement of Net Assets (Component Units GASB) ..................................................... 14 Balance Sheets (Component Units FASB) .................................................................... 15 Statement of Revenues, Expenses and Changes in Net Assets ........................................ 27 Statement of Revenues, Expenses and Changes in Net Assets (Component Units-GASB). 29 Statement of Activities (Component Units FASB)........................................................ 31 Statement of Cash Flows .................................................................................................. 80 Notes to the Financial Statements Note 1 Summary of Significant Accounting Policies .................................................. 82 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments........................ 88 Note 3 Accounts Receivable........................................................................................ 91 Note 4 Inventories........................................................................................................ 91 Note 5 Notes/Loans Receivable................................................................................... 91 Note 6 Capital Assets................................................................................................... 92 Note 7 Deferred Revenue............................................................................................. 93 Note 8 Long Term Liabilities ...................................................................................... 93 Note 9 Lease Obligations............................................................................................. 94 Note 10 Retirement Plans .............................................................................................. 98 Note 11 Risk Management.............................................................................................101 Note 12 Contingencies...................................................................................................102 Note 13 Post Employment Benefits Other Than Pension Benefits................................102 Note 14 Natural Classifications with Functional Classifications ..................................103 Note 15 Component Units .............................................................................................104 BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA June 30, 2004 Hugh A. Carter, Jr. ...........................Atlanta State-At-Large Term Expires January 1, 2009 William H. Cleveland .......................Atlanta State-At-Large Term Expires January 1, 2009 Donald M. Leebern, Jr............... ........Atlanta State-At-Large Term Expires January 1, 2005 Doreen Stiles Poitevint ..................Bainbridge State-At-Large Term Expires January 1, 2011 Joel O. Wooten, Jr. ......................Columbus State-At-Large Term Expires January 1, 2006 W. Mansfield Jennings, Jr.............Hawkinsville First District Term Expires January 1, 2010 Julie Ewing Hunt ..............................Tifton Second District Term Expires January 1, 2011 Martin W. NeSmith. ........................Claxton Third District Term Expires January 1, 2006 Wanda Yancey Rodwell...........Stone Mountain Fourth District Term Expires January 1, 2005 Elridge W. McMillan .....................Atlanta Fifth District Term Expires January 1, 2010 Michael J. Coles .......................Kennesaw Sixth District Term Expires January 1, 2008 Glenn S. White ...................Lawrenceville Seventh District Term Expires January 1, 2005 Connie Cater ...............................Macon Eighth District Term Expires January 1, 2006 Patrick W. Pittard .........................Atlanta Ninth District Term Expires January 1, 2010 James R. Jolly...............................Dalton Tenth District Term Expires January 1, 2008 Joe Frank Harris .....................Cartersville Eleventh District Term Expires January 1, 2006 Timothy J. Shelnut ......................Augusta Twelfth District Term Expires January 1, 2007 Allan Vigil ................................Morrow Thirteenth District Term Expires January 1, 2010 OFFICERS OF THE BOARD OF REGENTS Joe Frank Harris .........................Chairman Joel O. Wooten, Jr. ............... Vice Chairman Thomas C. Meredith ....................Chancellor William R. Bowes ......................Treasurer Gail S. Weber ..........Secretary to the Board Annual Financial Report FY 2004 1 BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA 270 Washington Street, S.W. Atlanta, Georgia 30334 Office of Fiscal Affairs Office of Internal Audit 404-656-2232 404-656-2237 January 31, 2005 Chancellor Thomas C. Meredith Board of Regents University System of Georgia Dear Chancellor Meredith: In keeping with the by-laws of the Board of Regents, we submit to you the Annual Financial Report of the University System of Georgia for the fiscal year ended June 30, 2004. The officers of the various institutions represented in this report have assured us that every effort has been made to reflect accurately the information considered important to all concerned parties. In the event that this report is not sufficient in detail or if there is additional information desired, this office will be glad to supply such information. Sincerely, ____________________________ William R. Bowes Vice Chancellor for Fiscal Affairs and Treasurer of the Board __________________________ Ronald B. Stark Associate Vice Chancellor for Internal Audit Annual Financial Report FY 2004 2 UNIVERSITY SYSTEM OF GEORGIA Annual Financial Report FY 2004 3 Institutions of the University System of Georgia RESEARCH UNIVERSITIES Georgia Institute of Technology ........................................................................................................ Atlanta Georgia State University.................................................................................................................... Atlanta Medical College of Georgia..............................................................................................................Augusta University of Georgia .........................................................................................................................Athens REGIONAL UNIVERSITIES Georgia Southern University ........................................................................................................ Statesboro Valdosta State University ................................................................................................................Valdosta STATE UNIVERSITIES Albany State University..................................................................................................................... Albany Armstrong Atlantic State University.............................................................................................. Savannah Augusta State University ..................................................................................................................Augusta Clayton College & State University..................................................................................................Morrow Columbus State University ............................................................................................................Columbus Fort Valley State University ........................................................................................................Fort Valley Georgia College & State University ........................................................................................ Milledgeville Georgia Southwestern State University ......................................................................................... Americus Kennesaw State University ........................................................................................................... Kennesaw North Georgia College & State University ..................................................................................Dahlonega Savannah State University ............................................................................................................. Savannah Southern Polytechnic State University ............................................................................................ Marietta State University of West Georgia ..................................................................................................Carrollton STATE COLLEGES Dalton State College ........................................................................................................................... Dalton Macon State College...........................................................................................................................Macon TWO-YEAR COLLEGES Abraham Baldwin Agricultural College .............................................................................................. Tifton Atlanta Metropolitan College ............................................................................................................ Atlanta Bainbridge College ...................................................................................................................... Bainbridge Coastal Georgia Community College ...........................................................................................Brunswick Darton College................................................................................................................................... Albany East Georgia College .................................................................................................................. Swainsboro Floyd College....................................................................................................................................... Rome Gainesville College......................................................................................................................Gainesville Georgia Perimeter College................................................................................................................ Decatur Gordon College............................................................................................................................Barnesville Middle Georgia College................................................................................................................... Cochran South Georgia College......................................................................................................................Douglas Waycross College .......................................................................................................................... Waycross INDEPENDENT RESEARCH UNIT Skidaway Institute of Oceanography ............................................................................................. Savannah Annual Financial Report FY 2004 4 STATE RESOURCES The General Appropriations Act of 2004, as amended, provided a total of $1,623,786,137 to the University System of Georgia. In addition, indirect funding from the Department of Administrative Services (DOAS) amounted to $3,583,000 and House Bills 122 and 1180 provided $6,244,639 from tobacco funds. The amounts were as follows: STATE APPROPRIATIONS AVAILABLE General Appropriations Act of 2004 House Bill 122 General State Funds Tobacco funds Indirect DOAS Funding - Communications House Bill 1180 General State Funds Tobacco funds TOTAL STATE APPROPRIATIONS AVAILABLE $1,668,270,708 6,585,889 3,583,000 (44,484,571) (341,250) $1,633,613,776 ALLOCATIONS BY BOARD OF REGENTS Educational and General Teaching Non-Teaching Tobacco funds Other Activities Regents Central Office Information Technology Southern Regional Education Board Rental Payments - Georgia Military College Georgia Public Telecommunications Commission Public Libraries Research Consortium Total Other Activities Special Initiative Funding Scholarships Total Educational and General $7,259,980 30,139,284 819,638 1,745,496 17,703,442 34,334,067 21,691,191 $1,340,738,725 141,298,579 6,244,639 113,693,098 31,120,771 517,964 1,633,613,776 TOTAL ALLOCATIONS BY BOARD OF REGENTS $1,633,613,776 Annual Financial Report FY 2004 5 UNIVERSITY SYSTEM OF GEORGIA Management's Discussion and Analysis Introduction The mission of the University System of Georgia is to contribute to the educational, cultural, economic, and social advancement of Georgia by providing excellent undergraduate general education and first-rate programs leading to associate, baccalaureate, masters, professional, and doctorate degrees; by pursuing leading-edge basic and applied research, scholarly inquiry, and creative endeavors; and by bringing these intellectual resources, and those of the public libraries, to bear on the economic development of the State and the continuing education of its citizens. The 34 institutions in the University System are led by Chancellor Thomas C. Meredith and the Board of Regents. The University System continues to thrive as shown by the following statistics: Faculty Students FY2004 FY2003 FY2002 11,274 10,626 9,484 257,715 241,878 228,326 Overview of the Financial Statements and Financial Analysis The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2004. These consolidated statements contain information from the 34 institutions of the University System of Georgia, the Skidaway Institute of Oceanography and the University System Office. Each institution has prepared a separate financial statement that is available on CD. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University System's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University System as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and Annual Financial Report FY 2004 6 non-current), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $798,974,906.19 3,758,146,274.78 272,006,679.57 4,829,127,860.54 Lia b ilitie s : C urrent Liabilities Non-current Liabilities Total Liabilities 452,173,289.13 525,025,800.93 977,199,090.06 Net A ssets: Inv ested in C apital A ssets, net of debt Restricted - nonex pendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 3,259,453,298.73 104,068,814.60 230,674,714.29 23,684,809.80 234,047,133.06 $3,851,928,770.48 June 30, 2003 $831,595,620.78 3,239,778,957.73 213,830,061.24 4,285,204,639.75 467,063,263.98 230,475,600.53 697,538,864.51 3,052,983,073.36 107,796,643.11 157,880,400.39 1,467,173.29 267,538,485.09 $3,587,665,775.24 The total assets of the institution increased by $543,923,220.79. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $518,367,317.05 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. Annual Financial Report FY 2004 7 The total liabilities for the year increased by $279,660,225.55. The combination of the increase total assets of $543,923,220.79 and the increase in total liabilities of $279,660,225.55 yields an increase in total net assets of $264,262,995.24. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $206,470,225.37. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 June 30, 2003 Operating Revenues $2,693,190,618.28 $2,473,938,687.15 Operating Expenses Operating Loss 4,431,777,048.19 (1,738,586,429.91) 4,363,743,608.38 (1,889,804,921.23) Nonoperating Revenues and Expenses 1,727,478,819.78 1,788,858,851.92 Incom e (Loss) B efore other revenues, expenses, gains or losses (11,107,610.13) (100,946,069.31) Other revenues, expenses, gains or losses 297,034,319.07 131,891,219.55 Increase in Net A ssets 285,926,708.94 30,945,150.24 Net A ssets at beginning of year, as originally reported Prior Year A djustm ents Net A ssets at beginning of year, restated 3,587,665,775.24 (21,663,713.70) 3,566,002,061.54 3,368,679,693.98 188,040,931.02 3,556,720,625.00 Net A ssets at End of Year $3,851,928,770.48 $3,587,665,775.24 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Annual Financial Report FY 2004 8 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2004 O pe ra ting R e v e nue T uitio n a nd Fe e s Fe de ra l A pp ro p ria tio ns G ra nts a nd C o ntra cts S a le s a nd S e rv ice s o f Ed uca tio na l D e p a rtm e nts A ux ilia ry O the r $666,308,628.57 13,885,343.98 1,289,015,301.30 56,855,339.18 366,766,668.51 300,359,336.74 T o ta l O p e ra ting R e v e nue 2,693,190,618.28 No no p e ra ting R e v e nue S ta te A p p ro p ria tio ns G ra nts a nd C o ntra cts G ifts Inv e stm e nt Inco m e O the r T o ta l No no p e ra ting R e v e nue 1,631,312,365.65 72,393,186.94 18,658,572.19 14,548,806.61 13,458,375.85 1,750,371,307.24 C a p ita l G ifts a nd G ra nts S ta te O the r C a p ita l G ifts a nd G ra nts T o ta l C a p ita l G ifts a nd G ra nts 218,922,737.41 78,111,581.66 297,034,319.07 T o ta l R e v e nue s $4,740,596,244.59 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2003 $572,596,703.74 15,374,929.46 1,206,994,741.31 52,283,792.42 325,096,736.06 293,791,448.25 2,466,138,351.24 1,700,906,532.56 65,090,522.93 9,684,629.26 18,217,665.52 3,496,558.75 1,797,395,909.02 123,744,771.78 8,146,447.77 131,891,219.55 $4,395,425,479.81 O p e ra tin g E x p e n s e s In s tru c tio n R e se a rch P u b lic S e rv ic e A c a d e m ic S u p p o rt S tu d e n t S e rv ic e s In s titu tio n a l S u p p o rt P la n t O p e ra tio n s a n d M a in te n a n c e S c h o la rs h ip s a n d Fe llo w s h ip s A u x ilia ry E n te rp ris e s U n a llo c a te d E x p e n s e s P a tie n t C a re (M C G o n ly ) T o ta l O p e ra tin g E x p e n s e s N o n o p e ra tin g E x p e n s e s In te re s t E x p e n s e (C a p ita l A s s e ts ) T o ta l E x p e n s e s June 30, 2004 $ 1 ,1 2 9 ,3 4 0 ,5 6 0 .5 0 7 1 0 ,2 1 7 ,7 7 7 .1 2 3 7 6 ,7 7 6 ,8 3 1 .0 7 3 1 6 ,6 5 5 ,5 3 8 .9 1 1 6 5 ,8 5 0 ,5 7 1 .3 4 6 3 5 ,4 0 5 ,5 5 9 .2 4 3 0 5 ,7 8 0 ,9 3 6 .4 4 2 4 5 ,0 4 9 ,7 2 3 .6 6 3 2 2 ,3 0 2 ,7 3 4 .8 2 6 5 ,7 9 7 ,2 9 8 .9 3 1 5 8 ,5 9 9 ,5 1 6 .1 6 4 ,4 3 1 ,7 7 7 ,0 4 8 .1 9 2 2 ,8 9 2 ,4 8 7 .4 6 $ 4 ,4 5 4 ,6 6 9 ,5 3 5 .6 5 June 30, 2003 $ 1 ,1 1 4 ,2 7 0 ,6 1 0 .9 5 6 7 2 ,5 1 8 ,6 4 3 .5 3 4 1 5 ,6 6 0 ,4 0 6 .7 4 3 0 3 ,4 0 1 ,0 7 2 .3 3 1 5 7 ,4 1 0 ,9 2 0 .9 3 6 5 2 ,4 3 0 ,4 9 6 .0 3 3 1 5 ,6 4 5 ,5 7 4 .8 4 2 5 4 ,0 2 4 ,7 2 6 .6 4 2 9 7 ,4 7 8 ,3 7 0 .5 2 2 7 ,2 0 7 ,3 0 6 .5 8 1 5 3 ,6 9 5 ,4 7 9 .2 9 4 ,3 6 3 ,7 4 3 ,6 0 8 .3 9 8 ,5 3 7 ,0 5 7 .1 0 $ 4 ,3 7 2 ,2 8 0 ,6 6 5 .4 9 Annual Financial Report FY 2004 9 Statement of Cash Flows The final statement presented by the University System of Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: O perating A ctivities Non-capital Financing A ctiv ities C apital and Related Financing A ctiv ities Investing A ctivities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 ,4 8 3 ,5 9 5 ,1 9 6 .3 3 ) 1 ,7 3 8 ,4 9 2 ,4 7 4 .0 9 (2 0 1 ,9 0 8 ,7 8 5 .2 9 ) (8 4 ,7 7 1 ,8 0 4 .6 0 ) (3 1 ,7 8 3 ,3 1 2 .1 3 ) 4 7 4 ,7 5 9 ,1 4 2 .3 9 $ 4 4 2 ,9 7 5 ,8 3 0 .2 6 June 30, 2003 ($ 1 ,7 0 0 ,3 8 7 ,9 3 7 .2 6 ) 1 ,7 4 7 ,3 5 1 ,2 2 8 .3 0 (1 9 6 ,9 8 0 ,4 3 5 .3 7 ) 8 6 ,8 5 0 ,6 8 9 .9 1 (6 3 ,1 6 6 ,4 5 4 .4 2 ) 5 3 7 ,9 2 5 ,5 9 6 .8 1 $ 4 7 4 ,7 5 9 ,1 4 2 .3 9 Capital Assets The University System of Georgia had many significant capital asset additions and renovations during FY2004. Some of these additions and renovations include the following: At Georgia Institute of Technology: The Technology Square Complex (131.1 M) The Environmental Science and Technology Building (57.4 M), the U.A. Whitaker Biomedical Engineering Building (23.2 M), the Bunger-Henry Building (9.3 M) and the Research Administration Building (5.3 M). At the University of Georgia: The Student Learning Center (42.8 M), the Complex Carbohydrate Research Center (39.1 M), Sanford Stadium North Stands Expansion (25.5 M), and Myers Hall Dormitory major renovation (17.2 M). At Georgia Southern University: Expansion of the Georgia Coastal Center (2.4 M) At Valdosta State University: Odum Library Addition (12.7 M) At Savannah State University: Freshman Living and Learning Center (14.9 M) Annual Financial Report FY 2004 10 At State University of West Georgia: Renovation of Adamson Hall (3.2 M) At Macon State College: Renovation of Thomas Hall on the Warner Robbins Campus (5M) At Abraham Baldwin Agricultural College: Agricultural Sciences Building (7.4 M) At Coastal Georgia Community College: Camden Center Facility (16.8 M) At Middle Georgia College: Wellness Center (4.8 M) At South Georgia College: Renovation of Classrooms and Gymnasium (4.8 M) For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of Statement No. 14, the University System of Georgia has included the financial statements and notes for all required component units for FY2004. Details for all component units are included in the Financial Statements; Note 1, Summary of Significant Accounting Policies; and Note 15, Component Units. Economic Outlook Despite Georgia's continuing sluggish economy and the impact that has had on the state budget, the University System of Georgia fared better in the FY 2005 budget than in the immediate two years prior. FY 2005 Budget reductions for the University System of Georgia, originally anticipated to be 5% of base level funding, were only 3.7% overall. Core instructional programs and services were reduced by only 2.5%. At the same time, the University System of Georgia's enrollment formula was fully funded, MRR funds were restored close to levels that existed prior to cuts of recent years, capital funding was increased significantly over last year's amount to more than $273 million, and a salary increase benefiting all state agencies, including the University System of Georgia, was approved. Since FY 2003, the University System of Georgia has received budget reductions totaling to $252.6 million. The budget cuts for FY 2005 increase that to $378 million, although the impact will be felt differentially across University System programs. In accordance with the new state budget process and the budget principles adopted by the Board of Regents as part of that process, some programs less critical to core missions will experience deeper cuts. The University System of Georgia continues to see a surge in student enrollments, which is expected to continue for several years. Headcount enrollment grew 6% from fall 2002 to fall 2003, or nearly 14,000 students. Credit hour enrollment is also up significantly. Despite the trend in state appropriations, the outlook for the University System may be more positive this year and next due to continuing enrollment growth across the system. The growth should result in increased formula funding and higher tuition revenue, both of which will lessen Annual Financial Report FY 2004 11 the impact of budget cuts. Overall, the system is in a strong financial position. There do not appear to be any conditions or factors that would substantially affect its operations or financial position. _______________________ William R. Bowes Vice Chancellor for Fiscal Affairs University System of Georgia Annual Financial Report FY 2004 12 Statement of Net Assets UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivable - Other Inventories Other Assets Total C urrent Assets Non-current Assets Noncurrent C ash Investments Notes Receivable, net C apital Assets, net Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-Term Debt C ompensated Absences (current portion) Total C urrent Liabilities Non-current Liabilities C ompensated Absences Long-term Liabilities Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unrestricted TOTAL NET ASSETS $437,797,034.89 41,477,952.60 70,331,770.73 1,556,073.27 180,419,461.52 16,878,041.32 50,514,571.86 798,974,906.19 5,178,795.37 221,801,280.11 45,026,604.09 3,758,146,274.78 4,030,152,954.35 4,829,127,860.54 84,440,188.34 22,540,017.61 183,986,452.81 32,470,722.98 37,842,359.42 14,039,764.20 76,853,783.77 452,173,289.13 55,084,073.24 469,941,727.69 525,025,800.93 977,199,090.06 3,259,453,298.73 104,068,814.60 230,674,714.29 23,684,809.80 234,047,133.06 $3,851,928,770.48 Annual Financial Report FY 2004 13 University System of Georgia Statement of Net Assets for Component Units reporting under GASB requirements. UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS - COMPONENT UNITS (GASB) June 30, 2004 Medical Georgia Tech College of Athletic Georgia Association Health, Inc. ASSETS Current Assets Cash and Cash Equivalents $16,410,420.00 $30,645,058.00 Short-term Investments 66,342,578.00 Accounts Receivable, net Receivables - Federal Financial Assistance 555,791.00 Receivables - State General Appropriations Allotment Receivables - Patient Accounts Receivables - Other 1,174,280.00 76,208,788.00 Inventories 6,906,269.00 Other Assets 5,819,299.00 1,216,506.00 Total Current Assets 23,403,999.00 181,874,990.00 University of Georgia Research Foundation $1,565,608.00 16,497,333.00 29,523,297.00 47,586,238.00 University of Georgia Athletic Association $46,657,588.00 4,538,465.00 177,286.00 51,373,339.00 Noncurrent Assets Noncurrent Cash Investments Notes Receivable, net Capital Assets, net Other Noncurrent Assets Total Noncurrent Assets TOTAL ASSETS 52,270,100.00 109,018,560.00 15,072,898.00 176,361,558.00 199,765,557.00 15,306,844.00 60,207,828.00 75,514,672.00 257,389,662.00 22,579,629.00 653,241.00 148,521,976.00 23,232,870.00 70,819,108.00 148,521,976.00 199,895,315.00 LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations Current Portion of Long-term Debt Compensated Absences (current portion) Due to related party - margin allocation Estimated third-party payor settlements Total Current Liabilities Noncurrent Liabilities Compensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES 3,829,152.00 5,309,930.00 745,783.00 16,795,354.00 373,863.00 21,288,140.00 11,857,346.00 19,225,453.00 9,780,303.00 17,688,873.00 1,713,481.00 468,764.00 12,067,110.00 652,779.00 8,101,765.00 11,300,141.00 10,774,000.00 47,997,902.00 1,352,976.00 2,237,031.00 52,370,939.00 31,059,183.00 110,823,022.00 110,823,022.00 122,890,132.00 $7,769,934.00 7,769,934.00 55,767,836.00 0.00 52,370,939.00 83,149,638.00 83,149,638.00 114,208,821.00 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS 1,443,218.00 11,958,903.00 41,236,048.00 22,237,256.00 $76,875,425.00 $58,113,115.00 $143,508,711.00 $201,621,826.00 653,241.00 71,098,910.00 11,982,912.00 17,794,928.00 $18,448,169.00 2,604,672.00 $85,686,494.00 Annual Financial Report FY 2004 14 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 1 of 12) Balance Sheet (FASB) June 30, 2004 Georgia Tech Foundation Georgia Tech Research Corporation Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Assets Cash and Cash Equivalents $3,043,000.00 Accounts, Notes, and Mortgages Receivable 6,403,000.00 Endowment And Other Investments 876,150,000.00 Pledges Receivable, net 11,785,000.00 Investments in Real Estate 5,118,000.00 Capital Assets, net 44,681,000.00 Other Assets 214,203,000.00 Total Assets 1,161,383,000.00 $31,590,389.00 24,431,450.00 1,456,300.00 $8,992.00 74,770.00 1,581,145.00 3,048,471.00 27,914,611.00 88,441,221.00 571,264.00 61,551.00 2,297,722.00 $337,000.00 1,118,000.00 112,490,000.00 10,370,000.00 1,438,000.00 71,778,000.00 197,531,000.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 5,831,000.00 224,312,000.00 118,422,000.00 348,565,000.00 30,235,433.00 1,333,349.00 26,276,925.00 468,433.00 56,512,358.00 1,801,782.00 6,729,000.00 175,840,000.00 4,110,000.00 186,679,000.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 287,177,000.00 247,592,000.00 278,049,000.00 $812,818,000.00 31,928,863.00 495,940.00 $31,928,863.00 $495,940.00 (383,000.00) 11,235,000.00 $10,852,000.00 Annual Financial Report FY 2004 15 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 2 of 12) Balance Sheet (FASB) June 30, 2004 Georgia State University Research Foundation Georgia State University Foundation University of Georgia Foundation Valdosta State University Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $5,496,061.46 2,000,000.00 3,875,991.22 12,298,135.83 23,670,188.51 $13,886,774.00 501,273.00 62,019,410.00 8,637,304.00 63,369,252.00 20,355,732.00 168,769,745.00 $4,914,050.00 160,872.00 421,797,629.00 26,402,004.00 19,498,544.00 172,529,619.00 48,835,175.00 694,137,893.00 $2,889,630.00 373,467.00 12,861,450.00 281,052.00 6,566,737.00 218,455.00 23,190,791.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 6,052,202.91 3,294,473.15 9,346,676.06 2,589,990.00 117,990.00 8,699,097.00 10,869,511.00 50,051,557.00 61,885.00 6,975,732.00 59,797,154.00 210,017,319.00 12,889,212.00 242,475,139.00 755,986.00 3,984,536.00 277,511.00 5,018,033.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 11,178,902.16 1,144,610.29 2,000,000.00 $14,323,512.45 21,886,008.00 32,091,158.00 54,995,425.00 $108,972,591.00 7,514,340.00 202,946,373.00 241,202,041.00 $451,662,754.00 3,097,642.00 1,421,338.00 13,653,778.00 $18,172,758.00 Annual Financial Report FY 2004 16 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 3 of 12) Balance Sheet (FASB) June 30, 2004 MCG Foundation, MCG Dental Inc. Foundation MCG Research MCG PPG Institute Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $17,832,187.00 378,370.00 92,246,839.00 4,327,339.00 3,526,436.00 245,088.00 118,556,259.00 $114,488.00 529,235.00 2,780,552.00 3,424,275.00 $3,781,960.00 5,836,218.00 99,000.00 9,717,178.00 $15,058,820.00 280,760.00 39,743,119.00 5,486,690.00 60,569,389.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 178,873.00 3,424,275.00 6,347,921.00 7,500.00 6,587,030.00 446,483.00 2,018,579.00 2,197,452.00 3,424,275.00 6,355,421.00 7,033,513.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 7,317,280.00 22,766,394.00 86,275,133.00 $116,358,807.00 3,361,757.00 53,535,876.00 $0.00 $3,361,757.00 $53,535,876.00 Annual Financial Report FY 2004 17 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 4 of 12) Balance Sheet (FASB) June 30, 2004 Georgia Southern University Housing Foundation Georgia Southern University Foundation Southern Boosters, Inc. Georgia Southern University Research & Service Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $40,978,441.00 33,442,636.00 38,480,020.00 112,901,097.00 $106,440.00 27,982,180.00 1,440,585.00 1,004,150.00 424,749.00 264,192.00 31,222,296.00 $909,258.00 $471,072.00 950,220.00 351,021.00 574,000.00 2,784,499.00 450,195.00 921,267.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 2,778,302.00 74,721,649.00 34,463,250.00 111,963,201.00 52,742.00 61,655.00 775,702.00 52,742.00 279,000.00 81,600.00 422,255.00 775,702.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 2,150,921.00 (1,213,025.00) $937,896.00 1,987,281.00 7,784,437.00 21,397,836.00 $31,169,554.00 677,051.00 1,685,193.00 $2,362,244.00 145,565.00 $145,565.00 Annual Financial Report FY 2004 18 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 5 of 12) Balance Sheet (FASB) June 30, 2004 Armstrong Atlantic State University Foundation Armstrong Atlantic State University Educational Properties Foundation, Inc. Augusta State University Fund Raising Foundation Augusta State University Athletic Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $695,441.00 4,222,935.00 117,165.00 5,035,541.00 $2,683,756.00 4,222,935.00 140,444.00 15,521,360.00 22,568,495.00 $811,517.00 1,540,688.00 12,509,314.00 849,897.00 20,000.00 $219,648.00 84,890.00 1,531,372.00 15,731,416.00 1,835,910.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 8,000.00 244,018.00 10,894.00 76,563.00 17,455,000.00 1,528,888.00 1,586,665.00 8,000.00 17,699,018.00 1,539,782.00 1,663,228.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 170,432.00 1,788,456.00 3,068,653.00 $5,027,541.00 12,368.00 1,788,456.00 3,068,653.00 $4,869,477.00 2,832,958.00 794,940.00 10,563,736.00 $14,191,634.00 172,682.00 $172,682.00 Annual Financial Report FY 2004 19 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 6 of 12) Balance Sheet (FASB) June 30, 2004 Columbus State University Foundation Columbus State University Alumni Association Foundation Properties, Inc. (Columbus State University) Columbus State University Athletic Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $6,159,303.00 3,924,018.00 24,029,163.00 37,054,881.00 128,181.00 71,295,546.00 $162,744.00 49,441.00 49,799.00 3,158.00 4,519.00 150.00 269,811.00 $924,062.00 198,351.00 56,157,814.00 527,248.00 57,807,475.00 $167,259.00 4,000.00 1,432,603.00 1,600.00 738.00 24,624.00 1,630,824.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 45,210.00 25,282.00 1,204,161.00 1,274,653.00 14,309.00 4,940.00 19,249.00 5,148,474.00 42,638.00 28,578.00 16,589,973.00 15,330,000.00 37,139,663.00 47,780.00 9,384.00 57,164.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 3,434,840.00 45,231,169.00 21,354,884.00 $70,020,893.00 171,575.00 78,987.00 $250,562.00 20,667,812.00 $20,667,812.00 (51,860.00) 404,388.00 1,221,132.00 $1,573,660.00 Annual Financial Report FY 2004 20 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 7 of 12) Balance Sheet (FASB) June 30, 2004 Walter & Emilie Spivey Foundation (Clayton College and State University) Clayton College and State University Foundation Georgia College and State University Alumni Association Georgia College and State University Foundation, Inc. Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $68,563.96 33,021.42 7,249,617.46 137,518.16 155,266.46 7,643,987.46 $810,800.00 3,300.00 1,842,140.00 166,428.00 2,822,668.00 $91,350.00 4,633,598.00 104,029.00 33,484.00 4,862,461.00 $734,497.00 8,113,971.00 433,446.00 50,995,083.00 18,254,742.00 78,531,739.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 20,500.00 0.00 20,500.00 1,888,931.00 0.00 65,339,383.00 68,195.00 67,296,509.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 394,370.00 7,249,617.46 $7,643,987.46 28,930.00 1,608,844.00 1,164,394.00 $2,802,168.00 122,073.00 89,700.00 4,650,688.00 $4,862,461.00 2,289,987.00 948,697.00 7,996,546.00 $11,235,230.00 Annual Financial Report FY 2004 21 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 8 of 12) Balance Sheet (FASB) June 30, 2004 Georgia Southwestern State University, Inc. Georgia Southwestern Research and Development Corporation, Inc. Kennesaw State University Foundation North Georgia College & State University Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $1,808,208.00 32,797.00 22,407,673.00 418,633.00 737,575.00 25,404,886.00 ($9,809.00) 9,809.00 782,340.00 782,340.00 $4,080,252.00 28,312,460.00 12,010,588.00 2,068,437.00 13,800.00 94,000,655.00 31,215,326.00 171,701,518.00 $1,704,735.00 132,957.00 14,079,379.00 160,525.00 2,755,679.00 9,121,410.00 27,954,685.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 22,198.00 6,201.00 28,399.00 0.00 12,751,792.00 98,597.00 184,927.00 126,880,621.00 246,163.00 15,895,730.00 156,057,830.00 3,138,567.00 109,500.00 23,717.00 10,895,000.00 30,957.00 14,197,741.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 14,906,304.00 4,132,359.00 6,337,824.00 $25,376,487.00 782,340.00 $782,340.00 1,585,281.00 4,341,975.00 9,716,432.00 $15,643,688.00 (96,400.00) 2,879,140.00 10,974,204.00 $13,756,944.00 Annual Financial Report FY 2004 22 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 9 of 12) Balance Sheet (FASB) June 30, 2004 Southern Polytechnic State University Foundation, Inc. State University of West Georgia Foundation Dalton State College Foundation Macon State College Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $777,656.30 304,206.68 976,385.00 83,024.38 823,044.00 21,901,852.94 16,191,705.33 41,057,874.63 $1,955,601.00 4,509.00 10,588,942.00 1,031,423.00 4,500.00 13,584,975.00 $363,600.00 8,842,318.00 693,031.00 9,898,949.00 $298,513.00 2,903,779.00 4,578,722.00 1,901,996.00 9,683,010.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 2,767,983.51 60,683.00 36,113,495.63 38,942,162.14 39,913.00 857,001.00 0.00 39,913.00 857,001.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 926,838.39 405,006.32 783,867.78 $2,115,712.49 457,587.00 1,068,842.00 12,058,546.00 $13,584,975.00 2,496,850.00 428,484.00 6,933,702.00 $9,859,036.00 452,315.00 2,555,021.00 5,818,673.00 $8,826,009.00 Annual Financial Report FY 2004 23 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 10 of 12) Balance Sheet (FASB) June 30, 2004 First Abraham Baldwin Agricultural College L.L.C. Abraham Baldwin Agricultural College Foundation Bainbridge College Foundation Coastal Georgia Community College Foundation, Inc. Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $68,969.00 35,217,256.00 1,154,288.00 36,440,513.00 $708,822.00 5,519,055.00 454,228.00 1,873,728.00 8,555,833.00 $40,536.00 40,536.00 $275,554.00 3,137,295.00 133,915.00 3,546,764.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 3,463,567.00 32,624,519.00 36,088,086.00 24,023.00 12,885.00 36,908.00 0.00 0.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 352,427.00 $352,427.00 1,013,618.00 1,379,547.00 6,125,760.00 $8,518,925.00 40,536.00 $40,536.00 735,617.00 1,127,044.00 1,684,103.00 $3,546,764.00 Annual Financial Report FY 2004 24 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 11 of 12) Balance Sheet (FASB) June 30, 2004 Darton College Foundation East Georgia College Foundation, Inc. Floyd College Foundation Cartersville Bartow Foundation (Floyd College) Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $217,403.00 50,050.00 1,101,741.00 1,369,194.00 $114,997.00 9,137.00 632,373.00 27,228.00 783,735.00 $22,281.07 17,555.27 555,145.84 $444,748.00 23,322.89 301,300.00 896,282.18 468,070.89 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 267.00 80,536.67 42,915.44 0.00 267.00 80,536.67 42,915.44 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 150,977.00 182,516.00 1,035,701.00 $1,369,194.00 80,491.00 702,977.00 $783,468.00 377,791.40 437,954.11 $815,745.51 295,155.45 130,000.00 $425,155.45 Annual Financial Report FY 2004 25 University System of Georgia Balance Sheets for Component Units reporting under FASB requirements. UNIVERSITY SYSTEM OF GEORGIA Component Units (page 12 of 12) Balance Sheet (FASB) June 30, 2004 Gainesville College Foundation Gordon College Foundation Middle Georgia College Foundation, Inc. South Georgia Waycross College College Foundation Foundation Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $109,558.00 8,118,921.00 5,550.00 8,400.00 8,242,429.00 $253,613.00 $311,685.00 $139,658.03 4,520,844.00 707,343.00 2,444,478.32 148,562.00 63,150.00 13,500.00 4,923,019.00 1,082,178.00 2,597,636.35 $112,489.00 94,265.00 1,113,327.00 1,252.00 1,321,333.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Long-Term Debt Liabilities under Split Interest Agreements Other Liabilities Total Liabilities 15,630.00 15,630.00 10,486.00 25,655.00 67,211.00 77,697.00 25,655.00 5,982.00 0.00 5,982.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 556,288.00 5,155,257.00 2,515,254.00 $8,226,799.00 4,845,322.00 $4,845,322.00 17,612.00 251,738.00 787,173.00 $1,056,523.00 542,436.30 118,212.75 1,936,987.30 $2,597,636.35 114,354.00 87,670.00 1,113,327.00 $1,315,351.00 Annual Financial Report FY 2004 26 Statement of Revenues, Expenses and Changes in Net Assets UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND C HANGES IN NET ASSETS for the Year Ended June 30, 2004 RE VE NU E S June 30, 2004 Ope ra ting Re v e nue s S tudent Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible A ccounts Federal A ppropriations G rants and C ontracts Fe d e r a l S tate O th e r S ales and S ervices of Educational D epartm ents A uxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health S ervices Intercollegiate A thletics Other Organizations Other Operating Revenues T ota l Ope ra ting Re v e nue s E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S taff B enefits Other Personal S ervices Travel Scholarships and Fellowships U tilitie s S upplies and Other S ervices D epreciation Total Operating Expenses Operating Income (loss) $841,127,159.29 170,883,978.80 3,934,551.92 13,885,343.98 766,068,201.47 210,077,591.55 312,869,508.28 56,855,339.18 107,513,496.31 71,163,754.17 70,438,783.19 35,552,206.93 29,440,600.74 38,525,964.41 14,131,862.76 300,359,336.74 2,693,190,618.28 823,094,620.91 1,257,931,455.16 506,276,636.65 3,145,359.09 39,393,546.29 257,073,907.21 131,323,474.58 1,206,628,377.83 206,909,670.47 4,431,777,048.19 (1,738,586,429.91) Annual Financial Report FY 2004 27 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) S tate Appropriations G rants and C ontracts Fe d e r a l S tate O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S tate O th e r T ota l Othe r Re v e nue s Increase in Net Assets NET ASSETS Net A ssets-beginning of year, as originally reported Prior Year A djustm ents Net A ssets-beginning of year, restated Net Assets-End of Year 1,631,312,365.65 25,129,808.73 2,409,183.01 44,854,195.20 18,658,572.19 14,548,806.61 (22,892,487.46) 13,458,375.85 1,727,478,819.78 (11,107,610.13) 114,277.85 218,922,737.41 77,997,303.81 297,034,319.07 285,926,708.94 3,587,665,775.24 (21,663,713.70) 3,566,002,061.54 $3,851,928,770.48 Annual Financial Report FY 2004 28 University System of Georgia Statement of Revenues, Expenses and Changes in Net Assets for Component Units reporting under GASB requirements. REVENUES UNIVERSITY SYSTEM OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS - COMPONENT UNITS (GASB) for the Year Ended June 30, 2004 University of GEORGIA TECH ATHLETIC ASSOC IATION Medical College of Georgia Health, Inc. Georgia Research Foundation University of Georgia Athletic Association Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations Grants and Contracts Federal State Other Sales and Services of Educational Departments Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Net Patient Service Revenue Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (loss) $0.00 $0.00 $0.00 $0.00 121,470,080.00 34,941,382.00 34,941,382.00 314,804,658.00 7,415,177.00 322,219,835.00 9,601,824.00 131,071,904.00 54,706,045.00 54,706,045.00 11,074,698.00 2,110,679.00 145,019.00 2,050,774.00 5,699,284.00 854,265.00 10,584,822.00 3,710,886.00 36,230,427.00 (1,289,045.00) 127,716,273.00 42,328,938.00 38,111,691.00 257,037.00 2,896,070.00 111,498,527.00 10,234,404.00 333,042,940.00 (10,823,105.00) 131,714,914.00 131,714,914.00 (643,010.00) 41,434,208.00 4,349,859.00 45,784,067.00 8,921,978.00 Annual Financial Report FY 2004 29 University System of Georgia Statement of Revenues, Expenses and Changes in Net Assets for Component Units reporting under GASB requirements, continued NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year GEORGIA TECH ATHLETIC ASSOC IATION Medical College of Georgia Health, Inc. 33,168,087.00 4,692,522.00 447,473.00 8,554,175.00 (5,209,019.00) 3,792,629.00 2,503,584.00 1,280,503.00 (11,300,141.00) (2,038,610.00) 25,802,361.00 14,979,256.00 0.00 2,503,584.00 0.00 14,979,256.00 74,371,841.00 186,642,570.00 74,371,841.00 186,642,570.00 $76,875,425.00 $201,621,826.00 University of Georgia Research Foundation University of Georgia Athletic Association 693,110.00 1,015,009.00 1,708,119.00 1,065,109.00 1,260,561.00 870,139.00 (1,406,510.00) 704,856.00 1,429,046.00 10,351,024.00 0.00 1,065,109.00 17,383,060.00 0.00 10,351,024.00 75,335,470.00 17,383,060.00 $18,448,169.00 75,335,470.00 $85,686,494.00 Annual Financial Report FY 2004 30 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Tech Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $5,433,000.00 4,755,000.00 66,722,000.00 $23,937,000.00 3,750,000.00 48,229,000.00 $12,579,000.00 67,000.00 50,000.00 $41,949,000.00 8,572,000.00 115,001,000.00 14,430,000.00 12,382,000.00 101,000.00 1,618,000.00 138,000.00 14,531,000.00 14,138,000.00 56,936,000.00 (56,936,000.00) 0.00 160,658,000.00 20,699,000.00 12,834,000.00 194,191,000.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Program Services Other Expenses Total Expenses Change in Net Assets 10,410,000.00 3,908,000.00 66,227,000.00 21,379,000.00 101,924,000.00 58,734,000.00 0.00 20,699,000.00 0.00 12,834,000.00 10,410,000.00 3,908,000.00 66,227,000.00 21,379,000.00 101,924,000.00 92,267,000.00 Net Assets Beginning Net Assets Ending Net Assets 228,443,000.00 $287,177,000.00 226,893,000.00 $247,592,000.00 265,215,000.00 $278,049,000.00 720,551,000.00 $812,818,000.00 Annual Financial Report FY 2004 31 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Tech Research Corporation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain(Loss) on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 361,712.00 (307,088.00) $0.00 3,270,991.00 303,344,019.00 303,344,019.00 (303,344,019.00) 306,669,634.00 0.00 $0.00 $0.00 361,712.00 (307,088.00) 0.00 0.00 306,615,010.00 0.00 0.00 0.00 0.00 306,669,634.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Program Services Other Expenses Total Expenses Change in Net Assets 304,901,796.00 304,901,796.00 1,767,838.00 0.00 0.00 0.00 0.00 0.00 304,901,796.00 0.00 0.00 0.00 0.00 0.00 0.00 304,901,796.00 1,767,838.00 Net Assets Beginning Net Assets Ending Net Assets 30,161,025.00 $31,928,863.00 $0.00 $0.00 30,161,025.00 $31,928,863.00 Annual Financial Report FY 2004 32 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Tech Alum ni Association Statem ent of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Revenues $0.00 403,573.00 5,533,856.00 5,937,429.00 $0.00 0.00 $0.00 0.00 $0.00 403,573.00 0.00 0.00 0.00 5,533,856.00 0.00 0.00 0.00 5,937,429.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Program Services Other Expenses Total Expenses C hange in Net A ssets 5,232,447.00 437,384.00 5,669,831.00 267,598.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,232,447.00 437,384.00 5,669,831.00 267,598.00 Net Assets B eginning Net A ssets Ending Net A ssets 228,342.00 $495,940.00 $0.00 $0.00 228,342.00 $495,940.00 Annual Financial Report FY 2004 33 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Tech Facilities, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $0.00 26,000.00 $0.00 464,000.00 161,000.00 30,863,000.00 2,296,000.00 (30,863,000.00) 31,050,000.00 (28,103,000.00) $0.00 0.00 $0.00 490,000.00 0.00 0.00 0.00 2,457,000.00 0.00 0.00 0.00 2,947,000.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Other Expenses Total Expenses C hange in Net Assets 33,293,000.00 33,293,000.00 (2,243,000.00) 0.00 (28,103,000.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 33,293,000.00 33,293,000.00 (30,346,000.00) Net Assets Beginning Net Assets Ending Net Assets 1,860,000.00 ($383,000.00) 39,338,000.00 $11,235,000.00 $0.00 41,198,000.00 $10,852,000.00 Annual Financial Report FY 2004 34 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia State University Research Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 103,636.18 579,504.25 $0.00 47,458.64 2,747,556.97 45,453,940.52 46,201,639.11 (45,453,940.52) 48,884,637.92 795,157.23 $0.00 0.00 $0.00 151,094.82 579,504.25 0.00 0.00 48,949,196.08 0.00 0.00 0.00 49,679,795.15 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 47,975,719.48 47,975,719.48 908,918.44 0.00 795,157.23 0.00 0.00 0.00 47,975,719.48 0.00 0.00 0.00 0.00 0.00 47,975,719.48 1,704,075.67 Net Assets Beginning Net Assets Ending Net Assets 10,269,983.99 $11,178,902.43 349,452.79 $1,144,610.02 2,000,000.00 $2,000,000.00 12,619,436.78 $14,323,512.45 Annual Financial Report FY 2004 35 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $563,711.00 295,106.00 1,567,327.00 10,111,432.00 205,198.75 $6,414,189.00 1,449,147.00 1,640,766.00 $3,490,829.00 5,483,489.00 6,730,145.00 19,472,919.75 (6,892,154.00) 2,611,948.00 162,009.00 9,136,327.00 $10,468,729.00 1,744,253.00 8,691,582.00 0.00 10,111,432.00 205,198.75 0.00 0.00 0.00 31,221,194.75 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 10,845,571.49 5,040,879.95 1,166,918.35 203,725.96 17,257,095.75 2,215,824.00 0.00 2,611,948.00 0.00 9,136,327.00 0.00 0.00 10,845,571.49 5,040,879.95 0.00 1,166,918.35 203,725.96 17,257,095.75 13,964,099.00 Net Assets Beginning Net Assets Ending Net Assets 19,670,188.00 $21,886,012.00 29,478,878.00 $32,090,826.00 45,859,426.00 $54,995,753.00 95,008,492.00 $108,972,591.00 Annual Financial Report FY 2004 36 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. The University of Georgia Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $1,612,531.00 86,146.00 326,777.00 7,463,939.00 3,037,765.00 23,097,749.00 35,624,907.00 $12,337,716.00 4,096,840.00 55,229,187.00 2,547,795.00 (23,401,254.00) 50,810,284.00 $19,857,359.00 85,298.00 1,929,566.00 303,505.00 22,175,728.00 $33,807,606.00 4,268,284.00 55,555,964.00 0.00 7,463,939.00 7,515,126.00 0.00 0.00 0.00 108,610,919.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 2,745,582.00 357,370.00 18,935,502.00 2,211,412.00 4,708,997.00 4,831,402.00 33,790,265.00 1,834,642.00 0.00 50,810,284.00 0.00 22,175,728.00 2,745,582.00 357,370.00 18,935,502.00 2,211,412.00 0.00 4,708,997.00 4,831,402.00 33,790,265.00 74,820,654.00 Net Assets Beginning Net Assets Ending Net Assets 5,679,698.00 $7,514,340.00 152,136,089.00 $202,946,373.00 219,026,313.00 $241,202,041.00 376,842,100.00 $451,662,754.00 Annual Financial Report FY 2004 37 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Valdosta State University Foundation Statement of Activities (FASB) For the Year Ended December 31, 2003 Temporarily Unrestricted Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $344,685.00 36,313.00 230,905.00 775,154.00 1,523,805.00 $791,243.00 234,472.00 68,618.00 45,100.00 727,468.00 (1,523,805.00) 2,910,862.00 343,096.00 $1,236,983.00 134,676.00 1,876,701.00 3,248,360.00 $2,372,911.00 405,461.00 2,176,224.00 0.00 820,254.00 727,468.00 0.00 0.00 0.00 0.00 6,502,318.00 Expenses/Losses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 433,781.00 19.00 1,403,784.00 8,849.00 170,618.00 208,702.00 2,225,753.00 685,109.00 0.00 343,096.00 0.00 3,248,360.00 433,781.00 19.00 1,403,784.00 8,849.00 170,618.00 208,702.00 0.00 2,225,753.00 4,276,565.00 Net Assets Beginning Net Assets Ending Net Assets 2,412,533.00 $3,097,642.00 1,078,242.00 $1,421,338.00 10,405,418.00 $13,653,778.00 13,896,193.00 $18,172,758.00 Annual Financial Report FY 2004 38 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Medical College of Georgia Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Revenues Gifts $206,023.00 Investment Income 934,111.00 Net Realized/Unrealized Gain on Securities 15,029.00 Rental Income 456,629.00 Other Income 10,367.00 Reclassifications Time 5,927,521.00 Total Revenues 7,549,680.00 Temporarily Restricted $5,847,442.00 128,744.00 8,820.00 256,970.00 (5,552,345.00) 689,631.00 Permanently Restricted $3,377,786.00 701,423.00 10,373,948.00 275,985.00 (375,176.00) 14,353,966.00 Total $9,431,251.00 1,764,278.00 10,397,797.00 456,629.00 543,322.00 0.00 22,593,277.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 7,468,220.00 157,843.00 7,626,063.00 (76,383.00) 0.00 689,631.00 0.00 14,353,966.00 0.00 0.00 7,468,220.00 0.00 0.00 0.00 157,843.00 7,626,063.00 14,967,214.00 Net Assets Beginning Net Assets Ending Net Assets 8,146,414.00 $8,070,031.00 21,324,012.00 $22,013,643.00 71,921,167.00 $86,275,133.00 101,391,593.00 $116,358,807.00 Annual Financial Report FY 2004 39 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Medical College of Georgia Dental Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Temporarily Permanently Unrestricted Restricted Restricted $0.00 99,694.00 $0.00 $0.00 3,498,509.00 3,598,203.00 0.00 0.00 Total $0.00 99,694.00 0.00 0.00 3,498,509.00 0.00 3,598,203.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 991,662.00 1,393,903.00 1,212,638.00 3,598,203.00 0.00 0.00 0.00 0.00 0.00 991,662.00 0.00 1,393,903.00 1,212,638.00 0.00 0.00 0.00 3,598,203.00 0.00 Net Assets Beginning Net Assets Ending Net Assets $0.00 $0.00 $0.00 0.00 $0.00 Annual Financial Report FY 2004 40 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Medical College of Georgia Research Institute Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Unrestricted $0.00 36,146.00 2,233,468.00 39,688,261.00 41,957,875.00 Temporarily Permanently Restricted Restricted Total $0.00 39,688,261.00 $0.00 $0.00 36,146.00 0.00 0.00 41,921,729.00 (39,688,261.00) 0.00 0.00 0.00 41,957,875.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 41,236,469.00 236,752.00 41,473,221.00 484,654.00 0.00 0.00 0.00 0.00 0.00 41,236,469.00 236,752.00 0.00 0.00 0.00 0.00 41,473,221.00 484,654.00 Net Assets Beginning Net Assets Ending Net Assets 2,877,103.00 $3,361,757.00 $0.00 $0.00 2,877,103.00 $3,361,757.00 Annual Financial Report FY 2004 41 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Medical College of Georgia Physicians Practice Group Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Temporarily Permanently Unrestricted Restricted Restricted $0.00 1,173,888.00 2,299,320.00 281,006.00 82,639,907.00 $0.00 $0.00 86,394,121.00 0.00 0.00 Total $0.00 1,173,888.00 2,299,320.00 281,006.00 82,639,907.00 0.00 86,394,121.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 82,597,573.00 82,597,573.00 3,796,548.00 0.00 0.00 0.00 0.00 0.00 0.00 82,597,573.00 0.00 0.00 0.00 0.00 82,597,573.00 3,796,548.00 Net Assets Beginning Net Assets Ending Net Assets 49,739,328.00 $53,535,876.00 $0.00 $0.00 49,739,328.00 $53,535,876.00 Annual Financial Report FY 2004 42 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Southern University Housing Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 2,171,917.00 2,171,917.00 $0.00 311,012.00 194,250.00 505,262.00 $0.00 0.00 $0.00 311,012.00 0.00 0.00 2,366,167.00 0.00 0.00 0.00 0.00 2,677,179.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 20,996.00 1,719,523.00 20,996.00 2,150,921.00 1,719,523.00 (1,214,261.00) 0.00 0.00 0.00 0.00 0.00 0.00 1,740,519.00 0.00 0.00 1,740,519.00 936,660.00 Net Assets Beginning Net Assets Ending Net Assets 0.00 $2,150,921.00 1,236.00 ($1,213,025.00) 0.00 $0.00 1,236.00 $937,896.00 Annual Financial Report FY 2004 43 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Southern University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $452,667.00 61,200.00 225,115.00 78,715.00 1,801,252.00 2,618,949.00 $1,097,091.00 460,013.00 1,164,993.00 198,223.00 (1,783,743.00) 1,136,577.00 $5,326,468.00 $6,876,226.00 521,213.00 109,578.00 1,390,108.00 0.00 0.00 386,516.00 (17,509.00) 5,418,537.00 0.00 0.00 0.00 9,174,063.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 1,042,130.00 991,494.00 272,290.00 2,305,914.00 313,035.00 0.00 1,136,577.00 0.00 5,418,537.00 0.00 0.00 1,042,130.00 991,494.00 0.00 0.00 272,290.00 2,305,914.00 6,868,149.00 Net Assets Beginning Net Assets Ending Net Assets 1,674,246.00 $1,987,281.00 6,647,860.00 $7,784,437.00 15,979,299.00 $21,397,836.00 24,301,405.00 $31,169,554.00 Annual Financial Report FY 2004 44 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Southern Boosters Inc Stateme nt of Activ ities (F unctional Displa y ) (F ASB) F or the Year Ended June 30, 2004 Unr e s tr ic te d Temporarily Re stricte d Pe r m a ne ntly Re stricte d Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition T im e Total Revenues $730,763.00 13,129.00 144,200.00 43,581.00 247,773.00 1,179,446.00 $865,767.00 45,000.00 37,101.00 (247,773.00) 700,095.00 $0.00 0.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fu n d r a is ing Total Expenses C hange in Net Assets 671,440.00 481,000.00 148,768.00 1,301,208.00 (121,762.00) 0.00 700,095.00 0.00 0.00 Net Assets Beginning Net Assets Ending Net Assets 798,813.00 $677,051.00 985,098.00 $1,685,193.00 $0.00 T o ta l $1,596,530.00 58,129.00 0.00 0.00 144,200.00 80,682.00 0.00 0.00 0.00 1,879,541.00 0.00 0.00 671,440.00 481,000.00 0.00 0.00 148,768.00 1,301,208.00 578,333.00 1,783,911.00 $2,362,244.00 Annual Financial Report FY 2004 45 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Southern University Research & Service Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 1,996.00 2,417,611.00 2,419,607.00 $0.00 0.00 $0.00 0.00 $0.00 1,996.00 0.00 0.00 0.00 2,417,611.00 0.00 0.00 0.00 0.00 2,419,607.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 278,354.00 1,855,212.00 207,467.00 14,558.00 2,355,591.00 64,016.00 0.00 0.00 0.00 0.00 278,354.00 1,855,212.00 207,467.00 0.00 14,558.00 0.00 0.00 2,355,591.00 64,016.00 Net Assets Beginning Net Assets Ending Net Assets 81,549.00 $145,565.00 $0.00 $0.00 81,549.00 $145,565.00 Annual Financial Report FY 2004 46 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Armstrong Atlantic State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted Permanently Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $623,730.00 20,335.00 62,144.00 535,865.00 (50,616.00) 1,191,458.00 $534,005.00 75,515.00 218,823.00 (535,865.00) 50,616.00 343,094.00 $314,120.00 314,120.00 $1,471,855.00 95,850.00 280,967.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,848,672.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 374,974.00 456,070.00 144,143.00 171,047.00 1,146,234.00 45,224.00 0.00 343,094.00 0.00 314,120.00 0.00 0.00 374,974.00 456,070.00 0.00 144,143.00 171,047.00 1,146,234.00 702,438.00 Net Assets Beginning Net Assets Ending Net Assets 125,208.00 $170,432.00 1,445,362.00 $1,788,456.00 2,754,533.00 $3,068,653.00 4,325,103.00 $5,027,541.00 Annual Financial Report FY 2004 47 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Armstrong Atlantic State University Educational Properties Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v enue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $623,730.00 29,534.00 62,144.00 1,832,019.00 18,078.00 535,865.00 (50,616.00) 3,050,754.00 $534,005.00 75,515.00 218,823.00 (535,865.00) 50,616.00 343,094.00 $314,120.00 314,120.00 $1,471,855.00 105,049.00 280,967.00 0.00 1,832,019.00 18,078.00 0.00 0.00 0.00 0.00 3,707,968.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fund r a is ing Total Expenses C hange in Net Assets 374,974.00 456,070.00 1,987,331.00 144,143.00 171,047.00 3,133,565.00 (82,811.00) 0.00 343,094.00 0.00 314,120.00 0.00 0.00 374,974.00 456,070.00 1,987,331.00 144,143.00 171,047.00 3,133,565.00 574,403.00 Net Assets Beginning Net Assets Ending Net Assets 95,179.00 $12,368.00 1,445,362.00 $1,788,456.00 2,754,533.00 $3,068,653.00 4,295,074.00 $4,869,477.00 Annual Financial Report FY 2004 48 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Augusta State University Fund Raising Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $279,885.00 139,317.00 $475,426.00 244,410.00 50,445.00 965,049.00 (556,066.00) 1,679,106.00 (80,640.00) $295,758.00 100,335.00 $1,051,069.00 239,652.00 714,894.00 959,304.00 50,445.00 0.00 0.00 (408,983.00) 702,004.00 0.00 0.00 0.00 2,300,470.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 226,308.00 63,690.00 33,678.00 773,531.00 132,929.00 90,141.00 1,320,277.00 358,829.00 0.00 (80,640.00) 0.00 702,004.00 226,308.00 63,690.00 33,678.00 773,531.00 132,929.00 0.00 90,141.00 1,320,277.00 980,193.00 Net Assets Beginning Net Assets Ending Net Assets 2,474,129.00 $2,832,958.00 875,580.00 $794,940.00 9,861,732.00 $10,563,736.00 13,211,441.00 $14,191,634.00 Annual Financial Report FY 2004 49 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Augusta State Univ ersity Athletic Association Statem ent of Activ ities (Functional Display) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Inv estm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e O ther Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Rev enues $0.00 664,042.00 664,042.00 $0.00 0.00 $0.00 0.00 $0.00 0.00 0.00 0.00 0.00 664,042.00 0.00 0.00 0.00 664,042.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is in g Total Expenses C hange in Net A ssets 1,136,850.00 1,136,850.00 (472,808.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,136,850.00 0.00 0.00 1,136,850.00 (472,808.00) Net Assets Beginning Net A ssets Ending Net A ssets 645,490.00 $172,682.00 $0.00 $0.00 645,490.00 $172,682.00 Annual Financial Report FY 2004 50 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Columbus State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $663,430.00 32,508.00 225,083.00 499.00 7,966,548.00 8,888,068.00 $7,114,246.00 565,794.00 833,857.00 333,189.00 (9,874,832.00) (1,027,746.00) $4,510,276.00 4,710.00 $12,287,952.00 603,012.00 142,229.00 13,711.00 1,201,169.00 0.00 0.00 347,399.00 1,908,284.00 6,579,210.00 0.00 0.00 0.00 14,439,532.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 7,974,766.00 33,260.00 753,748.00 300,079.00 9,061,853.00 (173,785.00) 0.00 (1,027,746.00) 0.00 6,579,210.00 0.00 0.00 0.00 7,974,766.00 33,260.00 753,748.00 300,079.00 9,061,853.00 5,377,679.00 Net Assets Beginning Net Assets Ending Net Assets 3,332,080.00 $3,158,295.00 46,535,460.00 $45,507,714.00 14,775,674.00 $21,354,884.00 64,643,214.00 $70,020,893.00 Annual Financial Report FY 2004 51 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Columbus State University Alumni Association Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition Time Total Revenues $130,622.00 1,349.00 47,797.00 179,768.00 $0.00 0.00 $0.00 5,664.00 5,664.00 $130,622.00 7,013.00 0.00 0.00 0.00 47,797.00 0.00 0.00 0.00 185,432.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fu n d r a is ing Total Expenses C hange in Net Assets 7,750.00 131,527.00 139,277.00 40,491.00 0.00 0.00 65.00 65.00 5,599.00 0.00 0.00 0.00 0.00 0.00 7,750.00 131,592.00 139,342.00 46,090.00 Net Assets Beginning Net Assets Ending Net Assets 131,085.00 $171,576.00 $0.00 73,387.00 $78,986.00 204,472.00 $250,562.00 Annual Financial Report FY 2004 52 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Foundation Properties, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $6,135,344.00 554,428.00 $411,685.00 23,809.00 3,115,279.00 (167,228.00) 2,993,726.00 (2,993,726.00) 12,631,549.00 (2,558,232.00) $0.00 0.00 $6,547,029.00 578,237.00 0.00 0.00 3,115,279.00 0.00 (167,228.00) 0.00 0.00 0.00 10,073,317.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 3,298,995.00 3,298,995.00 9,332,554.00 5,353.00 5,353.00 (2,563,585.00) 0.00 0.00 0.00 0.00 0.00 0.00 3,304,348.00 0.00 0.00 3,304,348.00 6,768,969.00 Net Assets Beginning Net Assets Ending Net Assets 11,335,258.00 $20,667,812.00 2,563,585.00 $0.00 $0.00 13,898,843.00 $20,667,812.00 Annual Financial Report FY 2004 53 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Columbus State University Athletic Fund, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $48,851.00 194.00 $192,686.00 359,111.00 126,803.00 247,356.00 82,386.00 (247,356.00) 423,204.00 386,827.00 $4,000.00 16,879.00 20,879.00 $245,537.00 376,184.00 0.00 0.00 0.00 209,189.00 0.00 0.00 0.00 830,910.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 154,430.00 125,663.00 138,729.00 418,822.00 4,382.00 870.00 870.00 385,957.00 0.00 20,879.00 0.00 0.00 0.00 0.00 154,430.00 125,663.00 139,599.00 419,692.00 411,218.00 Net Assets Beginning Net Assets Ending Net Assets (56,242.00) ($51,860.00) 17,561.00 $403,518.00 1,201,123.00 $1,222,002.00 1,162,442.00 $1,573,660.00 Annual Financial Report FY 2004 54 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Walter & Emilie Spivey Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 39,600.93 112,278.24 151,879.17 $0.00 0.00 $0.00 0.00 $0.00 39,600.93 112,278.24 0.00 0.00 0.00 0.00 0.00 0.00 151,879.17 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 77,295.76 42,374.50 9,023.99 128,694.25 23,184.92 0.00 0.00 0.00 0.00 0.00 0.00 77,295.76 0.00 0.00 42,374.50 9,023.99 128,694.25 23,184.92 Net Assets Beginning Net Assets Ending Net Assets 7,620,802.54 $7,643,987.46 $0.00 $0.00 7,620,802.54 $7,643,987.46 Annual Financial Report FY 2004 55 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Clayton College & State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition T im e Total Revenues $14,311.00 4,536.00 (1,949.00) $641,333.00 45,118.00 75,949.00 $58,757.00 (4,777.00) 503,216.00 (503,216.00) 515,337.00 259,184.00 58,757.00 $714,401.00 49,654.00 74,000.00 0.00 0.00 (4,777.00) 0.00 0.00 0.00 833,278.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fu nd r a is in g Total Expenses C hange in Net Assets 36,101.00 120,900.00 77,273.00 159,384.00 159,746.00 553,404.00 (38,067.00) 0.00 259,184.00 0.00 58,757.00 36,101.00 0.00 120,900.00 77,273.00 0.00 159,384.00 159,746.00 553,404.00 279,874.00 Net Assets Beginning Net Assets Ending Net Assets 66,997.00 $28,930.00 1,349,660.00 $1,608,844.00 1,105,637.00 $1,164,394.00 2,522,294.00 $2,802,168.00 Annual Financial Report FY 2004 56 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia College & State University Alumni Association, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Other Income Reclassifications Program Total Revenues and Other Support $0.00 617.00 7,956.00 120,220.00 213,941.00 342,734.00 $22,357.00 125,840.00 69,063.00 1,001.00 (213,941.00) 4,320.00 $256,755.00 244,676.00 13,088.00 514,519.00 $279,112.00 126,457.00 321,695.00 134,309.00 0.00 0.00 861,573.00 Expenses Institutional Support Academic Support Student Financial Aid Fundraising Total Expenses Change in Net Assets 138,090.00 29,209.00 159,024.00 12,368.00 338,691.00 4,043.00 0.00 4,320.00 0.00 514,519.00 138,090.00 29,209.00 159,024.00 12,368.00 338,691.00 522,882.00 Net Assets Beginning Net Assets Ending Net Assets 118,030.00 $122,073.00 85,380.00 $89,700.00 4,136,169.00 $4,650,688.00 4,339,579.00 $4,862,461.00 Annual Financial Report FY 2004 57 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia College & State University Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenue Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain(Loss) on Sale of jAssets Other Income Reclassifications Program Total Revenues and Othe Support $1,949,771.00 37,512.00 40,428.00 (536,895.00) 5,777,064.00 1,036,584.00 8,304,464.00 $696,756.00 143,364.00 46,422.00 171,039.00 224,146.00 (1,036,584.00) 245,143.00 $121,766.00 554,866.00 193.00 676,825.00 $2,768,293.00 180,876.00 641,716.00 (365,856.00) 6,001,403.00 0.00 0.00 9,226,432.00 Expenses Institutional Support Academic Support Student Financial Aid Fundraising Total Expenses Change in Net Assets 7,068,703.00 478,326.00 296,981.00 71,673.00 7,915,683.00 388,781.00 0.00 245,143.00 0.00 676,825.00 7,068,703.00 478,326.00 296,981.00 71,673.00 0.00 7,915,683.00 1,310,749.00 Net Assets Beginning Net Assets Ending Net Assets 1,901,206.00 $2,289,987.00 703,554.00 $948,697.00 7,319,721.00 $7,996,546.00 9,924,481.00 $11,235,230.00 Annual Financial Report FY 2004 58 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Southwestern State University Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev e nues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition Time Total Revenues $17,381.00 470,177.00 1,044,824.00 (76,293.00) 736,098.00 2,192,187.00 $822,479.00 98,535.00 576,097.00 187,997.00 (736,098.00) 949,010.00 $196,478.00 13,069.00 209,547.00 $1,036,338.00 568,712.00 1,620,921.00 0.00 0.00 124,773.00 0.00 0.00 0.00 3,350,744.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 242,308.20 428,435.92 242,341.72 478,144.52 433,966.64 1,825,197.00 366,990.00 0.00 949,010.00 0.00 209,547.00 0.00 0.00 242,308.20 428,435.92 242,341.72 478,144.52 433,966.64 1,825,197.00 1,525,547.00 Net Assets Beginning Net Assets Ending Net Assets 14,532,869.00 $14,899,859.00 3,189,794.00 $4,138,804.00 6,128,277.00 $6,337,824.00 23,850,940.00 $25,376,487.00 Annual Financial Report FY 2004 59 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Georgia Southwestern Research and Development C orporation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Investment Incom e Net Realized and Unrealized G ain on Securities G ain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition T im e Total Revenues $0.00 135,009.00 135,009.00 $0.00 0.00 $0.00 0.00 $0.00 0.00 0.00 0.00 0.00 135,009.00 0.00 0.00 0.00 135,009.00 Expenses I n s tr u c tio n Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 376,664.00 376,664.00 (241,655.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 376,664.00 0.00 0.00 0.00 376,664.00 (241,655.00) Net Assets Beginning Net Assets Ending Net Assets 1,023,995.00 $782,340.00 $0.00 $0.00 1,023,995.00 $782,340.00 Annual Financial Report FY 2004 60 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Kennesaw State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $227,726.00 1,831,504.00 137,301.00 6,614,378.00 3,470,221.00 2,824,413.00 15,105,543.00 $999,783.00 222,813.00 858,284.00 (2,824,413.00) (743,533.00) $419,896.00 419,896.00 $1,647,405.00 2,054,317.00 995,585.00 0.00 6,614,378.00 3,470,221.00 0.00 0.00 0.00 14,781,906.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 11,274,071.00 1,062,123.00 379,225.00 49,072.00 12,764,491.00 2,341,052.00 0.00 (743,533.00) 0.00 419,896.00 0.00 0.00 11,274,071.00 1,062,123.00 0.00 379,225.00 49,072.00 12,764,491.00 2,017,415.00 Net Assets Beginning Net Assets Ending Net Assets (755,771.00) $1,585,281.00 5,085,508.00 $4,341,975.00 9,296,536.00 $9,716,432.00 13,626,273.00 $15,643,688.00 Annual Financial Report FY 2004 61 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. North Georgia College & State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted Permanently Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $416,860.00 145,613.00 1,410,653.00 600,355.00 1,194,889.00 3,768,370.00 $532,271.00 1,186,629.00 187,756.00 (1,194,889.00) 711,767.00 $128,492.00 128,492.00 $1,077,623.00 1,332,242.00 0.00 0.00 1,410,653.00 788,111.00 0.00 0.00 0.00 0.00 4,608,629.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 519,757.00 168,913.00 325,652.00 1,448,712.00 559,079.00 185,822.00 3,207,935.00 560,435.00 0.00 711,767.00 0.00 128,492.00 519,757.00 0.00 168,913.00 325,652.00 1,448,712.00 559,079.00 185,822.00 3,207,935.00 1,400,694.00 Net Assets Beginning Net Assets Ending Net Assets (656,835.00) ($96,400.00) 2,167,373.00 $2,879,140.00 10,845,712.00 $10,974,204.00 12,356,250.00 $13,756,944.00 Annual Financial Report FY 2004 62 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Southern Polytechnic State University Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Fund Raising Foundation Rental Income - Residence Halls Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $532,920.51 25,932.54 $511,943.27 18,609.46 (155,829.54) 1,226,749.75 44,544.02 522,746.92 (522,746.92) 2,152,520.18 52,349.83 $34,827.24 $1,079,691.02 44,542.00 (111,285.52) 0.00 1,226,749.75 0.00 34,827.24 0.00 0.00 0.00 2,239,697.25 Expenses Instruction Research Institutional Support Academic Support Student Services - Residence Halls Student Financial Aid Other Liabilities Fundraising Total Expenses C hange in Net Assets 89,206.07 522,746.92 1,182,270.44 59,612.03 241,871.84 236,658.18 2,332,365.48 (179,845.30) 0.00 52,349.83 0.00 34,827.24 0.00 0.00 89,206.07 522,746.92 1,182,270.44 59,612.03 241,871.84 236,658.18 2,332,365.48 (92,668.23) Net Assets Beginning Net Assets Ending Net Assets 1,106,683.69 $926,838.39 352,656.49 $405,006.32 749,040.54 $783,867.78 2,208,380.72 $2,115,712.49 Annual Financial Report FY 2004 63 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. State University of West Georgia Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended December 31, 2003 Temporarily Unrestricted Restricted Permanently Restricted Total Rev enues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $226,937.00 226,937.00 $1,240,832.00 24,685.00 233,843.00 1,499,360.00 $1,225,709.00 1,943,964.00 10,669.00 3,180,342.00 $2,693,478.00 1,968,649.00 0.00 0.00 0.00 244,512.00 0.00 0.00 0.00 4,906,639.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 35,322.00 69,817.00 105,139.00 121,798.00 771,380.00 720,159.00 295,819.00 22,040.00 1,809,398.00 (310,038.00) 2,451.00 189,655.00 175,470.00 367,576.00 2,812,766.00 773,831.00 0.00 945,136.00 0.00 0.00 541,106.00 22,040.00 2,282,113.00 2,624,526.00 Net Assets Beginning Net Assets Ending Net Assets 335,789.00 $457,587.00 1,378,880.00 $1,068,842.00 9,245,780.00 $12,058,546.00 10,960,449.00 $13,584,975.00 Annual Financial Report FY 2004 64 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Dalton State College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $147,643.00 36,583.00 93,676.00 $16,890.00 8,368.00 25,466.00 193,018.00 470,920.00 200,559.00 251,283.00 $59,241.00 150,064.00 456,673.00 (393,577.00) 272,401.00 $223,774.00 195,015.00 575,815.00 0.00 0.00 0.00 0.00 0.00 0.00 994,604.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 12,820.00 401,751.00 0.00 750.00 34,218.00 18,186.00 467,725.00 3,195.00 63,596.00 978.00 146,083.00 210,657.00 40,626.00 15,759.00 15,759.00 256,642.00 76,416.00 0.00 418,488.00 0.00 750.00 180,301.00 18,186.00 694,141.00 300,463.00 Net Assets Beginning Net Assets Ending Net Assets 2,493,655.00 $2,496,850.00 387,858.00 $428,484.00 6,677,060.00 $6,933,702.00 9,558,573.00 $9,859,036.00 Annual Financial Report FY 2004 65 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Macon State College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES, GAIN AND OTHER SUPPORT Gifts $59,213.00 Investment Income 1,892.00 Net Unrealized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues (670.00) 782,912.00 843,347.00 $1,587,757.00 78,924.00 6,140.00 55,125.00 (782,912.00) 945,034.00 $493,957.00 211,940.00 705,897.00 $2,140,927.00 80,816.00 217,410.00 55,125.00 0.00 0.00 2,494,278.00 EXPENSES: Instuction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 243,916.00 170,029.00 69,182.00 112,196.00 595,323.00 248,024.00 0.00 945,034.00 243,916.00 0.00 170,029.00 0.00 705,897.00 69,182.00 112,196.00 595,323.00 1,898,955.00 NET ASSETS Beginning Net Assets Ending Net Assets 204,291.00 $452,315.00 1,609,987.00 $2,555,021.00 5,112,776.00 $5,818,673.00 6,927,054.00 $8,826,009.00 Annual Financial Report FY 2004 66 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. First ABAC L.L.C. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition Time Total Revenues $0.00 $0.00 267,051.00 190,831.00 0.00 457,882.00 $0.00 0.00 $0.00 267,051.00 0.00 0.00 190,831.00 0.00 0.00 0.00 0.00 457,882.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fu n d r a is in g Total Expenses C hange in Net Assets 105,455.00 0.00 0.00 105,455.00 352,427.00 0.00 0.00 0.00 0.00 105,455.00 0.00 0.00 0.00 0.00 105,455.00 352,427.00 Net Assets Beginning Net Assets Ending Net Assets 0.00 $0.00 0.00 $352,427.00 0.00 $0.00 0.00 $352,427.00 Annual Financial Report FY 2004 67 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Abraham Baldwin Agricultural College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $289,366.00 $927,858.00 8,830.00 50,000.00 (179,122.00) 435,718.00 179,122.00 169,074.00 1,542,698.00 $483,725.00 483,725.00 $1,700,949.00 0.00 435,718.00 8,830.00 0.00 50,000.00 0.00 0.00 0.00 2,195,497.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 132,879.00 314,434.00 86,839.00 219,718.00 (50,644.00) 172,853.00 487,287.00 1,055,411.00 0.00 483,725.00 0.00 0.00 447,313.00 0.00 0.00 172,853.00 86,839.00 707,005.00 1,488,492.00 Net Assets Beginning Net Assets Ending Net Assets 1,064,262.00 $1,013,618.00 324,136.00 $1,379,547.00 5,642,035.00 $6,125,760.00 7,030,433.00 $8,518,925.00 Annual Financial Report FY 2004 68 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Bainbridge College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $18,526.00 18,526.00 $0.00 0.00 $0.00 0.00 $18,526.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 18,526.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fun d r a is ing Total Expenses C hange in Net Assets 12,182.00 12,182.00 6,344.00 0.00 0.00 0.00 0.00 12,182.00 0.00 0.00 0.00 0.00 0.00 0.00 12,182.00 6,344.00 Net Assets Beginning Net Assets Ending Net Assets 34,192.00 $40,536.00 $0.00 $0.00 34,192.00 $40,536.00 Annual Financial Report FY 2004 69 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Coastal Georgia Community College Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended December 31, 2003 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $153,052.00 29,178.00 55,754.00 49,488.00 438,222.00 725,694.00 $478,987.00 51,480.00 3,966.00 $115,886.00 195,321.00 (438,222.00) 96,211.00 311,207.00 $747,925.00 80,658.00 255,041.00 0.00 0.00 49,488.00 0.00 0.00 0.00 1,133,112.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 273,113.00 73,203.00 36,688.00 3,100.00 96,085.00 41,520.00 523,709.00 201,985.00 13,600.00 13,600.00 82,611.00 (13,600.00) (13,600.00) 324,807.00 273,113.00 0.00 73,203.00 36,688.00 3,100.00 96,085.00 41,520.00 523,709.00 609,403.00 Net Assets Beginning Net Assets Ending Net Assets 533,632.00 $735,617.00 1,044,433.00 $1,127,044.00 1,359,296.00 $1,684,103.00 2,937,361.00 $3,546,764.00 Annual Financial Report FY 2004 70 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Darton College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition Time Total Revenues $195,315.00 1,197.00 $56,506.00 $125,000.00 21,636.00 $376,821.00 22,833.00 16,382.00 16,382.00 196,512.00 9,760.00 66,266.00 (9,760.00) 153,258.00 416,036.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fu n d r a is ing Total Expenses C hange in Net Assets 27,783.00 59,060.00 5,257.00 71,709.00 12,738.00 176,547.00 19,965.00 102,002.00 102,002.00 (35,736.00) 4,035.00 5,000.00 9,035.00 144,223.00 27,783.00 63,095.00 5,257.00 178,711.00 12,738.00 287,584.00 128,452.00 Net Assets Beginning Net Assets Ending Net Assets 131,012.00 $150,977.00 218,252.00 $182,516.00 891,478.00 $1,035,701.00 1,240,742.00 $1,369,194.00 Annual Financial Report FY 2004 71 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. East Georgia College Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program S c ho la r s hip s Time Total Revenues $83,322.00 913.00 345.00 $133,360.00 16,963.00 6,363.00 1,298.00 79,213.00 8,983.00 174,074.00 6,297.00 (79,213.00) (8,983.00) 74,787.00 $0.00 0.00 $216,682.00 17,876.00 6,708.00 0.00 0.00 7,595.00 0.00 0.00 0.00 248,861.00 Expenses Instruction Public Service Institutional Support Academic Support Student Services Student Financial Aid Fu n d r a is ing Total Expenses C hange in Net Assets 49,958.00 29,255.00 34,490.00 2,349.00 4,800.00 39,418.00 3,515.00 163,785.00 10,289.00 0.00 74,787.00 0.00 0.00 49,958.00 29,255.00 34,490.00 2,349.00 4,800.00 39,418.00 3,515.00 163,785.00 85,076.00 Net Assets Beginning Net Assets Ending Net Assets 70,202.00 $80,491.00 628,190.00 $702,977.00 $0.00 698,392.00 $783,468.00 Annual Financial Report FY 2004 72 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Floyd C ollege Foundation Statem ent of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Rev enues $6,413.02 41,750.92 38,150.00 17,555.27 103,869.21 $0.00 $283,954.11 0.00 283,954.11 $290,367.13 41,750.92 0.00 0.00 38,150.00 17,555.27 0.00 0.00 0.00 387,823.32 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is in g Total Ex penses C hange in Net A ssets 28,766.62 5,727.91 1,868.06 75,259.00 35,111.61 146,733.20 (42,863.99) 0.00 0.00 0.00 283,954.11 0.00 0.00 28,766.62 5,727.91 1,868.06 75,259.00 35,111.61 146,733.20 241,090.12 Net Assets B eginning Net A ssets Ending Net A ssets 420,655.39 $377,791.40 0.00 $0.00 154,000.00 $437,954.11 574,655.39 $815,745.51 Annual Financial Report FY 2004 73 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. C artersville/Bartow Foundation Statem ent of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on Securities G ain on Sale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Revenues $23,000.00 2,980.59 1,856.55 27,837.14 $0.00 0.00 $0.00 2,000.00 2,000.00 $23,000.00 4,980.59 1,856.55 0.00 0.00 0.00 0.00 0.00 0.00 29,837.14 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent Services S tudent Financial A id Fu n d r a is in g Total Expenses C hange in Net A ssets 1,717.50 1,073.95 25,360.17 25,675.11 53,826.73 (25,989.59) 0.00 0.00 0.00 2,000.00 0.00 0.00 1,717.50 1,073.95 0.00 25,360.17 25,675.11 53,826.73 (23,989.59) Net Assets Beginning Net A ssets Ending Net A ssets 321,145.04 $295,155.45 $0.00 128,000.00 $130,000.00 449,145.04 $425,155.45 Annual Financial Report FY 2004 74 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Gainesville College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Reclassification Program Equipment Time Total Revenues $341,724.00 114,113.00 522,763.00 32,805.00 488,800.00 1,500,205.00 $173,036.00 87,161.00 416,450.00 41,517.00 (488,800.00) 229,364.00 $46,748.00 73.00 46,821.00 $561,508.00 201,274.00 939,286.00 0.00 0.00 74,322.00 0.00 0.00 0.00 1,776,390.00 Expenses Instruction Research Institutional Support Academic support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 6,199.00 12,376.00 296,640.00 287,291.00 109,577.00 712,083.00 788,122.00 0.00 229,364.00 0.00 46,821.00 6,199.00 0.00 12,376.00 296,640.00 0.00 287,291.00 109,577.00 712,083.00 1,064,307.00 Net Assets Beginning Net Assets Ending Net Assets (86,196.00) $701,926.00 4,045,817.00 $4,275,181.00 3,202,871.00 $3,249,692.00 7,162,492.00 $8,226,799.00 Annual Financial Report FY 2004 75 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Gordon College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $78,423.00 126,714.00 583,399.00 289.00 788,825.00 $0.00 0.00 $0.00 0.00 $78,423.00 126,714.00 583,399.00 0.00 0.00 289.00 0.00 0.00 0.00 0.00 788,825.00 Expenses Instruction Research Institutional Support Management and General Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 16,766.00 121,980.00 676.00 139,422.00 649,403.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 16,766.00 0.00 121,980.00 676.00 139,422.00 649,403.00 Net Assets Beginning Net Assets Ending Net Assets 4,195,919.00 $4,845,322.00 $0.00 $0.00 4,195,919.00 $4,845,322.00 Annual Financial Report FY 2004 76 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Middle Georgia College Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v enue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $21,495.00 373.00 $74,598.00 17,959.00 $219,759.00 398.00 (628.00) 49,434.00 (19,684.00) (29,750.00) 71,302.00 72,873.00 189,779.00 $315,852.00 18,730.00 (628.00) 0.00 0.00 0.00 0.00 0.00 0.00 333,954.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fund r a is ing Total Expenses C hange in Net Assets 13,532.00 16,869.00 33,232.00 9,754.00 73,387.00 (2,085.00) 0.00 72,873.00 0.00 189,779.00 0.00 0.00 13,532.00 0.00 16,869.00 33,232.00 9,754.00 73,387.00 260,567.00 Net Assets Beginning Net Assets Ending Net Assets 19,697.00 $17,612.00 178,865.00 $251,738.00 597,394.00 $787,173.00 795,956.00 $1,056,523.00 Annual Financial Report FY 2004 77 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. South Georgia College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $8,729.60 50,344.62 147,857.82 $162,210.66 2,021.33 150,053.00 (175,053.00) 359,006.37 (12,842.34) $93,445.93 25,000.00 118,445.93 $264,386.19 50,344.62 147,857.82 0.00 0.00 2,021.33 0.00 0.00 0.00 464,609.96 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 12,689.91 132,388.02 112,042.56 12,010.45 269,130.94 89,875.43 0.00 (12,842.34) 0.00 118,445.93 12,689.91 0.00 132,388.02 0.00 0.00 112,042.56 12,010.45 269,130.94 195,479.02 Net Assets Beginning Net Assets Ending Net Assets 452,560.87 $542,436.30 131,055.09 $118,212.75 1,818,541.37 $1,936,987.30 2,402,157.33 $2,597,636.35 Annual Financial Report FY 2004 78 University System of Georgia Statement of Activities for Component Units reporting under FASB requirements. Waycross College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition T im e Total Revenues $37,946.00 1,278.00 1,576.00 $16,586.00 22,106.00 $110,117.00 756.00 57,115.00 54,885.00 33,191.00 128,876.00 (54,885.00) (33,191.00) (49,384.00) 167,988.00 $164,649.00 24,140.00 58,691.00 0.00 0.00 0.00 0.00 0.00 0.00 247,480.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 800.00 8,186.00 9,664.00 54,885.00 524.00 74,059.00 54,817.00 0.00 (49,384.00) 0.00 167,988.00 800.00 0.00 8,186.00 0.00 9,664.00 54,885.00 524.00 74,059.00 173,421.00 Net Assets Beginning Net Assets Ending Net Assets 59,537.00 $114,354.00 137,054.00 $87,670.00 945,339.00 $1,113,327.00 1,141,930.00 $1,315,351.00 Annual Financial Report FY 2004 79 Statement of Cash Flows UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPE RA T ING A CT IVIT IE S Tuition and Fees Federal A ppropriations G rants and C ontracts (Exchange) S ales and S ervices of Educational D epartm ents Paym ents to S uppliers Paym ents to Em ployees Paym ents for S cholarships and Fellowships Loans Issued to S tudents and Em ployees C ollection of Loans to S tudents and Em ployees A uxiliary Enterprise C harges: Residence Halls B ookstore Food Services P a r k in g /T r a n s p o r ta tio n Health S ervices Intercollegiate A thletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating A ctivities CA SH F LOWS F ROM NON- CA PIT A L F INA NCING A CT IVIT IES S tate A ppropriations A gency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing A ctivities CA SH F LOWS F ROM CA PIT A L A ND RELA T E D F INA NCING A CT IVIT IE S C apital G rants and G ifts Received Proceeds from sale of C apital A ssets Purchases of C apital A ssets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing A ctivities CA SH F LOWS F ROM INVE ST ING A CT IVIT IE S Proceeds from S ales and Maturities of Investm ents Interest on Investm ents Purchase of Investm ents Net C ash Provided (used) by Investing A ctivities Net Increase/Decrease in C ash C ash and C ash Equivalents - B eginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $719,123,136.25 16,168,852.00 1,244,533,868.83 59,784,025.40 (1,867,414,847.98) (2,083,010,131.09) (243,431,781.41) (17,197,302.10) 17,697,031.90 111,432,036.64 75,010,016.79 67,009,180.86 36,047,715.83 30,210,098.98 39,018,561.08 14,198,255.27 297,226,086.42 (1,483,595,196.33) 1,631,509,277.55 11,897,937.35 95,085,259.19 1,738,492,474.09 37,655,632.09 (47,185.22) (204,565,528.81) (12,202,332.95) (22,749,370.40) (201,908,785.29) 126,391,312.23 8,361,564.60 (219,524,681.43) (84,771,804.60) (31,783,312.13) 474,759,142.39 $442,975,830.26 Annual Financial Report FY 2004 80 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA TING LOSS T O NET CA SH PROVIDE D (USED) BY OPERA T ING A CT IVIT IES: Operating Incom e (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by O perating A ctivities D epreciation C hange in A ssets and Liabilities: Receivables, net I n v e nto r ie s O ther A ssets A ccounts Payable Deferred Revenue O ther Liabilities C om pensated A bsences Net C ash Provided (used) by Operating A ctivities ($1,738,586,429.91) 206,913,020.78 29,738,880.63 5,400,436.45 9,483,189.95 11,248,144.88 (46,903,328.71) 36,551,418.81 2,559,470.79 ($1,483,595,196.33) NON-C ASH INVESTING , NON-C APITAL FINANC ING , AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations C hange in fair value of investm ents recognized as a com ponent of inter C hange in interest receivable affecting interest received G ift of capital assets reducing proceeds of capital grants and gifts $96,619,508.31 $759,976.85 $305,884.96 $67,957,203.46 Annual Financial Report FY 2004 81 UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations The University System of Georgia serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity The University System of Georgia is comprised of thirty-four (34) State supported member institutions of higher education in Georgia. The accompanying financial statements reflect the consolidated operations of the University System of Georgia. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University System of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, all 34 institutions are considered organizational units of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of their legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report. These statements (Statement of Net Assets and Statement of Revenues, Expenses, and Changes in Net Assets for the four component units reporting under GASB requirements and the Balance Sheet and Statement of Activities for the 49 component units reporting under FASB requirements) are reported discretely in the University System's report. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Annual Financial Report FY 2004 82 Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University System was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University System's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University System is considered a special-purpose government engaged only in business-type activities. Accordingly, the University System'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 inter-institution transactions have been eliminated. The University System has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University System accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Annual Financial Report FY 2004 83 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University System's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University System'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to University System of Georgia when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $177,775,827.42 to the University System of Georgia. This resulted in a cumulative total of $1,991,949,742.77 as of June 30, 2004. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Annual Financial Report FY 2004 84 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. University System of Georgia had accrued liability for compensated absences in the amount of $129,531,317.10 as of 7-1-2003. For FY2004, $102,983,702.53 was earned in compensated absences and employees were paid $100,577,162.62, for a net increase of $2,406,539.91. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $131,937,857.01. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University System's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University System's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University System is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Annual Financial Report FY 2004 85 Expendable Restricted Net Assets include the following: Restricted - E&G and Other Organized A ctivities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Expendable June 30, 2004 $142,698,069.52 45,443,648.83 17,543,780.69 1,009,105.59 23,980,109.66 $230,674,714.29 Restricted net assets expendable Capital Projects: This represents resources for which the University System is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University System, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net A ssets June 30, 2004 $58,842,227.63 115,607,658.66 7,155,944.69 52,441,302.08 $234,047,133.06 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University System of Georgia, 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. Annual Financial Report FY 2004 86 Classification of Revenues The University System has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University System, 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 University System's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University System has recorded contra revenue for sponsored and unsponsored scholarships. Annual Financial Report FY 2004 87 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus the University System 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 any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus University System of Georgia), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Annual Financial Report FY 2004 88 Categorization of Deposits The University System'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 University System or by its agent in the University System's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University System'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 University System's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits Carrying Amount Bank Balances Risk Categories 1 2 3 $229,158,292.16 $266,676,814.96 $20,618,340.46 $58,694,394.23 $185,112,167.16 15,266,970.27 10,772,387.00 57,237.79 10,621,374.56 93,774.65 $244,462,866.07 $277,486,805.60 $21,575,578.25 $69,353,372.43 $185,205,941.81 Annual Financial Report FY 2004 89 Categorization of Investments The University System's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University System or its agent in the University System's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University System's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University System's name. At June 30, 2004, the University System's investments consisted of the following: Type of Investm ents C om m on S tock C orporate B onds U.S. G overnm ent S ecurities and C orporate Obligations T o ta ls Risk C ategories 1 2 3 $2,737,812.42 619,328.91 39,308,516.11 $42,665,657.44 $9,157,189.00 9,572,203.32 107,747,001.88 $126,476,394.20 $770,812.17 10,317.90 953,987.78 $1,735,117.85 C arrying Amount $12,665,813.59 10,201,850.13 148,009,505.77 $170,877,169.49 Investm ents Not S ubject to C ategorizations: Board of Regents Short-Term Fund Total Return Fund Balanced Income Fund Legal Fund Building Investm ent Bank of American Bond Funds Investm ent Portfolio A ccounts Mutual Funds Real Estate State Investm ent Pool Short Term Investm ents Investm ent in G HEA C Loans Total Investm ents 53,966,557.47 65,343,489.55 4,398,131.41 7,335,355.47 6,500,000.00 13,281,112.45 241,927.49 98,220,180.42 40,909,914.70 $461,073,838.45 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University System did not own any specific, identifiable investment securities of the pool. Annual Financial Report FY 2004 90 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r S ub Total Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $28,160,232.68 11,559,434.96 66,940,387.96 1,616,314.02 150,872,057.71 259,148,427.33 6,841,121.81 $252,307,305.52 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ook store Food Services Physical Plant O th e r T o ta l $11,753,603.26 859,048.82 1,771,079.85 2,494,309.39 $16,878,041.32 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University System for amounts cancelled under these provisions. As the University System determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University System has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was approximately $1,013,800.61. Annual Financial Report FY 2004 91 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $112,794,333.54 70,341,415.03 183,135,748.57 Additions $18,621,187.33 111,037,119.53 129,658,306.86 Reductions $178,507.50 66,373,959.73 66,552,467.23 Ending Balance 6/30/2004 $131,237,013.37 115,004,574.83 246,241,588.20 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 122,501,145.85 3,336,683,822.64 180,276,255.51 860,874,528.21 116,306,586.92 509,847,261.87 13,116,900.92 5,139,606,501.92 10,480,738.68 514,717,628.30 31,890,829.42 85,684,591.66 65,291,894.32 31,930,417.13 4,142,010.35 744,138,109.86 2,223,308.20 65,957,854.96 5,580,916.84 53,498,667.75 4,362,668.35 2,871,794.31 205,740.00 134,700,950.41 130,758,576.33 3,785,443,595.98 206,586,168.09 893,060,452.12 177,235,812.89 538,905,884.69 17,053,171.27 5,749,043,661.37 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 43,025,517.78 1,042,649,549.85 61,538,094.68 565,745,459.82 7,464,574.52 367,970,186.23 578,008.30 2,088,971,391.18 4,129,568.75 107,980,314.13 6,577,756.30 79,784,160.17 8,283,685.47 31,845,968.70 47,595.77 238,649,049.29 1,780,831.37 34,585,889.33 3,640,475.10 45,244,573.78 1,239,498.37 3,967,430.84 22,766.89 90,481,465.68 45,374,255.16 1,116,043,974.65 64,475,375.88 600,285,046.21 14,508,761.62 395,848,724.09 602,837.18 2,237,138,974.79 Total Capital Assets, Being Depreciated, Net 3,050,635,110.74 505,489,060.57 44,219,484.73 3,511,904,686.58 Capital Assets, net $3,233,770,859.31 $635,147,367.43 $110,771,951.96 $3,758,146,274.78 Annual Financial Report FY 2004 92 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fe e s Research Other D eferred Revenue T o ta ls $107,483,271.10 26,933,088.15 49,570,093.56 $183,986,452.81 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Current Portion $198,294,596.21 $289,346,450.28 $13,464,899.44 $474,176,147.04 $13,404,637.66 Other Liabilities Compensated Absences 129,531,317.10 Other Long Term Liabilities 2,533,934.98 Total 132,065,252.08 102,983,702.53 7,500,000.00 110,483,702.53 100,577,162.62 228,590.13 100,805,752.75 131,937,857.01 9,805,344.85 141,743,201.86 76,853,783.77 635,126.54 77,488,910.31 Total Long Term Obligations $330,359,848.29 $399,830,152.81 $114,270,652.19 $615,919,348.90 $90,893,547.97 Annual Financial Report FY 2004 93 Note 9. Lease Obligations The University System of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Lease Obligations (for all institutions) Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases Operating Leases $39,174,405.46 38,444,139.17 37,240,693.09 36,541,753.60 35,904,078.42 182,597,611.14 188,536,520.20 169,954,450.87 119,909,256.88 52,591,655.57 $16,727,975.76 7,116,684.68 6,704,348.92 4,443,004.99 3,387,973.49 10,569,101.00 50.00 50.00 50.00 30.00 $900,894,564.41 420,452,417.78 6,279,731.79 $474,162,414.84 $48,949,268.84 CAPITAL LEASES Several of the institutions in the University System of Georgia had capital leases as of June 30, 2004. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2032. Expenditures for fiscal year 2004 were $36,352,982.23 of which $22,892,487.46 represented interest. Total principal paid on capital leases was $13,460,494.77 for the fiscal year ended June 30, 2004. Interest rates range from 2.25 percent to 11 percent. Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Details for each capital lease are included with the individual institution financial report. Some of the major leases are listed below: Annual Financial Report FY 2004 94 Georgia Institute of Technology had three capital leases with related parties in fiscal year 2004. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000.00 for the Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc, both discretely presented component units. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2004 the remaining long-term debt obligation (principal) under the lease was $19,945,000.00, and the amount due (principal and interest) in the next fiscal year is $1,426,153.76. In August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200.00 with the Georgia Tech Foundation, Inc. for a complex of buildings collectively named "Technology Square". Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2004 the remaining long-term debt obligation (principal) under the lease was $139,900,440.00, and the amount due (principal and interest) in the next fiscal year is $9,838,142.60. In February 2001 Georgia Institute of Technology entered into a capital lease of $44,980,000.00 with the Georgia Tech Foundation, Inc. for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 30-year period that began May 2001 and expires November 2031. At June 30, 2004 the remaining long-term debt obligation (principal) under the lease was $44,220,000.00, and the amount due (principal and interest) in the next fiscal year is $3,065,317.52. Georgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $64,029,360.00 with The University Financing Foundation for the Technology Square Research Building. The lease term is for a 23year period that began June 2003 and expires June 2026. At June 30, 2004 the remaining longterm debt obligation (principal) under the lease was $63,779,827.56 and the amount due (principal and interest) in the next fiscal year is $3,888,108.54. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease. Georgia State University has two capital leases associated with buildings. In July 2001, Georgia State University entered in to a capital lease valued at $34,650,000.00 with an effective interest rate of 6.985 percent with the Georgia State University Foundation (Foundation), whereby the University leases the Student Recreation Center for a twenty-year period that began July 2001 and expires June 2021. In March 2000, the University entered into a capital lease valued at $14,038,328.00 with an effective interest rate of 6.985 percent with the Foundation whereby the University leases the Alpharetta Center for a twenty-year period that began March 2000 and expires February 2020. The outstanding principal liability at June 30, 2004 on these capital leases is $31,989,764.69 and $12,404,315.09 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI. The Medical College of Georgia has various leases for equipment with an outstanding balance at June 30, 2004 in the amount of $4,009,327.24. Annual Financial Report FY 2004 95 The University of Georgia occupies four real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2011, 2032, 2033, and 2034. The equipment capital leases expire between 2005 and 2009. Expenditures for fiscal year 2004 were $5,214,701.25, of which $3,705,519.93 represented interest and $1,509,181.32 represented principal paid on capital leases. Interest rates range from 2.25 percent to 8.36 percent. The carrying values of assets held under capital lease, including the current liability portion, at June 30, 2004 were $61,697,311.23 (buildings $61,576,744.50 and equipment $120,566.73). All four of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In June of 2001, the University of Georgia entered into a capital lease with the UGAREF whereby the University leases a building for a 10-year period that began June 1, 2001 and expires June 30, 2011. In August of 2001, the University of Georgia entered into a second capital lease with the UGAREF, whereby the University leases the Carlton Street Parking Deck for a 30-year period that began September 30, 2001 and expires August 31, 2031. In November of 2002, the University of Georgia entered into the third capital lease with the UGAREF whereby the University leases the East Village Parking Deck for a 30-year period that began on November 1, 2002 and expires July 31, 2032. In September of 2003, The University of Georgia entered into the fourth capital leases with The University of Georgia Real Estate foundation, whereby, the University leases the Complex Carbohydrate Research Center for a 30-year period that began on September 25, 2003 and expires September 30, 2033. The outstanding liability at June 30, 2004 on these capital leases is $60,040,275.86. Georgia Southern University had two capital leases with related entities in the current fiscal year. In March 1995, Georgia Southern University entered into a capital lease of $3,000,000.00 at 5.50 percent with the Georgia State Financing and Investment Commission, a party external to the system, whereby the University leases a building for a thirty-year period that began in March 1995 and expires February 2025. The outstanding liability at June 30, 2004 on this capital lease is $2,505,614.80. In October 2002, the University entered into a capital lease of $42,668,051.33 (recorded at Net Present Value of Lease Payments) at 4.89 percent with the Georgia Southern University Housing Foundation, Inc., a related party, whereby the University leases land and buildings for a twenty-seven year period that began September 2003 and expires October 2031. The outstanding liability at June 30, 2004 on this capital leases is $38,849,881.66. Valdosta State University has several capital leases with the Valdosta State University Foundation, a related entity. The lease purchase obligation at June 30, 2004 on these capital leases is $346,251.25. The University at its option may terminate the leases. Kennesaw State University had four capital leases with Kennesaw State University Foundation, Inc., a discretely presented component unit, in the current fiscal year. In May 2002, Kennesaw State University entered into a capital lease of $3,965,767.73 at 9.14 percent whereby the University leases nine houses for a twenty-five-year period that began May 2002 and expires April 2027. The outstanding liability at June 30, 2004 on this capital lease is $3,827,805.96.In August 2002, the University entered into a capital lease of $21,016,937.82 at 4.7 percent whereby the University leases two parking decks for a twenty-four-year period that began August 2002 and expires July 2026. In August 2003 the lease payments increased because Annual Financial Report FY 2004 96 additional space was added to one of the decks bringing the value of the lease to $24,093,887.21. The decks are constructed on land owned by the University and leased to Kennesaw State University Foundation, Inc. for $1.00 annually for a period of 25 years commencing in June 2001. At the expiration of the ground lease, ownership of the parking decks transfers to the University. The outstanding liability at June 30, 2004 on this capital lease is $22,976,018.41.In January 2004 the University entered into a capital lease of $2,718,027.73 at 5.5 percent whereby the University leases a portion of a building for a twenty-five-year period that began January 2004 and expires June 2029. The University has the right of first refusal to lease additional space in the building complex. Should the cumulative value of the rent payments equal the value of the Foundation's financing instrument and all additional rent under the terms of the agreement, Kennesaw State University Foundation, Inc. will gift the property to the University. The outstanding liability at June 30, 2004 on this capital lease is $2,680,973.09.In February 2004 the University entered into a capital lease of $200,000 at 2.0 percent whereby the University leases a house for a fifteen-year period that began February 2004 and expires January 2019. The outstanding liability at June 30, 2004 on this capital leases is $195,215.65. Georgia Perimeter College has one capital lease on the Gwinnett University Center. In November 2001, Georgia Perimeter entered into this 22-year lease with an implicit interest rate of 5.15 percent. Current outstanding balance as of June 30, 2004 is $16,294,290.32. This lease will expire in 2023. The University System Office has four capital leases payable in monthly installments with terms expiring in 2007. The University System Office entered into two new Capital Lease Obligations in FY 04. In February 2004 these lease obligations were completed for the purchase of numerous items of equipment. Both obligations, Number 190 and Number 208, were entered into with SunTrust Bank. Obligation Number 190 has an interest rate of 3.37% and an original principal amount of $1,555,624.29 maturing in FY 2007. Obligation Number 208 has an interest rate of 3.7% and an original principal amount of $126,047.32 maturing in FY 2007. OPERATING LEASES The University System of Georgia's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2030. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. System-wide, remaining payments on operating leases total $48,949,268.84. Annual Financial Report FY 2004 97 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description The University System of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of the University System of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University System of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $106,773,703.51 $107,129,310.57 $105,288,726.51 Employees' Retirement System of Georgia Plan Description The University System of Georgia 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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 Annual Financial Report FY 2004 98 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University System 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 University System also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. Total contributions to the plan made during fiscal year 2004 amounted to $360,561.42, of which $280,825.62 was made by the University System and $79,735.80 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Annual Financial Report FY 2004 99 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy The University System of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The University System of Georgia and the covered employees made the required contributions of $61,449.664.05 (10.03%) and $30,758,206.22 (5%), respectively. Georgia Defined Contribution Plan Plan Description The University System of Georgia 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. Annual Financial Report FY 2004 100 Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $5,469,337.35 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. The University System of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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 University System of Georgia, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the Annual Financial Report FY 2004 101 performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University System of Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 11,661 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, the University System of Georgia recognized as incurred $45,081,480.77 of expenditures, which was net of $17,938,834.52 of participant contributions. Annual Financial Report FY 2004 102 Note 14. Natural Classifications with Functional Classifications The University System's operating expenses by functional classification for FY2004 are shown below: Functional Classification Natural Classification Instruction Research Public Service Academic Support Student Services Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation $571,948,270.40 216,193,526.68 177,092,777.18 1,365,608.51 10,382,255.58 $184,095,859.72 219,442,810.30 73,921,806.26 388,097.81 15,568,021.91 (795,735.87) 1,794,234.04 7,549,332.49 1,981,149.95 111,532,470.88 34,072,054.65 196,158,579.21 16,867,217.92 $47,302,398.86 131,180,196.87 42,225,928.05 414,154.11 5,025,859.93 877,870.29 21,359,893.20 124,183,124.94 4,207,404.82 $10,943,367.81 159,138,459.23 43,069,267.36 60,352.23 2,928,123.58 201,555.50 2,757,142.07 70,419,136.50 27,138,134.63 $1,009,250.95 88,971,158.42 21,023,414.22 77,653.29 1,542,254.94 2,314,117.88 1,767,063.69 46,826,521.49 2,319,136.46 Total Expenses $1,129,340,560.50 $710,217,777.12 $376,776,831.07 $316,655,538.91 $165,850,571.34 Natural Classification Plant Operations & Maintenance Scholarships & Fellowships Auxiliary Enterprises Unallocatted Expenses Patient Care Total Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation $250,247.75 109,833,022.98 29,879,486.48 (7,938,407.64) 230,486.66 70,285,507.97 86,125,288.88 17,115,303.36 $170,131.00 35,798.24 48,388.97 3,387.23 244,670,500.46 667.00 118,132.70 2,718.06 $611,698.86 78,075,074.05 17,775,269.41 8,638,696.87 1,077,685.03 10,724,370.85 15,128,368.22 171,188,717.98 19,082,853.55 $0.00 (469,662.94) 5,778.05 66,261,183.82 $5,463,825.31 61,283,679.23 16,439,017.90 204,420.55 260,801.32 74,947,771.85 $823,094,620.91 1,257,931,455.16 506,276,636.65 3,145,359.09 39,393,546.29 257,073,907.21 131,323,474.58 1,206,628,377.83 206,909,670.47 Total Expenses $305,780,936.44 $245,049,723.66 $322,302,734.82 $65,797,298.93 $158,599,516.16 $4,431,777,048.19 Annual Financial Report FY 2004 103 Note 15. Component Units Georgia Institute of Technology Georgia Tech Foundation, Inc., (Foundation) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the Institute in support of its programs. The Foundation board of trustees is self-perpetuating and consists of forty-five (45) elected trustees, who are alumni of the Institute and five (5) ex-officio trustees. Although the Institute does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted for support of the Institute. Because the resources held by the Foundation are used by, or for the benefit of, the Institute, the Foundation is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The Foundation is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. The Foundation's financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in the Foundation's independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $50,536,092.41 to the Institute for restricted and unrestricted purposes. Note 9 of this financial report provides information on related party leases between the Foundation and the Institute. Complete financial statements for the Foundation can be requested at the following address: Georgia Tech Foundation, Inc. Controller's Office 760 Spring Street, N.W., Suite 400 Atlanta, GA 30308 Georgia Tech Athletic Association (Association) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). The Association administers the Institute's intercollegiate athletics program, including fund-raising to support scholarships. The 14-member association board of trustees is appointed predominantly by the President of the Georgia Institute of Technology, and consists of faculty, alumni, students, and friends of the Institute. Although the Institute does not control the timing or amount of receipts and disbursements, all of the Association's resources are restricted to support the intercollegiate athletic program for Georgia Tech. Because the resources are used for the benefit of the Institute, the Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. Annual Financial Report FY 2004 104 The Association is a private nonprofit organization that reports under GASB standards, the same used by the Institute. The Association's financial information has been condensed, and expenses have been converted from functional to natural classification for presentation within the Institute's financial statements. The Association's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Association distributed $4,314,549.78 to the Institute for scholarship support and $4,027,688 in other payments that were either expense reimbursements or support for Institute programs. The Institute distributed to the Association, $1,936,857.69 in (net) fees collected from students for support of the intercollegiate athletic program. Complete financial statements for the Association can be requested at the following address: Georgia Tech Athletic Association 150 Bobby Dodd Way, NW Atlanta, GA 30332-0455 Attention: Mollie Simmons Mayfield Assistant Director of Athletics Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research Corporation (referred to in the singular as GTRC in this document) are legally separate, taxexempt affiliates of the Georgia Institute of Technology (Institute). GTRC functions as the prime contractor for most sponsored research conducted at Georgia Tech and subcontracts with the Institute for faculty and staff services. GTRC's 12-member board of trustees is selfperpetuating and consists of senior Institute administrators, alumni, and supporters of Georgia Tech. GTRC's income and resources are restricted to support research mission objectives of Georgia Tech. Because resources held by GTRC are restricted for use in support of the Institute, GTRC is considered a component unit of Georgia Tech and is discretely presented in the Institute's financial statements. GTRC is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-forProfit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. GTRC's financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in GTRC's independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). GTRC's fiscal year is July 1 through June 30. During the year ended June 30, 2004, GTRC distributed $297,210,831 to the Institute, primarily as reimbursement for research and other sponsored activities conducted on campus. The Institute distributed $3,640,724.81 to GTRC, primarily for related-party rental payments. Note 9 of this financial report provides information on related party leases. Complete financial statements for GTRC can be requested at the following address: Georgia Tech Research Corporation Director of Accounting and Reports 505 Tenth Street Atlanta, GA 30332-0415 Annual Financial Report FY 2004 105 Georgia Tech Facilities, Inc., (Facilities) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). Facilities constructs research and auxiliary buildings and other structures for use by the Institute and then leases the completed buildings/structures to the Institute. The eight-member Facilities board is appointed by the President of the Georgia Institute of Technology and consists of alumni and friends of Georgia Tech. Although the Institute does not control the timing or amount of receipts and disbursements for Facilities, its resources and income are restricted to support the construction activities of Georgia Tech. Because the restricted resources held by Facilities can only be used by, or for the benefit of, the Institute, Facilities is considered a component unit of Georgia Tech and is discretely presented in the Institute's financial statements. Facilities is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-forProfit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. Facilities' financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in the Facilities' independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). Facilities' fiscal year is July 1 through June 30. Investments valued at $19.945 million, and bonds payable are included in Facilities' financial statements. The corresponding buildings and associated long-term debt are included in the Institute's report and will be eliminated for CAFR reporting. Note 9 of this financial report provides information on related party leases. Complete financial statements for Facilities can be obtained from the following address: Georgia Tech Facilities, Inc. Treasurer's Office Lyman Hall, Room 315 Atlanta, GA 30332-0257 Attention: Joel Hercik Georgia Tech Alumni Association (Alumni Association) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). The Alumni Association acts primarily as a point of contact with the Institute's alumni, prospective students, and friends for outreach and development. The 43 member Alumni Association board of trustees is selfperpetuating and consists of alumni and friends of the Institute. Although the Institute does not control the timing or amount of receipts from the Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests are restricted to support the Alumni Association's mission of serving and promoting the alumni of the Institute. Because resources held by the Alumni Association are used by, or for the benefit of, the Institute, the Alumni Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The Alumni Association is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and Annual Financial Report FY 2004 106 presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. The Alumni Association's financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in the Alumni Association's independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). The Alumni Association's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Alumni Association paid $561,610.26 to the Institute primarily for reimbursement of employee insurance costs. The Institute funded $144,353.00 in Alumni Association costs in support of that unit's communication and outreach mission. The Alumni Association also received $3,599,884.00 in funding support from the Georgia Tech Foundation, Inc., another component unit of the Institute. Complete financial statements for the Alumni Association can be requested at the following address: Georgia Tech Alumni Association 190 North Avenue Atlanta, GA 30313 Attention: Controller . Investments for Component Units: The Georgia Tech Foundation, Inc. (GTF) holds investments totaling $881.3 million as of June 30, 2004, of which $271.4 million is the corpus of the endowment. Included in GTF's investments is $52.3 million in assets held and invested for the benefit of the Georgia Tech Athletic Association, Inc. (GTAA). Earnings on GTF's endowment are used to support programs and services of the Georgia Institute of Technology. Earnings on funds held for the benefit of GTAA are used to support the athletic and scholarship programs of that organization. Endowment corpus is nonexpendable, but the earnings on the investments may be spent in accordance with donor restrictions or in accordance with GTF's spending policy. GTF has established a spending policy in which up to 6% of the twelve quarter average market value of the endowment funds is allocated from the earnings for expenditure. In fiscal year 2004, the Foundation allocated 5.7% of that average. Georgia Tech Facilities, Inc. lists investments totaling $112.5 million on its balance sheet; however, this is composed primarily of investments in capital leases, with the Georgia Institute of Technology being the lessee on these agreements. Long Term Liabilities for Component Units: Georgia Tech Foundation, Inc. has three bond issues outstanding with balances totaling $226,060,000 (not including an unamortized bond discount of $1,748,000). These serial and term bonds include both tax exempt and taxable instruments. The proceeds from the bond issues were used to construct (for the Georgia Institute of Technology) a new Campus Recreation Center and Technology Square, a complex of buildings which includes a bookstore, retail space, a hotel, professional education center, economic development building, parking deck, and an Annual Financial Report FY 2004 107 academic building which houses the College of Management. Interest rates on the bonds range from 2.99% to 6.6%. Details of outstanding balances and current year activity for the three bond issues are shown in the statements which follow. Georgia Tech Facilities, Inc. has four bond issues outstanding with balances totaling $175,840.000. The proceeds from the bond issues were used to acquire or construct (for the benefit of the Georgia Institute of Technology) the Habersham Building, which houses the Institute's Ivan Allen College, Bioengineering and Biosciences Building, Family Housing Complex, Klaus parking deck, and the Molecular Science and Engineering Building. Interest rates on the bonds range from 2% to 5.25%. Details of outstanding balances and current year activity for the four bond issues are shown in the statements, which follow. The Georgia Tech Athletic Association, Inc. has one bond issue outstanding with a balance of $110,155,000 and one unsecured note payable totaling $1,036,175. The combined balance for the two is $111,191,175. The bonds payable total does not include an unamortized discount of $1,000,908 and an unamortized "swaption" premium of $2,346,236. Proceeds from the bonds and note payable were used to finance the acquisition and/or construction of athletic related facilities. Interest rates on the bonds and note range from 4% to 5.5%. Detail of outstanding balances and current year activity for the long-term debt is shown in the statements, which follow. For the Fiscal Year Ended June 30, 2004: Long Term Liabilities Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Georgia Tech Foundation, Inc. Bonds Payable Series 2001A Series 2002A (Tax Exempt) Series 2002B (Taxable) Georgia Tech Facilities, Inc. Bonds Payable Series 1997A Series 1997B Beginning Balance July 1, 2003 $44,980,000.00 111,090,000.00 73,190,000.00 10,595,000.00 20,375,000.00 Series 2003 Series 2004 Georgia Tech Athletic Association, Inc. Bonds and Note Payable Series 2001 and Note Payable 111,828,820.00 Additions Reductions Ending Balance June 30, 2004 Amounts due Within One Year $760,000.00 1,835,000.00 605,000.00 $44,220,000.00 109,255,000.00 72,585,000.00 $790,000.00 1,900,000.00 1,315,000.00 225,000.00 430,000.00 70,320,000.00 75,205,000.00 10,370,000.00 19,945,000.00 70,320,000.00 75,205,000.00 235,000.00 450,000.00 2,367,000.00 1,659,317.00 112,536,503.00 1,713,481.00 Total Long Term Debt $372,058,820.00 $147,892,000.00 $5,514,317.00 $514,436,503.00 $6,403,481.00 Annual Financial Report FY 2004 108 Debt Service Obligations Annual debt service requirements to maturity for Georgia Tech Foundation Series 2001A, 2002A, and 2002B bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2032 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-28 Principal Interest Total $4,005,000.00 $12,247,589.03 4,180,000.00 12,079,973.78 4,385,000.00 11,879,629.78 4,605,000.00 11,662,200.03 4,825,000.00 11,437,490.53 28,135,000.00 53,148,807.73 37,250,000.00 44,016,058.85 46,015,000.00 32,029,819.29 54,845,000.00 18,404,121.75 37,815,000.00 3,071,206.75 $16,252,589.03 16,259,973.78 16,264,629.78 16,267,200.03 16,262,490.53 81,283,807.73 81,266,058.85 78,044,819.29 73,249,121.75 40,886,206.75 $226,060,000.00 $209,976,897.52 $436,036,897.52 Annual debt service requirements to maturity for Georgia Tech Facilities, Inc. Series 1997A, 1997B, 2003, and 2004 bonds payable are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2036 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-32 Bonds Payable Principal Interest Total $685,000.00 2,150,000.00 2,550,000.00 3,920,000.00 4,040,000.00 22,800,000.00 28,945,000.00 37,450,000.00 42,380,000.00 21,660,000.00 9,260,000.00 $8,044,143.78 8,449,238.78 8,383,616.28 8,309,060.65 8,186,708.76 38,343,705.64 32,172,876.55 23,698,513.42 13,365,375.00 5,397,250.00 700,250.00 $8,729,143.78 10,599,238.78 10,933,616.28 12,229,060.65 12,226,708.76 61,143,705.64 61,117,876.55 61,148,513.42 55,745,375.00 27,057,250.00 9,960,250.00 $175,840,000.00 $155,050,738.86 $330,890,738.86 Annual Financial Report FY 2004 109 Annual debt service requirements to maturity for the Georgia Tech Athletic Association series 2001 bonds payable and unsecured note payable are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bonds and Note Payable Principal Interest Total $1,713,481.00 1,779,482.00 1,855,480.00 1,951,979.00 2,052,978.00 11,832,869.00 15,463,334.00 20,018,285.00 26,198,287.00 28,325,000.00 $5,620,572.00 5,554,895.00 5,475,095.00 5,380,006.00 5,279,962.00 24,823,881.00 21,193,902.00 16,630,655.00 10,785,493.00 3,032,334.00 $7,334,053.00 7,334,377.00 7,330,575.00 7,331,985.00 7,332,940.00 36,656,750.00 36,657,236.00 36,648,940.00 36,983,780.00 31,357,334.00 $111,191,175.00 $103,776,795.00 $214,967,970.00 Georgia State University The Georgia State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Georgia State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The 34-member board of the Foundation, of which 7 members are exofficio, is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $16,737,330 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Assistant Vice President Development Finance and Operations, Georgia State University Foundation, P. O. Box 3963, Atlanta, GA 30302-3963. Annual Financial Report FY 2004 110 The Georgia State University Research Foundation, Inc. (Research Foundation) is a legally separate, tax-exempt component unit of Georgia State University and was established to contribute to the scientific, literary, educational, and charitable functions of the University in securing gifts, contributions, and grants from individuals, private organizations, and public agencies, and in obtaining contracts with such individuals or entities for the performance of sponsored research, development, or other programs by the various colleges, schools, departments or other units of the University. Most of the research grants awarded to the Research Foundation are subcontracted to the University, which is responsible for the fiscal administration of the grants. The ten member board of the Research Foundation is selfperpetuating and consists of faculty and administrators of the University. Because the resources held by the Research Foundation can only be used by or for the benefit of the University, the Research Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Research Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Research Foundation paid to the University $46,288,108 in grant revenue and $540,021 for support of research activities. They also paid to the Foundation $750,000 for an Eminent Scholar Chair in Drug Discovery. Complete financial statements for the Research Foundation can be obtained from the office of the Georgia State University Research Foundation, Inc., Alumni Hall, Suite G76, Atlanta, GA 30303. Investments for Component Units: The Foundation holds endowment investments in the amount of $62 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donor and the Foundation's current endowment spending policy. The Trustees of the Foundation adopted an endowment spending policy that provides for the allocation of endowment funds at the rate of 70% of the previous year's allocation plus 30% of the current year's market values at a spending rate of 4.5% of the market value of the endowment funds. A 1% management fee is used to fund the Foundation's administrative activities. The balance of the return is applied to the value of the endowment funds. Long Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year June 30, 2004 are shown below: Beginning Balance July 1, 2003 Additions Ending Amounts due Balance within Reductions June 30, 2004 One Year Rialto Center Capital Lease Alpharetta Campus Facilities Capital Lease Student Recreation Center Bonds Piedmont Ellis Promissory Note $3,472,491.90 7,727,865.36 30,825,000.00 9,000,000.00 $789,224.81 $257,835.11 125,190.36 1,380,000.00 $4,003,881.60 7,602,675.00 29,445,000.00 9,000,000.00 $330,416.20 375,750.00 1,430,000.00 166,668.00 Total Long Term Debt $51,025,357.26 $789,224.81 $1,763,025.47 $50,051,556.60 $2,302,834.20 Annual Financial Report FY 2004 111 Rialto Center - Capital lease During 1994, the Foundation purchased and has since renovated facilities currently occupied by the University's School of Music. The project included the purchase and renovation of two existing office buildings and the Foundation entered into a long-term land lease for the renovation and use of an existing performing arts theater (Rialto Theater). The project is being financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (Authority) and loaned to The University Financing Foundation (TUFF). The Foundation has entered into long-term lease commitments with TUFF to provide for the debt service payments on the bonds and other bond financing related expenses. The Foundation leases the facilities to the University through a series of oneyear renewable lease agreements. Title to the two office buildings will pass to the Foundation at the end of the lease period or the retirement of the bonds, whichever occurs first. During 2004, the 1994 bonds issued by the Authority were refunded to obtain savings in debt service and to obtain funds for improvements to the Rialto Theater. Accordingly, the Authority entered into a new loan agreement with TUFF and a new agreement with the Foundation as the guarantor of the bonds. The guarantee is expressly limited to the unrestricted income and unrestricted assets of the Foundation. The terms of the long-term lease commitment between TUFF and the Foundation were modified to reflect the new interest rate of the bonds, the additional proceeds available for capital improvements, the additional bond financing-related expenses and extending the term of the lease through November 1, 2015. Pursuant to this transaction, the Foundation also formed Rialto Center, Limited Liability Company (LLC), a single member LLC with the Foundation as the sole member, for the purpose of holding the related capital lease. Financial statements of the Foundation incorporate the financial activities of Rialto Center, LLC. Interest expense relating to the TUFF lease obligation for the years ended June 30, 2004 and 2003 amounted to $293,702 and $296,213, respectively. Annual debt service requirements to maturity for the Rialto Center Capital Lease are as follows: Rialto Capital Lease Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 Year 1 2 3 4 5 6-10 11-15 Principal $330,416.20 263,001.74 281,245.56 300,754.89 321,617.54 1,815,760.72 691,084.95 Interest Total $266,842.62 249,782.26 231,538.44 212,029.11 191,166.46 588,577.60 35,377.86 $597,258.82 512,784.00 512,784.00 512,784.00 512,784.00 2,404,338.32 726,462.81 $4,003,881.60 $1,775,314.35 $5,779,195.95 Annual Financial Report FY 2004 112 Alpharetta Campus Facilities Capital lease On September 23, 1998, $10,600,000 of revenue bonds were issued by the Development Authority of Alpharetta, Georgia (Development Authority) for the purpose of financing the costs of acquiring, constructing and installing educational facilities located in the City of Alpharetta to be leased by the Foundation. The bonds are special limited obligation bonds payable by the Development Authority from lease payments made to it by the Foundation. The lease obligates the Foundation, on a limited recourse basis, to make lease payments sufficient to pay 83.5% of principal and interest on the bonds with the balance to be paid by the Development Authority. The Foundation in turn subleases the facilities to the Board of Regents of the University System of Georgia (Board of Regents) for the use of the University. The liability of the Foundation is limited to the interest of the Foundation in the project and the rents, profits, issues, products and proceeds thereof. The City of Alpharetta is obligated to make 100% of the principal and interest payments on the bonds to the extent rental payments derived from the project are insufficient for such purposes. Interest expense related to lease obligations with the Development Authority amounted to $492,378 and $364,793 for the years ended June 30, 2004 and 2003, respectively. Annual debt service requirements to maturity for the Alpharetta Campus Facilities Capital Lease are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 Year 1 2 3 4 5 6-10 11-15 Alpharetta Capital Lease Principal Interest Total $375,750.00 388,275.00 404,975.00 421,675.00 438,375.00 2,475,775.00 3,097,850.00 $329,475.34 314,614.43 298,973.66 282,469.37 264,956.98 1,018,228.40 372,726.78 $705,225.34 702,889.43 703,948.66 704,144.37 703,331.98 3,494,003.40 3,470,576.78 $7,602,675.00 $2,881,444.96 $10,484,119.96 Student Recreation Center - Bonds On October 15, 1998, $33,430,000 of revenue bonds were issued by the Atlanta Development Authority (ADA) with the proceeds to be loaned to the Foundation for the purpose of financing the acquisition, construction, improvement and equipping of a student recreation center for the benefit of the University. The bonds are special limited obligation bonds of the ADA payable from funds received from the Foundation pursuant to a promissory note between the ADA and the Foundation. The Foundation leases the facilities to the Board of Regents for the use of the University. The Foundation's liability on the note is limited to its interest in the project and the rents and revenues from the project, including amounts received pursuant to the rental agreement with the Board of Regents. Payment of principal and interest on the bonds are insured by American Municipal Bond Assurance Corporation (AMBAC). Principal payments are to be Annual Financial Report FY 2004 113 made annually to October 1, 2018. Interest is paid semi-annually also through 2018 at a rate specified in the revenue bonds ranging from 3.60% to 4.60%. Annual debt service requirements to maturity for the Recreation Center Bonds are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 Year 1 2 3 4 5 6-10 11-15 Recreation Center Bonds Principal Interest Total $1,430,000.00 1,490,000.00 1,550,000.00 1,615,000.00 1,680,000.00 9,595,000.00 12,085,000.00 $1,274,165.00 1,216,338.33 1,155,386.67 1,090,576.67 1,021,465.00 3,914,180.00 1,393,570.83 $2,704,165.00 2,706,338.33 2,705,386.67 2,705,576.67 2,701,465.00 13,509,180.00 13,478,570.83 $29,445,000.00 $11,065,682.50 $40,510,682.50 Piedmont/Ellis - Promissory Note The Foundation, as sole member of Piedmont/Ellis, LLC, has entered into a $9 million promissory note with a financial entity to finance the purchase of land and buildings. The note has an interest rate of 4.0% per annum above the commercial paper rate, secured by the associated real and personal property and is payable over 24 consecutive months of interest only, ten equal monthly installments of $27,778 with principal payments beginning January 2005 with a balloon payment of $8,833,332 due November 2005. Annual debt service requirements to maturity for the Piedmont Ellis Promissory Note are as follows: Piedmont Ellis Promissory Note Year Ending June 30: 2005 2006 Year 1 2 Principal Interest (Estimated) Total $166,668.00 8,833,332.00 $492,000.00 160,000.00 $658,668.00 8,993,332.00 $9,000,000.00 $652,000.00 $9,652,000.00 Annual Financial Report FY 2004 114 University of Georgia The University of Georgia Foundation The University of Georgia Foundation (the "Foundation") is a legally separate, tax-exempt component unit of The University of Georgia. The Foundation was chartered in 1937 to receive and administer contributions for the support of the academic programs of the University of Georgia (the "University"). The 55-member Board of Trustees has fiduciary responsibility for managing the Foundation's assets. The Foundation Executive Committee is composed of the chairman, vice-chairman, secretary, treasurer, the chairman from each of the other standing trustee committees and two at-large members. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $12,382,773 to the University for scholarships and donor-restricted support. Facilities valued at $85 million and the associated long-term debt are included in the financial statements of the Foundation. The corresponding capital leases and associated long-term debt are included in the University's report and will be eliminated for CAFR reporting. Complete financial statements for the Foundation can be obtained from the Foundation office at 394 South Milledge Avenue, Athens, GA 30602. Annual Financial Report FY 2004 115 Long Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Principal due within One Year $25,620,000 bond issue: Par value of bonds outstanding $ 25,125,000 $ Cost of bond issuance, net of accumulated amortization of $27,593 and $17,487 (285,704) Total $25,620,000 bonds payable 24,839,296 $ (515,000) $ 24,610,000 $ 10,106 (275,598) (504,894) 24,334,402 $39,155,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $12,135 and $2,923 Cost of bond issuance, net of accumulated amortization of $91,289 and $21,675 Total $39,155,000 bonds payable 39,155,000 147,362 (1,115,123) 38,187,239 (9,212) 69,614 60,402 39,155,000 138,150 (1,045,509) 38,247,641 740,000 740,000 $99,860,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $146,083 and $38,005 Cost of bond issuance, net of accumulated amortization of $214,632 and $55,747 Total $99,860,000 bonds payable 99,860,000 1,916,546 (2,817,849) 98,958,697 (108,078) 158,885 50,807 99,860,000 1,808,468 (2,658,964) 99,009,504 $8,215,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $7,341 and $0 Cost of bond issuance, net of accumulated amortization of $17,955 and $0 Total $8,215,000 bonds payable 8,215,000 (107,509) (259,306) 7,848,185 (8,403) (8,403) (90,000) 7,341 17,955 (64,704) 8,125,000 (100,168) (249,754) 7,775,078 230,000 230,000 $25,970,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $1,274 Cost of bond issuance, net of accumulated amortization of $9,244 Total $25,970,000 bonds payable 25,970,000 (166,793) (1,184,485) 24,618,722 1,274 9,244 10,518 25,970,000 (165,519) (1,175,241) 24,629,240 Total bonds payable $ 169,833,417 $ 24,610,319 $ (447,871) $ 193,995,865 $ 970,000 $73,100,000 revolving credit agreement $1,900,000 credit agreement $300,000 credit agreement 11,953,536 1,636,000 43,634 200,000 11,997,170 1,636,000 200,000 T otal revolving credit agreements $1,800,000 note payable $880,000 note payable $ 13,589,536 $ 243,634 $ $ 13,833,170 $ 1,446,250 856,237 (89,000) (25,203) 1,357,250 831,034 89,000 26,732 Total notes payable $ 2,302,487 $ $ (114,203) $ 2,188,284 $ 115,732 T otal Long Term Debt $ 185,725,440 $ 24,853,953 $ (562,074) $ 210,017,319 $ 1,085,732 Annual Financial Report FY 2004 116 Debt Obligations $25,620,000 Bond Issue--In 2001, the Development Authority of the Unified Government of Athens - Clarke County, Georgia (the "Development Authority") issued Revenue Bonds (UGA Real Estate Foundation, Inc. Project), Series 2001 (the "2001 Bonds") and entered into an agreement (the "2001 Loan Agreement") to loan $25,620,000 to the Real Estate Foundation. The 2001 Bonds are secured by a letter of credit issued on behalf of the Real Estate Foundation in favor of the Development Authority under the Real Estate Foundation's $73.1 million credit agreement discussed below. The Foundation has guaranteed the obligations, including the letter of credit, under the Real Estate Foundation's $73.1 million revolving credit agreement. During 2002, the Real Estate Foundation used the proceeds of this loan to fund purchases and improvements of certain properties. Borrowings under the 2001 Loan Agreement bear interest payable monthly at a formula rate adjusted each week (1.08% and 1% at June 30, 2004 and 2003, respectively). The loan matures in 2031, subject to certain early repayment provisions. During the years ended June 30, 2004 and 2003, principal payments of $515,000 and $495,000, respectively, were made. At June 30, 2004, the Real Estate Foundation had an outstanding interest rate swap agreement effectively changing the interest rate exposure on 2001 Loan Agreement from variable to a 1.75% fixed rate until February 1, 2005. The fair value of the termination cost of the interest rate swap as of June 30, 2004 and 2003 was $48,489 and $209,254, respectively, and was recorded as an accrued liability in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $160,765 and a loss of $209,254 for the years ended June 30, 2004 and 2003, respectively, as an adjustment to interest expense related to this swap. $39,155,000 Bond Issue--In 2002, the Development Authority issued Educational Facilities Revenue Bonds (UGAREF CCRC Building, LLC Project), Series 2002 (the "CCRC Bonds") and entered into an agreement (the "CCRC Loan Agreement") to loan $39,155,000 to UGAREF CCRC Building, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "CCRC Entity"). Payment of principal and interest under the CCRC Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facility and by the CCRC Entity's interest in certain rents and leases derived from the facility. During the years ended June 30, 2004 and 2003, the CCRC Entity used the proceeds of this loan to fund construction of the facility. Borrowings under the CCRC Loan Agreement bear interest payable semiannually on December 15 and June 15 at fixed rates ranging from 2.5% to 5% depending on the term. Principal payments are due on December 15 starting in 2004 and continuing through 2032. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal Interest Total $740,000 760,000 780,000 800,000 825,000 4,545,000 5,570,000 7,085,000 9,025,000 9,025,000 $1,747,014 1,728,264 1,709,014 1,688,264 1,664,889 7,891,118 6,872,146 5,356,316 3,403,519 928,419 $2,487,014 2,488,264 2,489,014 2,488,264 2,489,889 12,436,118 12,442,146 12,441,316 12,428,519 9,953,419 0 0 $39,155,000 $32,988,961 $72,143,961 Annual Financial Report FY 2004 117 $99,860,000 Bond Issue--In 2002, the Housing Authority of the City of Athens, Georgia issued Student Housing Lease Revenue Bonds (UGAREF East Campus Housing, LLC Project), Series 2002 (the "Housing Bonds") and entered into an agreement (the "Housing Loan Agreement") to loan $99,860,000 to UGAREF East Campus Housing, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Housing Entity"). Payment of principal and interest under the Housing Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facilities and by the Housing Entity's interest in certain rents and leases derived from the facility. During the years ended June 30, 2004 and 2003, the Housing Entity used the proceeds of this loan to fund construction of certain real estate projects. Borrowings under the Housing Loan Agreement bear interest payable semiannually on December 1 and June 1 at fixed rates ranging from 3% to 5.25% depending on the term. Principal payments are due on December 1 starting in 2005 and continuing through 2033. $99,860,000 Bond Issue Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal Interest Total $0 1,825,000 1,875,000 1,935,000 2,000,000 11,110,000 13,550,000 17,715,000 22,510,000 27,340,000 $4,791,550 4,764,175 4,708,675 4,651,525 4,590,000 21,703,300 18,945,806 14,899,681 9,758,000 3,451,250 $4,791,550 6,589,175 6,583,675 6,586,525 6,590,000 32,813,300 32,495,806 32,614,681 32,268,000 30,791,250 0 0 $99,860,000 $92,263,963 $192,123,963 Annual Financial Report FY 2004 118 $8,215,000 Bond Issue--In 2003, the Oconee County Industrial Development Authority issued Revenue Bonds (UGAREF Gainesville Campus, LLC Project), Series 2003 (the "Gainesville Campus Bonds") and entered into an agreement (the "Gainesville Campus Loan Agreement") to loan $8,215,000 to UGAREF Gainesville Campus, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Gainesville Campus Entity"). Payment of principal and interest under the Gainesville Campus Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facility and by the Gainesville Campus Entity's interest in certain rents and leases derived from the facility. During the year ended June 30, 2003, the Gainesville Campus Entity used the proceeds of this loan to fund the purchase of a facility and land. Borrowings under the Gainesville Campus Loan Agreement bear interest payable semiannually on December 15 and June 15 at fixed rates ranging from 2.2% to 4.375% depending on the term. Principal payments are due on December 15 starting in 2003 and continuing through 2027. During the year ended June 30, 2004, a principal payment of $90,000 was made. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $8,215,000 Bond Issue Principal Interest Total $230,000 240,000 250,000 250,000 260,000 1,380,000 1,620,000 1,975,000 1,920,000 $293,529 288,241 282,729 277,104 271,431 1,248,046 997,113 635,728 172,375 $523,529 528,241 532,729 527,104 531,431 2,628,046 2,617,113 2,610,728 2,092,375 0 0 0 $8,125,000 $4,466,296 $12,591,296 Annual Financial Report FY 2004 119 $25,970,000 Bond Issue--In 2004, the Development Authority issued $25,545,000 of Educational Facilities Revenue Bonds (UGAREF Coverdell Building, LLC Project), Series 2004A, and $425,000 of Educational Facilities Taxable Revenue Bonds (UGAREF Coverdell Building, LLC Project), Series 2004B (collectively, the "Coverdell Bonds"). The Development Authority entered into an agreement (the "Coverdell Loan Agreement") to loan $25,970,000 to UGAREF Coverdell Building, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Coverdell Entity"). Payment of principal and interest under the Coverdell Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facility and by the Coverdell Entity's interest in certain rents and leases derived from the facility. During the year ended June 30, 2004, the Coverdell Entity used the proceeds of this loan to fund construction of the facility. Borrowings under the Coverdell Loan Agreement bear interest payable semiannually on December 15 and June 15 at fixed rates ranging from 2.5% to 5% depending on the term. Principal payments are due on December 15 starting in 2006 and continuing through 2034. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $25,970,000 Bond Issue Principal Interest Total $0 0 460,000 500,000 510,000 2,810,000 3,430,000 4,300,000 5,435,000 6,920,000 1,605,000 $1,295,161 1,165,645 1,159,003 1,146,110 1,133,485 5,409,525 4,789,699 3,926,248 2,785,731 1,298,938 40,125 $1,295,161 1,165,645 1,619,003 1,646,110 1,643,485 8,219,525 8,219,699 8,226,248 8,220,731 8,218,938 1,645,125 0 $25,970,000 $24,149,669 $50,119,669 $73,100,000 Revolving Credit Agreement--during the year ended June 30, 2002, the Real Estate Foundation established a $50 million revolving credit agreement with a bank which was later increased to a limit of $75 million. The agreement expires November 30, 2005. In connection with establishing a separate $1.9 million credit agreement discussed below, the credit limit on the revolving credit agreement is effectively reduced to $73.1 million. The revolving credit agreement provides for direct borrowings or letters of credit at the Real Estate Foundation's option. Credit available under the revolving credit agreement is reduced by outstanding borrowings and outstanding letters of credit. At June 30, 2004, amounts outstanding or issued under this agreement included borrowings of $11,997,170 and a letter of credit and bank credit reserves of $25,485,347, resulting in $35,617,483 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's 30-day London Interbank Offered Rate ("LIBOR") rate plus 32 basis points (or .325%). At June 30, 2004 and 2003, the rates applicable to the borrowings were 1.45% and 1.65%, respectively. The Foundation has guaranteed the obligations of the Real Estate Foundation under this revolving credit agreement. $1,900,000 Credit Agreement--during the year ended June 30, 2003, the Real Estate Foundation established a $1.9 million credit agreement with a bank which expires July 29, 2007. The credit agreement provides for direct borrowings for the purchase and improvement of a property in Cortona, Italy. At June 30, 2004, amounts outstanding under this agreement were $1,636,000 with $264,000 available as borrowing capacity. Borrowings under the credit agreement bear interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). At June 30, Annual Financial Report FY 2004 120 2004 and 2003, the rates applicable to the borrowings were 1.81% and 1.57%, respectively. The Foundation has guaranteed the obligations of the Real Estate Foundation under this credit agreement. $300,000 Credit Agreement--during the year ended June 30, 2003, the Foundation established a $0.3 million credit agreement with a bank which expires June 30, 2009. The credit agreement provides for direct borrowings for the purchase and improvement of a property in Costa Rica. At June 30, 2004, amounts outstanding under this agreement were $200,000 with $100,000 available as borrowing capacity. Borrowings under the credit agreement bear interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). Interest is payable monthly until June 1, 2005. Thereafter, principal and interest will be due on a monthly basis, using a 19-year amortization until expiration. At June 30, 2004, the rate applicable to the borrowings was 1.61%. $300,000 Credit Agreement Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $0 10,526 10,526 10,526 168,422 Interest variable variable variable variable variable Total $0 10,526 10,526 10,526 168,422 0 0 0 0 0 0 0 $200,000 variable $200,000 Annual Financial Report FY 2004 121 $11,000,000 Credit Agreement--during the year ended June 30, 1994, the Foundation established an $11 million revolving credit agreement with a bank that expired on June 30, 2003. The outstanding balance was paid in full during 2003. The University of Georgia Research Foundation, Inc. ("Research Foundation") had agreed to pay the interest costs on borrowings related to this agreement. During the year ended June 30, 2003, the Research Foundation paid interest of $4,724. $1,800,000 Note Payable--during the year ended June 30, 2000, the Foundation signed a $1.8 million promissory note agreement with a bank, which expires on December 31, 2019. At June 30, 2004, $1,357,250 was outstanding under this agreement. Interest is charged at a fixed rate of 7.13%. Principal payments in the amount of $22,250 are payable quarterly. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $1,800,000 Note Payable Principal Interest Total $89,000 89,000 89,000 89,000 89,000 445,000 445,000 22,250 $94,842 88,571 82,187 75,804 69,420 251,349 91,763 399 $183,842 177,571 171,187 164,804 158,420 696,349 536,763 22,649 0 0 0 0 $1,357,250 $754,335 $2,111,585 Annual Financial Report FY 2004 122 $880,000 Note Payable--during the year ended June 30, 2002; the Foundation borrowed $880,000 from a bank, which expires on May 1, 2007. At June 30, 2004, $831,034 was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 0.45% or 1.56% and 1.77% at June 30, 2004 and 2003, respectively. Principal and interest are payable monthly. At June 30, 2004, the Foundation had an outstanding interest rate swap agreement effectively changing the interest rate exposure on the $880,000 note payable from variable to a 5.9% fixed rate over the term of the note payable. The fair value of the termination cost of the interest rate swap as of June 30, 2004 and 2003 was $39,855 and $114,329, respectively, and was recorded as an accrued liability in accordance with SFAS No. 133. The Foundation recorded a gain of $74,474 and a loss of $114,329 for the years ended June 30, 2004 and 2003, respectively, as an adjustment to interest expense related to this swap. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $880,000 Note Payable Principal Interest Total $26,732 28,352 775,950 variable variable variable $26,732 28,352 775,950 0 0 0 0 0 0 0 0 0 $831,034 variable $831,034 Annual Financial Report FY 2004 123 The University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation, Inc. (the "Research Foundation") is a legally separate, tax-exempt component unit of The University of Georgia (the "University"). The Research Foundation serves to enhance the research mission of the University by securing sponsored research funding and by providing funding of special research initiatives. All University intellectual property developed through these research programs are managed by the Research Foundation. The eighteen-member board of directors consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Research Foundation itself. Although the University does not control the timing or amount of receipts from the Research Foundation, all sponsored research awards are subcontracted to the University and other resources and related income are restricted to benefit the research mission of the University. Consequently, the Research Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Research Foundation is considered a special-purpose government entity engaged only in business-type activities and is required to follow all applicable GASB pronouncements. The Research Foundation's fiscal year is July 1 through June 30. During fiscal year 2004, the Research Foundation transferred approximately $120 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. Approximately, $9 million is Research Foundation assets are invested with the University of Georgia Foundation, a component unit of the University. These and other transactions will be eliminated for CAFR reporting. Complete financial statements for the Research Foundation can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602. The University of Georgia Athletic Association, Inc. The University of Georgia Athletic Association, Inc. (the "Association") is a legally separate, tax-exempt component unit of The University of Georgia (the "University"). The Association was organized in 1928 as a not-for-profit corporation to promote intercollegiate athletic sports representing the University. The twenty-member board of the directors consists of faculty, staff, students, and alumni of the University. Although the university does not control the timing or amount of receipts from the Association, the majority of resources or income thereon that the Association holds and invests are restricted to the athletic activities of the University. Because these restricted resources held by the Association can only be used by, or for the benefit of, the University and their management role is significant to the accomplishment of the University's mission, the Association is considered a component unit of the University and is discretely presented in the University's financial statements. For financial reporting purposes, the Association is considered a special purpose government agency engaged only in business type activities, as defined by GASB Statement 34. The Association's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Association made payments to the University for services such as food services, parking services, health services, tuition, gas, electricity, security, and golf course maintenance. These payments totaled $2,908,945.24 and were recognized as Annual Financial Report FY 2004 124 expenses of the Association. Capital assets net of accumulated depreciation of $148.5 M are included in the financial statements of the Association. These capital assets, excluding moveable equipment, are included in the University's report and will be eliminated for CAFR reporting. Complete financial statements for the Association can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602. Long Term Liabilities 2004 2003 Note payable to bank in 20 semi-annual principal payments of $340,000 plus interest beginning January 1, 1995. Interest is paid at a fixed rate of 5.98%. The Association has assigned all proceeds expected to be received from certain sky suites as collat $340,000 $1,020,000 Note payable to bank in 40 semi-annual principal payments of $320,000 plus interest beginning January 1, 2001. Interest is payable at interest rate ranging from 5.30% to 8.50%, adjusted monthly, based on an adjusted thirty-day LIBOR rate of LIBOR plus 0. Note payable to the University of Georgia over 20 years in annual payments of $477,917 at a fixed rate of 6.186% beginning in 1996. Note payable to vendor over 10 years in annual payments of $94,518 through 2008. The implicit interest rate is 8.5% and the note is secured by a first priority purchase money security interest on equipment with a net book value of $1,011,626. Revenue bonds payable Total Debt 10,560,000 3,224,540 11,200,000 3,486,777 378,074 70,000,000 $84,502,614 472,592 34,000,000 $50,179,369 Changes in long-term liabilities for Athletic Association for the fiscal year ended June 30, 2004 are shown below: Athletic Association Long-term debt Total Long Term Debt Beginning Balance July 1, 2003 Additions $50,179,369.00 $50,179,369.00 $36,000,000.00 $36,000,000.00 Reductions Ending Balance June 30, 2004 Amounts due within One Year $1,676,755.00 $1,676,755.00 $84,502,614.00 $84,502,614.00 $1,352,976.00 $1,352,976.00 Annual Financial Report FY 2004 125 Debt Serv ice Obligations The annual debt serv ice requirem ents at June 30, 2004 are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $1,352,976.00 1,030,201.00 1,048,490.00 1,067,912.00 994,016.00 4,849,019.00 3,200,000.00 960,000.00 70,000,000.00 I n te r e s t $1,511,293.00 1,459,620.00 1,406,939.00 1,353,128.00 1,298,115.00 5,617,851.00 4,495,422.00 3,875,958.00 3,850,000.00 1,690,333.00 T o ta l $2,864,269.00 2,489,821.00 2,455,429.00 2,421,040.00 2,292,131.00 10,466,870.00 7,695,422.00 4,835,958.00 3,850,000.00 71,690,333.00 0.00 0.00 $84,502,614.00 $26,558,659.00 $111,061,273.00 D ue to the fact that the revenue bonds have a variable rate, the interest used abov e for the revenue bonds was based on the interest rate in effect as of June 30, 2004. Valdosta State University Valdosta State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The 25-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is January 1 through December 31. During the year ended December 31, 2003, the Foundation distributed $1,506,097 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 102 Georgia Avenue, Valdosta, GA 31602. Annual Financial Report FY 2004 126 Investments for Component Units: Valdosta State University Foundation holds endowment investments in the amount of $12,861,450. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by donors. Valdosta State University Foundation, in conjunction with donors, has established a spending plan whereby 4.5% of the previous year's December 31 portfolio value may be expended. Long Term Liabilities for Component Units: Valdosta State University Foundation issued Bonds to finance the acquisition of facilities for Valdosta State University. The bonds mature serially and are collateralized by real estate. The interest rates for the 95 and 98 bonds are 4.8% and 5.0% respectively. The Foundation also incurred a Note Payable to a local financial institution to assist with updating University Athletic facilities. For consolidated reporting purposes, the following details must be considered. The Foundation has reported this transaction as a receivable from the University and as a long-term liability of $268,892.41. Since the University retains ownership of the facility, the University has recorded a capital asset and long-term liability. The Foundation entry should be eliminated for consolidated reporting. Changes in long-term liabilities for the Foundation for the fiscal year ended December 31, 2003 are shown below: Beginning Balanc e January 1, 2003 Additions Reduc t ions Ending Amounts due Balanc e within Dec. 31, 2003 One Year Revenue Bonds Payable 95 Bond 98 Bond Note Payable $2,106,241.00 3,148,582.00 $327,145.00 $0.00 $266,405.00 543,245.00 49,062.00 $1,839,836.00 2,605,337.00 278,083.00 $266,404.00 343,390.00 278,083.00 Total Long Term Debt $5,581,968.00 $0.00 $858,712.00 $4,723,256.00 $887,877.00 Annual Financial Report FY 2004 127 Debt Service Obligations for Component Units Annual debt service requirements to maturity for component unit's revenue bonds and note payable are as follows: Year Ending December Year 2004 1 2005 2 2006 3 2007 4 2008 5 2009 through 2013 6-10 Bonds and Note Payable Principal Interest Total $703,951.00 456,818.00 479,666.00 503,658.00 528,849.00 1,311,594.00 $183,926.00 152,976.00 130,128.00 106,137.00 80,945.00 84,608.00 $887,877.00 609,794.00 609,794.00 609,795.00 609,794.00 1,396,202.00 $3,984,536.00 $738,720.00 $4,723,256.00 Medical College of Georgia Medical College of Georgia Foundation, Inc. Medical College of Georgia Foundation (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirty-eight member Board of Directors including fourteen ex officio members has the legal responsibility to govern the corporation. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources and income that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $6.6 million to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Alumni Center at 919 15th Street, Augusta, GA 30912 or from the foundation's website at www.mcgfoundation.org. Annual Financial Report FY 2004 128 Investments for Component Unit: Medical College of Georgia Foundation holds endowment investments in the amount of $91.2 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation, in conjunction with the donors, disburses funds that are used to provide financial assistance to students as well as maintain and improve the high standard of instruction, advance study and research at the Medical College of Georgia. Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (the "Foundation") is a legally separate, taxexempt component unit of Medical College of Georgia (College). The Foundation receives and manages funds that are ultimately used to maintain and improve the high standard of instruction at the Medical College of Georgia Dental School. Substantially all revenue of the Foundation is received from clinical and patient fees for dental services performed for the public by resident and faculty of the College. The Foundation does not have any employees, and depends on MCG for staff support. Resources of the Foundation are used for research and advanced study at the Medical College of Georgia. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the college and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is from March 1, 2003 through February 29, 2004. During the year ended February 29, 2004, the foundation distributed $1,393,903 to the College for both advanced study and research purposes. Complete financial statements for the foundation can be obtained from the Administrative Office of Medical College of Georgia, School of Dentistry, AD 1104, Augusta, Georgia 30912. Annual Financial Report FY 2004 129 Investments for Component Units: Medical College of Georgia Dental Foundation holds investments in the amount of $2.8 million. The Foundation's by-laws allow the annual increases in net assets to be used for support of the Dental School. The Foundation has established a spending plan whereby 75% of earnings are used for Dental School support, 10% are used for the Dental School Dean's Fund, and 15% are used for Dental School departmental support. Medical College of Georgia Research Institute The Medical College of Georgia Research Institute (the "Institute") is a legally separate, taxexempt component unit of the Medical College of Georgia (College). The Institute was established in 1980 to contribute to the educational, research and service functions of the Medical College of Georgia. Managed by an Executive Committee reporting to a twenty-seven member Board of Directors, the Institute obtains contracts from individuals, industrial, government and public agencies for the performance of sponsored research, development, and other programs by the various departments and units of the College. All research contracts awarded to the Institute are sub-contracted to the College, which is responsible for the fiscal administration of the research projects. Although the College does not control the timing or amount of activity, all grant awards are sub-contracted and managed by the College. Because of this special relationship, the Institute is considered a component unit of the College and is discretely presented in the College's financial statements. The Institute is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Institute sub-contracted $39.7 of research programs to the College. Complete financial statements for the Institute can be obtained from the Administrative Office at 1120 15th St, Augusta, Georgia 30912 or from the Institute's website at www.mcg.edu/grantscontracts/mcgri. Investments for Component Units: The Research Institute holds investments of $99,000, these funds are used to support research related activities at the Medical College of Georgia. Medical College of Georgia Physicians Practice Group Foundation The Medical College of Georgia Physicians Practice Group Foundation (PPG) is a legally separate, tax-exempt component unit of the Medical College of Georgia (College). The foundation acts primarily as a nonprofit organization for the purpose of enhancing the clinical, research, and educational missions of the College and billing and collecting for medical services Annual Financial Report FY 2004 130 provided to patients. Revenues are obtained primarily from physician fees charged to patients at Medial College of Georgia Hospital and Clinics, which is operated by Medical College of Georgia Health Inc. The PPG Properties, LLC is a limited liability company formed in 2001 by PPG to manage real estate rental properties. PPG Alternative Collections, LLC is a limited liability company formed in 2003 by PPG to bill and collect for anesthesia services provided to patients. PPG is the sole partner and has sole voting control of both LLC's. Because the PPG Foundation's purpose is to support the clinical, research, and educational missions of the College, it is considered a component unit of the College and is discretely presented in the College's financial statements. The PPG is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations with the exceptions as noted below. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The Foundation's consolidated financial statements have been prepared substantially on the basis of cash receipts and cash disbursements with the exception of the following: interest earned on investments, salary supplements due to College, incentive compensation, and retirement plan contribution expense are accounted for using the accrual method of accounting. Additionally, four-year scholarships awarded to College students are expensed in the year awarded, and property and equipment are capitalized and depreciated. Prior to fiscal 2003, PPG recorded its investments in mutual funds, equity securities, and debt securities at amortized cost. On July 1, 2002, PPG elected to apply the provisions of Statement of Financial Accounting Standards (SFAS) No. 124, Accounting Investments Held by Not-for-Profit Organizations. SFAS No. 124 requires that investment in equity securities with readily determinable fair values and all investments in debt securities be reported at fair value with gains and losses included in a statement of activities. The adjustment to record its investments at fair value at the date of adoption was an unrealized loss of approximately $518,000 and is included in the statement of revenues collected and expenses paid for the year ended June 30, 2003. Other adjustments required under accounting principles generally accepted in the United Sates of America for the accrual basis of accounting have not been reflected in the accompanying financial statements, including the equity method of accounting for PPG's investments in a joint venture. The equity method of accounting requires that the carrying value of investments meeting certain criteria be adjusted to reflect the investor's share of the investee's income and losses with the income or losses included in a statement of activities. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $48,935,000 to the College for salaries and departmental support. Complete financial statements for the foundation can be obtained from the Administrative Office at 1499 Walton Way, Suite 1400, Augusta, Georgia 30901. Annual Financial Report FY 2004 131 Investments for Component Units: The Medical College of Georgia Physicians Practice Group Foundation holds investments in the amount of $39.3 million; these funds are used to support the salaries and department activities at the Medical College of Georgia. Medical College of Georgia Health, Inc. Medical College of Georgia Health, Inc. (the Company) is a legally separate, tax-exempt component unit of Medical College of Georgia (the College). The Company is organized to further the health sciences, patient care, research, and education missions of the Medical College of Georgia Hospitals and Clinics (the Hospital). The Hospital, which is owned by the Board of Regents of the University System of Georgia (Regents), consists of a 632 licensed bed acute care hospital and related outpatient care facilities principally located in Augusta, Georgia. Because of the special relationship with the College, the Company is considered a component unit and is discretely presented in the college's financial statements. The Company utilizes the accrual basis of accounting using the economic resources measurement focus. Pursuant to, and as permitted by GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the Company has elected to apply the provisions of all relevant pronouncements of the Financial Accounting Standards Board (FASB), including those issued after November 30, 1989, that do not conflict with or contradict GASB pronouncements. The Company's fiscal year is July 1 through June 30. Complete financial statements for the Company can be obtained from the Administrative Office at 1120 15th Street, Augusta, Georgia 30912. Investments for Component Units: The Medical College of Georgia Health, Inc. (the Company) holds investments in the amount of $15.3 million. These funds are used to support on-going operations. Long-Term Liabilities for Component Units: The Medical College of Georgia Health, Inc. is the lessee of certain equipment under noncancelable leases expiring in various years through 2008. Interest rates range from 5.45% to 6.68%. Professional liability is the self-insured portion of professional liability risks. Accrued professional liability costs are determined actuarially. Annual Financial Report FY 2004 132 Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Leases Lease Obligations Other Liabilities Professional Liabilities Total Long Term Debt Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year $2,046,548.00 $1,007,868.00 $959,703.00 $2,094,713.00 $652,779.00 3,462,000.00 2,866,000.00 6,328,000.00 $5,508,548.00 $3,873,868.00 $959,703.00 $8,422,713.00 $652,779.00 Lease Obligations Year Ending June 30: 2005 2006 2007 2008 Year 1 2 3 4 Lease Obligations Principal Interest Total $652,779.00 642,371.00 613,216.00 186,347.00 $108,239.00 70,882.00 32,434.00 5,697.00 $761,018.00 713,253.00 645,650.00 192,044.00 $2,094,713.00 $217,252.00 $2,311,965.00 Georgia Southern University Georgia Southern University Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The forty-one member board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these Annual Financial Report FY 2004 133 differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $960,008 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the University Advancement Office, P.O. Box 8040, Statesboro, Georgia 30461. Southern University Housing Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation constructs auxiliary and student services buildings and facilities for use by the university and then leases the completed buildings to the institution. The six-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. The majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Financing lease investment valued at $33 million and associated long-term receivables of $34 million are included in the financial statements of the foundation. The corresponding capital leases and associated long-term debt are included in the university's report and will be eliminated for CAFR reporting. Complete financial statements for the foundation can be obtained from the Georgia Southern Legal Office, P.O. Box 8020, Statesboro, Georgia 30461. Southern Boosters, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation acts primarily as a fund-raising organization to supplement resources that are available to the university in support of its athletic programs. The fifty-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue Annual Financial Report FY 2004 134 recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, Southern Boosters distributed $199,836 to the university for unrestricted purposes. Complete financial statements for the foundation can be obtained from the Southern Boosters Cowart Building, Lanier Road, P.O. Box 8086, Statesboro, GA 30461. Georgia Southern University Research and Services Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation solicits Federal, State and private sponsored research opportunities for the university. The six-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. The majority of income held by the foundation is restricted to research and academic support of the university. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation received $2 million in contract revenues from Federal, State and private grantors. Complete financial statements for the foundation can be obtained from the Georgia Southern University Provost Office, P.O. Box 8022, Statesboro, GA 30461. Investments for Component Units: Georgia Southern University Foundation, Inc. holds endowment investments in the amount of $28 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia Southern University Housing Foundation, Inc. holds investment in direct financing lease with two Georgia Southern University residence halls, Southern Courtyard and Southern Pines in the amount of $33.5 million. Interest income from the lease agreement is used to retire related bond debt. Annual Financial Report FY 2004 135 Long Term Liabilities for Component Units: Student Housing Bonds are issued by the Georgia Southern University Housing Foundation, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Georgia Southern University. The interest rate is 4.89%. Southern Boosters, Inc. issued a note payable to Sea Island Bank, payable in annual installments of $35,220 beginning September 15, 2004 including interest at a variable rate (4.75% at June 30, 2004), through September 14, 2013, unsecured. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2003 Additions Reductions June 30, 2004 One Year Southern Boosters, Inc Note Payable Ga Sou Univ Housing Foundation Bonds Payable-South Trust Ga Sou Univ Housing Foundation Bonds Payable-BB&T $0.00 $279,000.00 38,737,928.00 35,983,721.00 $0.00 0.00 0.00 $279,000.00 38,737,928.00 35,983,721.00 $23,636.00 395,000.00 Total Long Term Debt $0.00 $75,000,649.00 $0.00 $75,000,649.00 $418,636.00 Debt Service Obligations for Component Units Annual debt service requirements to maturity for Southern Boosters, Inc. note payable to Sea Island Bank are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $28,364.00 22,855.00 23,982.00 25,166.00 26,382.00 152,251.00 Interest Total $6,856.00 12,365.00 11,238.00 10,054.00 8,838.00 26,209.00 $35,220.00 35,220.00 35,220.00 35,220.00 35,220.00 178,460.00 0.00 0.00 0.00 0.00 0.00 0.00 $279,000.00 $75,560.00 $354,560.00 Annual Financial Report FY 2004 136 Debt Service Obligations Annual debt service requirements to maturity for Georgia Southern University Housing Foundation revenue bonds payable to South Trust Bank are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $395,000.00 885,000.00 910,000.00 955,000.00 985,000.00 5,460,000.00 6,695,000.00 8,520,000.00 13,375,000.00 Interest Total $1,718,831.26 1,706,981.26 1,680,431.26 1,634,931.26 1,606,281.26 7,480,056.30 6,275,906.26 4,447,250.00 2,184,405.00 $2,113,831.26 2,591,981.26 2,590,431.26 2,589,931.26 2,591,281.26 12,940,056.30 12,970,906.26 12,967,250.00 15,559,405.00 0.00 0.00 0.00 $38,180,000.00 $28,735,073.86 $66,915,073.86 Annual debt service requirements to maturity for Georgia Southern University Housing Foundation revenue bonds payable to BB&T are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $0.00 100,000.00 875,000.00 755,000.00 840,000.00 5,105,000.00 6,190,000.00 7,760,000.00 9,810,000.00 4,465,000.00 Interest Total $297,321.50 1,698,980.00 1,696,230.00 1,672,167.50 1,650,461.26 7,739,493.80 6,561,690.00 4,851,587.50 2,636,462.50 330,000.00 $297,321.50 1,798,980.00 2,571,230.00 2,427,167.50 2,490,461.26 12,844,493.80 12,751,690.00 12,611,587.50 12,446,462.50 4,795,000.00 0.00 0.00 $35,900,000.00 $29,134,394.06 $60,239,394.06 Annual Financial Report FY 2004 137 Armstrong Atlantic State University Armstrong Atlantic State University Foundation (foundation) is a legally separate, taxexempt component unit of Armstrong Atlantic State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The 22-member board of the foundation is selfperpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $1,146,234.00 to the university for unrestricted purposes. Complete financial statements for the foundation can be obtained from the Office of External Affairs, Armstrong Atlantic State University, Savannah, GA. Armstrong Atlantic State University Educational Properties Foundation, Inc. (EPFI) (foundation) is a legally separate, tax-exempt component unit of Armstrong Atlantic State University (university). The foundation buys buildings and leases them to the university, manages an apartment complex, and operates student housing. The five-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31. Annual Financial Report FY 2004 138 Investments for Component Units: Armstrong Atlantic State University Foundation holds endowment investments in the amount of $4.2 million. Armstrong Atlantic State University Educational Properties holds real estate assets that have been purchased through bonds and bridge financing. There are no endowments in EPI. Long-Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable EPFI Foundation Student Housing Res. Instr. & Research Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year $9,000,000.00 $8,455,000.00 $0.00 $17,455,000.00 0.00 $205,000.00 Total Long Term Debt $9,000,000.00 $8,455,000.00 $0.00 $17,455,000.00 $205,000.00 Debt Service Obligation: Annual debt service requirements to maturity for student housing bonds (Educational Properties Foundation, Inc.) Bonds Payable Year Ending June 30: Year Principal Interest Total 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $205,000.00 450,000.00 475,000.00 495,000.00 520,000.00 3,015,000.00 3,840,000.00 4,890,000.00 3,565,000.00 $17,455,000.00 $0.00 $0.00 $205,000.00 450,000.00 475,000.00 495,000.00 520,000.00 3,015,000.00 3,840,000.00 4,890,000.00 3,565,000.00 0.00 0.00 0.00 $17,455,000.00 Annual Financial Report FY 2004 139 Augusta State University Augusta State University Foundation (foundation) is a legally separate, tax-exempt component unit of Augusta State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The foundation board is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $1,089,296.60 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 2500Walton Way, Augusta, GA 30904 or from the foundation's website at www.aug.edu/alumni Augusta State University Athletic Association (foundation) is a legally separate, tax-exempt component unit of Augusta State University (university). The foundation manages all extramural athletic activities. The board of the foundation is self-perpetuating and consists of university employees, graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. The principal assets and revenue producer for the Athletic Association is the Forest Hills Golf Club. Complete financial statements for the foundation can be obtained from the Vice President Annual Financial Report FY 2004 140 for Business and Student Services Office at 2500 Walton Way, Augusta, GA 30904 or from the foundation's website at www.aug.edu/athletics/ Investments for Component Units: Augusta State University Foundation holds endowment investments in the amount of $2.5 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: The Augusta State University Athletic Association has a long term liability of 1.6 million dollars in the form of a bank loan to finance a major golf course renovation project. Columbus State University Columbus State University Foundation (foundation) is a legally separate, tax-exempt component unit of Columbus State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $2,004,605 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the CSU Foundation at 4225 University Avenue, Columbus, GA 31907. Foundation Properties, Inc. (foundation) is a legally separate, tax-exempt component unit of Columbus State University (university). The foundation constructs auxiliary buildings and facilities for use by the university and then leases the completed buildings to the Board of Regents of the University System of Georgia. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university by the donors. Because these restricted resources held by the foundation can only be Annual Financial Report FY 2004 141 used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from Foundation Properties, Inc. at 4225 University Avenue, Columbus, GA 31907. Columbus State University Athletic Fund, Inc (foundation) is a legally separate, tax-exempt component unit of Columbus State University (university). The foundation supports athletic endeavors of the institution. These endeavors include but not limited to student services and student financial aid. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $257,975 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the CSU Athletic Fund, Inc. at 4225 University Avenue, Columbus, GA 31907. Columbus State University Alumni Association, Inc (foundation) is a legally separate, taxexempt component unit of Columbus State University (university). The foundation seeks to promote the mission of the University through mutually beneficial relations between the University and its alumni. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the Annual Financial Report FY 2004 142 University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from Columbus State University Alumni Association, Inc. at 4225 University Avenue, Columbus, GA 31907. Investments for Component Units: Columbus State University Foundation holds endowment investments in the amount of $24 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Columbus State University Foundation, in conjunction with the donors, has established a spending plan to annually distribute 5% of a trailing three-year average of the endowment's total asset value, with the understanding that this spending rate plus inflation will not normally exceed total return from investments. This trailing three-year average shall be set back six months from the time of current-year calculations for the purposes of spending, with the three year average being that of either calendar or fiscal-year periods according to the requirements of the budgetary process. Columbus State University Athletic Fund holds endowment investments in the amount of $1.4 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: Student Housing Bonds are issued by Foundation Properties, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Columbus State University. Educational Programming Bonds are issued by the Foundation Properties, Inc to finance the purchase of the One Arsenal to be incorporated with the future development of the Uptown campus. Commercial Bonds are issued by the Foundation Properties, Inc to finance the purchase of the Rankin and Oglethorpe buildings in Uptown Columbus. A portion of this property is considered commercial property the remainder of which is utilized for student housing. Annual Financial Report FY 2004 143 Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Foundation Properties Student Housing Educational Programming Commercial Beginning Balance July 1, 2003 $13,764,970.00 1,982,460.00 5,556,874.00 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year $0.00 7,260,000.00 $372,500.00 142,500.00 54,580.00 $13,392,470.00 9,099,960.00 5,502,294.00 $408,084.00 165,083.00 81,678.00 Total Long Term Debt $21,304,304.00 $7,260,000.00 $569,580.00 $27,994,724.00 $654,845.00 Debt Service Obligations for Component Units Annual debt service requirements to maturity for Student Housing (Foundation Properties, Inc.) revenue bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $408,083.00 3,696,884.00 368,750.00 4,868,753.00 300,000.00 3,750,000.00 Interest Total $227,943.00 188,496.00 158,630.00 152,923.00 55,425.00 177,547.00 $636,026.00 3,885,380.00 527,380.00 5,021,676.00 355,425.00 3,927,547.00 0.00 0.00 0.00 0.00 0.00 0.00 $13,392,470.00 $960,964.00 $14,353,434.00 Annual Financial Report FY 2004 144 Debt Service Obligations Annual debt service requirements to maturity for Educational Programming(Foundation Properties, Inc.) revenue bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $165,083.00 7,079,885.00 27,500.00 1,827,492.00 Interest Total $711,379.00 356,298.00 37,842.00 37,281.00 $876,462.00 7,436,183.00 65,342.00 1,864,773.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $9,099,960.00 $1,142,800.00 $10,242,760.00 Annual debt service requirements to maturity for Commercial (Foundation Properties, Inc.) revenue bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Princ ipal Int erest T ot al $81,679.00 528,681.00 323,179.00 4,568,755.00 $116,147.00 109,746.00 99,650.00 93,203.00 $197,826.00 638,427.00 422,829.00 4,661,958.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $5,502,294.00 $418,746.00 $5,921,040.00 Annual Financial Report FY 2004 145 Clayton College and State University Clayton College & State University Foundation, Inc. (foundation) is a legally separate, taxexempt component unit of Clayton College & State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The foundation board of directors is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $170,577 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Alumni Affair Office at the Harry Downs Continuing Education Building, Morrow, Georgia 30260. The Walter and Emilie Spivey Foundation, Inc. (foundation) is a legally separate, tax-exempt component unit of Clayton College & State University (university). The foundation provides music scholarships and sponsors programming in Spivey Hall, the university's world class music performance hall. The foundation Board of Directors is self-perpetuating and consists of friends of the university, and the university president. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31. Annual Financial Report FY 2004 146 Investments for Component Units: Clayton College & State University Foundation holds endowment investments in the amount of $1.9 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Walter and Emilie Spivey Foundation held investments in the amount of $7.4 million at June 30, 2004. The Walter and Emilie Spivey Foundation Board Members have established a spending plan whereby earnings may be used for music scholarships and Spivey Hall programming. Georgia College and State University Georgia College & State University Foundation (foundation) and Georgia College & State University Alumni Association, Inc. (association) are legally separate, tax-exempt component units of Georgia College & State University (university). The foundation and alumni association act primarily as fund-raising organizations to supplement the resources that are available to the university in support of its programs. The boards of the foundation and association are selfperpetuating and consist of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation or association, the majority of resources or income thereon, which the foundation and association hold and invest, are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation and the association can only be used by, or for the benefit of, the university, the foundation and the association are considered component units of the university and are discretely presented in the university's financial statements. The foundation information includes three single member limited liability companies (LLC's) whose sole member is the foundation. The limited liability companies (LLC I, II and III) were formed primarily to construct and finance various buildings and improvements located on the property of Georgia College & State University. LLC III was not officially operational until July 14, 2004. The foundation and association are private nonprofit organizations that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $339,350 and the association distributed $159,024 to the University for both restricted and unrestricted purposes. Complete financial statements for both the Foundation and Alumni Association can be obtained from the Georgia College & State University Advancement Office at Campus Box 96, Milledgeville, GA 31061. Annual Financial Report FY 2004 147 Investments for Component Units: Georgia College & State University Foundation holds endowment investments of $8.1 million and the Alumni Association holds endowment investments of $4.6 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia College & State University Foundation and Alumni Association, in conjunction with the donors, has established a spending plan whereby 4.75% of the fair market value at year end may be used for academic scholarships and .25% may be used for administrative expenses. Long Term Liabilities for Component Units: Student Activities Facilities Bonds are issued by the Georgia College & State University Real Estate Foundation, a component unit of the GC&SU Foundation, to finance a student activities facility at Georgia College & State University. The bonds mature serially and are serviced by a pledge of a portion of student activity fees paid by students each semester at Georgia College & State University. Lease Revenue Bonds were issued by the Georgia College & State University Foundation Property II, LLC to finance a student center and parking lot at the University. The bonds, serial and term, are secured by a pledge of a portion of rental income to be paid by the Board of Regents of the University System of Georgia. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year Student Housing Revenue Bonds $55,875,000.00 Lease Revenue Bonds 0.00 Total Long Term Debt $55,875,000.00 $0.00 7,840,000.00 $7,840,000.00 $0.00 $55,875,000.00 0.00 7,840,000.00 $0.00 $63,715,000.00 $0.00 0.00 $0.00 Annual Financial Report FY 2004 148 Debt Service Obligations for Component Units Annual debt service requirements to maturity for Student Housing Revenue Bonds, LLC I) payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0.00 480,000.00 560,000.00 685,000.00 815,000.00 6,195,000.00 8,495,000.00 10,875,000.00 13,905,000.00 13,865,000.00 Interest Total $2,318,437.00 1,947,225.00 1,929,025.00 1,907,238.00 1,880,987.00 8,836,362.00 7,535,413.00 5,848,938.00 3,690,837.00 1,000,388.00 $2,318,437.00 2,427,225.00 2,489,025.00 2,592,238.00 2,695,987.00 15,031,362.00 16,030,413.00 16,723,938.00 17,595,837.00 14,865,388.00 $55,875,000.00 $36,894,850.00 $92,769,850.00 Annual debt service requirements to maturity for Lease Revenue Bonds (LLC I I) payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $0.00 265,000.00 275,000.00 275,000.00 280,000.00 1,555,000.00 1,860,000.00 1,785,000.00 1,545,000.00 Interest Total $300,421.00 297,439.00 291,019.00 284,144.00 276,506.00 1,220,613.00 905,275.00 491,634.00 47,700.00 $300,421.00 562,439.00 566,019.00 559,144.00 556,506.00 2,775,613.00 2,765,275.00 2,276,634.00 1,592,700.00 $7,840,000.00 $4,114,751.00 $11,954,751.00 Annual Financial Report FY 2004 149 Georgia Southwestern State University The Georgia Southwestern Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southwestern State University. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The 36-member Board of Trustees of the Foundation is self-perpetuating and consists of graduates, community members and other friends of the university. Although the university does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the university by donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The Georgia Southwestern Research and Development Corporation, Inc. (GSWR&DC) is also a legally separate, tax-exempt component unit of Georgia Southwestern State University. The GSWR&DC acts primarily to manage research grants and contracts in support of the university's mission. The 12-member Board of Trustees is composed of university personnel and community members. The GSWR&DC does not regularly distribute income to the university. The activities of the GSWR&DC support the research mission of the university and, accordingly, it is considered a component unit of the university. The Foundation and GSWR&DC are private nonprofit organizations that report under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $1,391,230 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 512 West Forsyth Street, Americus, Georgia 31709. Investments for Component Units: Georgia Southwestern Foundation holds endowment investments in the amount of $22.4 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia Southwestern Foundation, in conjunction with the donors, has established a spending plan whereby 5% to 6% of the earnings may be used for expenses. The remaining earnings are set aside as a reserve. Long Term Liabilities for Component Units: The Foundation does not have any long-term debt. Annual Financial Report FY 2004 150 Kennesaw State University Kennesaw State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Kennesaw State University (University). The Foundation's mission is to be advocates for the University and to receive, invest, account for and allocate private gifts and contributions in support of the University. The Foundation provides student housing and parking and leases administrative space to the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $2,542,605.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1000 Chastain Rd. Kennesaw, GA 30114. Investments for Component Units: Kennesaw State University Foundation holds endowment investments in the amount of $12,010,588.00. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Kennesaw State University Foundation, in conjunction with the donors, has established a spending plan whereby 4% of the earnings may be used for academic scholarships. Long Term Liabilities for Component Units: During the year ended June 30, 2004, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation in a variable interest rate loan which is secured by three letters of credit. The Series 2003A Student Housing Facilities Bonds were issued to finance student housing on University Property and mature August 2031. The Series 2003B University Facilities Bonds were issued to finance parking facilities on University property and mature August 2026. During the year Series 2001A and 2001A bonds that were issues in 2001 were refunded. During the year ended June 30, 2004, the Foundation assumed Educational Facilities Bonds issued by the Development Authority of Cobb County. The bonds were used to finance the acquisition of existing teaching and administrative facilities and mature August 2031. Annual Financial Report FY 2004 151 During the year ended June 30, 2004, the Foundation purchased an apartment complex and assumed a note payable to a financial institution. The note matures April 2010 with a final payment of the entire outstanding principal balance. The note bears interest at a rate of 8.58%. The obligations of the Foundation to repay these liabilities are secured by a deed to secure debt, an assignment of rents and leases, and by a security agreement which encumbers the Foundation's interest in the projects and revenues. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year Student Housing Facilities Bonds University Facilities Bonds Educational Facilities Revenue Bonds Note Payable Total Long Term Debt $37,755,000.00 22,940,000.00 $85,705,785.00 25,045,000.00 15,990,000.00 2,474,836.00 $37,755,000.00 22,940,000.00 2,335,000.00 $85,705,785.00 25,045,000.00 13,655,000.00 2,474,836.00 $705,000.00 550,000.00 650,000.00 24,795.00 $60,695,000.00 $129,215,621.00 $63,030,000.00 $126,880,621.00 $1,929,795.00 Debt Service Obligations for Component Units Annual debt service requirements on long term liabilities are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $1,929,795.00 2,987,008.00 3,139,418.00 3,307,044.00 3,469,904.00 22,316,667.00 25,610,000.00 25,740,000.00 28,615,000.00 9,765,785.00 Interest Total $0.00 $1,929,795.00 2,987,008.00 3,139,418.00 3,307,044.00 3,469,904.00 22,316,667.00 25,610,000.00 25,740,000.00 28,615,000.00 9,765,785.00 0.00 0.00 $126,880,621.00 $0.00 $126,880,621.00 Annual Financial Report FY2004 152 North Georgia College and State University The North Georgia College & State University Foundation, Inc. (Foundation) was formed and incorporated under the laws of the state of Georgia in January, 1959. The purpose of the Foundation is to support North Georgia College & State University (University), its students, faculty and staff and the educational programs designed for its students, potential students and alumni. The Foundation's support comes primarily from contributions and grants from alumni, corporations, foundations and other individuals. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The twenty-three-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. During the year ended June 30, 2004, the Foundation made distributions of $2,462,965 to or on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Institutional Advancement at 70 Alumni Drive, Dahlonega, GA 30533. The Foundation prepares its financial reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. With the exception of necessary presentation adjustments, no modifications have been made to the Foundation's financial information in the University's financial report for these differences. The Foundation manages a charitable gift annuity and currently pays 5% to the life beneficiary. Upon the death of the income beneficiary, the remaining funds will be unrestricted. The Foundation realized an eleven percent investment return on the endowments in its business year ending June 30, 2004. An Investment Committee determines the appropriate investment mix to provide performance results needed to produce adequate funding for the University. The investment mix currently is approximately 60% Equity and 40% Bonds and Cash Equivalents. Annual Financial Report FY 2004 153 Long Term Liabilities for Component Units: Revenue Bonds Payable Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year Student Housing Total Long Term Debt $10,950,000.00 $10,950,000.00 $0.00 $0.00 $55,000.00 $55,000.00 $10,895,000.00 $10,895,000.00 $95,000.00 $95,000.00 Debt Service Obligations for Component Units Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Bonds Payable Principal Interest Total $95,000.00 100,000.00 100,000.00 100,000.00 100,000.00 1,200,000.00 2,500,000.00 3,300,000.00 3,400,000.00 $464,700.00 459,000.00 454,750.00 450,500.00 446,250.00 2,069,750.00 1,653,250.00 1,015,750.00 225,250.00 $559,700.00 559,000.00 554,750.00 550,500.00 546,250.00 3,269,750.00 4,153,250.00 4,315,750.00 3,625,250.00 $10,895,000.00 $7,239,200.00 $18,134,200.00 Annual Financial Report FY 2004 154 Southern Polytechnic State University Southern Polytechnic State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Southern Polytechnic State University. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The forty-member board of the Foundation is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30 2004, the Foundation distributed $694,316.06 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 1100 South Marietta Pkwy., Marietta, Ga. 30060. SPSU Student Housing I, LLC and SPSU Management, LLC Southern Polytechnic State University Foundation, Inc established two LLC's to construct and manage student housing for use by the University. The net proceeds from student housing are for the exclusive use of the Foundation and the University. Buildings valued at 8.7 million plus current buildings under construction and the associated long term debt of 35.7 million are included in the financial statements of the Foundation. Investments for Component Units: Southern Polytechnic State University Foundation, Inc. holds endowment investments in the amount of $976,385.00. The corpus of the endowment is nonexpendable, but earnings on the investments may be expended as restricted by the donors. Southern Polytechnic State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 5% of the investments may be used for the purpose as restricted by the donors. Annual Financial Report FY 2004 155 Long Term Liabilities for Component Units: Student Housing Bonds were issued by the Marietta Development Authority to finance student housing on University property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Southern Polytechnic State University. Interest rates vary between 2.5% and 5.25%. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year Student Housing Total Long Term Debt $0.00 $35,690,000.00 $0.00 $35,690,000.00 $0.00 $0.00 $35,690,000.00 $35,690,000.00 $0.00 $0.00 Debt Service Obligations for Component Units Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $0.00 850,000.00 810,000.00 900,000.00 970,000.00 5,340,000.00 6,550,000.00 8,420,000.00 10,095,000.00 1,755,000.00 Interest Total $1,279,421.00 1,644,970.00 1,623,720.00 1,599,420.00 1,576,020.00 7,388,055.00 6,179,975.00 4,301,769.00 1,935,500.00 87,750.00 $1,279,421.00 2,494,970.00 2,433,720.00 2,499,420.00 2,546,020.00 12,728,055.00 12,729,975.00 12,721,769.00 12,030,500.00 1,842,750.00 0.00 0.00 $35,690,000.00 $27,616,600.00 $63,306,600.00 Annual Financial Report FY 2004 156 State University of West Georgia State University of West Georgia Foundation (Development) State University of West Georgia Foundation is a legally separate, tax-exempt component unit of State University of West Georgia. The foundation acts primarily as a fund-raising organization to supplement resources available to the University for support of its programs. The foundation board consists of approximately 40 members and is made up of alumni and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31, 2003. During the year ended December 31, 2003, the foundation distributed $1,314,937 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Offices at 1601 Maple St, Carrollton, GA 30118. UWG Real Estate Foundation During the spring of 2004, the UWG Real Estate Foundation (foundation) was formed. By resolution of the Internal Revenue Service, (IRS), it is a legally separate, tax-exempt component unit of the State University of West Georgia (university). (The IRS ruling was issued August 23, 2004). The foundation was formed to construct auxiliary buildings and facilities for use by the university and then lease the completed buildings to the institution. The nine-member board of the foundation is self-perpetuating and is controlled by friends of the university. The foundation does not have any receipts or assets as of June 30, 2004. The first facility project will be a campus center, with construction expected to start in January, 2005, and be completed for use in mid 2006. The majority of resources or income thereon that the foundation is expected to generate will be restricted to the real estate activities of the university. Because these restricted resources held by the foundation will only be used by, or for the benefit of, the university, the foundation would be considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that will report under FASB standards. Annual Financial Report FY 2004 157 Investments for Component Units: State University of West Georgia Foundation (Development) State University of West Georgia Foundation holds endowment investments in the amount of $11,314,911. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. State University of West Georgia Foundation, in conjunction with the donors, has established a spending plan whereby up to 5% of the corpus balance earnings may be used for academic scholarships and 1% to 3% may be used for an administrative fee. The remaining balance of the earnings are set aside as a reserve. The State University of West Georgia Housing Foundation, LLC was formed in July, 2003 to construct additional housing for the University. The Foundation is the sole member of this LLC. At December 31, 2003 the project was in progress with a targeted completion date of fall 2004. Long Term Liabilities for Component Units: State University of West Georgia Foundation (Development) Student Housing Bonds were issued by the State University of West Georgia Foundation to finance student housing on university property in the amount of $13,205,000. The bonds, serial and term, are secured by pledges of gross receipts from student housing at State University of West Georgia. The Foundation is financing the student housing project by issuing variable rate bonds. The rate is the Weekly Swap Index published by the Bond Market Association, adjusted weekly, with a cap of 12.0%. The current rate is 1.15%. I understand that the historical average rate over the last ten years has been 3.5%. The fixed bond rate for our project would be approximately 6.5%. The Foundation chose the variable rate bonds in order to take advantage of the low rates available at this time. In addition, the Foundation has the option of doing an "interest rate swap" if the rates increase by swapping all or a part of the debt for fixed rate bonds at a later time. Therefore, the Foundation has the flexibility to switch to a fixed rate. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Student Housing Total Long Term Debt Beginning Balance January 1, 2003 Additions Reductions Ending Amounts due Balance within December 31, 2003 One Year $0.00 $13,205,000.00 $0.00 $13,205,000.00 $0.00 $0.00 $13,205,000.00 $13,205,000.00 $405,783.16 $405,783.16 Annual Financial Report FY 2004 158 Debt Service Obligations for Component Unit: State University of West Georgia Foundation (Development) Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Bonds Payable Year Ending March 31: 2004 2005 2006 2007 2008 2009 through 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26 Principal Interest & LOC Total $0.00 375,000.00 385,000.00 400,000.00 2,185,000.00 2,565,000.00 3,005,000.00 3,520,000.00 770,000.00 $405,783.16 405,791.46 401,017.66 389,366.56 377,336.93 1,692,758.56 1,329,762.58 903,774.45 404,922.73 13,860.00 $405,783.16 405,791.46 776,017.66 774,366.56 777,336.93 3,877,758.56 3,894,762.58 3,908,774.45 3,924,922.73 783,860.00 $13,205,000.00 $6,324,374.09 $19,529,374.09 Dalton State College Dalton State College Foundation (foundation) is a legally separate, tax-exempt component unit of Dalton State College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirty-nine member board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $631,681 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 213 N College Drive, Dalton, GA 30720-3797. Investments for Component Units: Annual Financial Report FY 2004 159 Dalton State College Foundation holds endowment investments in the amount of $8.8 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: Dalton State College did not have any Long Term Liabilities for Component Units for FY 2004. Debt Service Obligations for Component Units Dalton State College did not have any Debt Service Obligations for Component Units for FY 2004. Macon State College Macon State College Foundation, Inc. (foundation) is a legally separate, non-profit corporation existing to support and enhance public higher education in the middle Georgia area. The foundation operates as a tax-exempt organization under Section 501(c) (3) of the Internal Revenue Code as a charitable organization whereby only unrelated business income, as defined by Section 512(a) (1) of the Code, is subject to federal income tax. The foundation is not a private foundation within the meaning of section 509(a) (1) and 170(b) (1) (A) (vi). Twenty-five foundation trustees represent central Georgia leaders from business, education, healthcare, and government. New trustees are elected by the current trustees, and members may serve an unlimited number of three year terms. Although the College does not control the timing or amount of receipts from the Foundation, the majority of the resources or income thereon are restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by or for the benefit of the College, the foundation is considered a component unit of the College and is discreetly presented in the College's financial statements. The foundation reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information as presented in this report; however, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $483,127.00 on behalf of the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Office of Development and Alumni Affairs at 100 College Station Drive, Macon, GA 31206. Annual Financial Report FY 2004 160 Investments for Component Units: Macon State College Foundation holds $5,818,673 net endowed assets. The corpus or the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The foundation has established a spending plan whereby 4-6% of the earnings may be used within the parameters of the donor's restrictions. Long Term Liabilities for Component Units: Macon State College Foundation had no long term liabilities as of June 30, 2004. Abraham Baldwin Agricultural College Abraham Baldwin Agricultural College Foundation (foundation) is a legally separate, taxexempt component unit of Abraham Baldwin Agricultural College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The twenty-seven-member board of the foundation is selfperpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $812,460 to or on behalf of the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at ABAC 13, 2802 Moore Highway, Tifton, GA. 31793. Investments for Component Units: Abraham Baldwin Agricultural College Foundation holds endowment investments in the amount of $5.5 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Annual Financial Report FY 2004 161 Long Term Liabilities for Component Units: Student Housing Bonds are issued by the First ABAC, L.L.C. to finance student housing on College property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Abraham Baldwin Agricultural College and are covered by a financial guaranty insurance policy issued by AMBAC Assurance Corporation. The bonds carry an interest rate ranging from 1.75% to 4.25%. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Real Estate Foundation Student Housing Res. Instr. & Research Athletic Foundation Athletic Facilities Total Long Term Debt Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year $0.00 $32,664,632.00 $0.00 $32,664,632.00 $23,205.00 $23,205.00 $32,641,427.00 0.00 0.00 $32,641,427.00 $4,023.00 $4,023.00 Debt Service Obligations for Component Units Annual debt service requirements to maturity for Student Housing (First ABAC, L.L.C.) revenue bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $0.00 685,000.00 725,000.00 785,000.00 870,000.00 4,790,000.00 5,635,000.00 7,065,000.00 9,005,000.00 2,055,000.00 Interest Total $1,314,231.00 1,306,344.00 1,289,394.00 1,270,519.00 1,249,831.00 5,834,100.00 4,949,691.00 3,460,812.00 1,488,962.00 43,669.00 $1,314,231.00 1,991,344.00 2,014,394.00 2,055,519.00 2,119,831.00 10,624,100.00 10,584,691.00 10,525,812.00 10,493,962.00 2,098,669.00 0.00 0.00 $31,615,000.00 $22,207,553.00 $53,822,553.00 Annual Financial Report FY 2004 162 Bainbridge College Bainbridge College Foundation (foundation) is a legally separate, tax-exempt component unit of Bainbridge College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The eleven-member board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $12,182 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 2500 E. Shotwell Street Bainbridge, GA 39819. Long Term Liabilities for Component Units Bainbridge College Foundation had no long term liabilities for FY2004. Coastal Georgia Community College Coastal Georgia Community College Foundation (foundation) is a legally separate, taxexempt component unit of Coastal Georgia Community College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the college in support of its programs. The 43-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. Annual Financial Report FY 2004 163 However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $674,312 to the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Business Affairs office at 3700 Altama Avenue, Brunswick, GA 31520. Investments for Component Units: Coastal Georgia Community College Foundation holds endowment investments in the amount of $2.14 million. The corpus of the endowment is nonexpendable, but the earnings on the investment are expended as restricted by the donors. Approximately 80% of endowment funds generate earnings for scholarships while 20% generate unrestricted earnings. Endowment fund investments are currently managed by Trusco Capital Management via the Total Return Fund. Long Term Liabilities for Component Units: Coastal Georgia Community College Foundation does not have any Long Term Liabilities. Darton College Darton College Foundation (foundation) is a legally separate, tax-exempt component unit of Darton College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The fifty-member board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon, that the foundation holds and invests, is restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $286,040.50 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Business Office at 2400 Gillionville Road, Albany, GA 31707. Annual Financial Report FY 2004 164 Investments for Component Units: Darton College Foundation holds endowment investments in the amount of $859,037.00. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: The Darton College Foundation has no long term liabilities. East Georgia College East Georgia College Foundation, Inc. (foundation) is a legally separate, tax-exempt component unit of East Georgia College (college). The foundation acts primarily as a fundraising organization to supplement the resources that are available to the college in support of its programs. The seven-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $40,882.82 to the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Treasurer of the Foundation, 131 College Circle, Swainsboro, GA 30401. Investments for Component Units: East Georgia College Foundation holds endowment investments in the amount of $632,373.00. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. East Georgia College Foundation, in conjunction with the donors, has established a spending plan whereby up to 100% of the earnings may be used for academic scholarships. If all the earnings are not used for scholarships, they will be set aside as a reserve. Long Term Liabilities: The East Georgia College Foundation does not have any long-term liabilities. Annual Financial Report FY 2004 165 Floyd College The Floyd College Foundation (foundation) is a legally separate, tax-exempt component unit of Floyd College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from the Administrative Office at 3175 Highway 27 South, Rome, GA 30162-1864. The Cartersville/Bartow College Foundation (foundation) is a legally separate, tax-exempt component unit of Floyd College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from the Administrative Office at 3175 Highway 27 South, Rome, GA 30162-1864. Annual Financial Report FY 2004 166 Investments for Component Units: The Floyd College Foundation holds endowment investments in the amount of $555,145.84. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Cartersville/Bartow College Foundation holds endowment investments in the amount of $23,322.89. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Resa Building Note Beginning Balance July 1, 2003 $23,597.28 Additions $0.00 Reductions $23,597.28 Ending Balance June 30, 2004 $0.00 Total Long Term Debt $23,597.28 $0.00 $23,597.28 $0.00 Gainesville College Gainesville College Foundation (Foundation) is a legally separate, tax-exempt component unit of Gainesville College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirty-six member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Non-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is January 1 through December 31. During the year ended December 31, 2003, the Foundation distributed $295,604.23 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation office at 3820 Mundy Mill Road; Oakwood, GA 30566. Annual Financial Report FY 2004 167 Investments for Component Units: Investments in marketable equity securities and debt securities consisted of the following as of December 31, 2003: Regions Morgan Keegan Stocks, Mutual Funds, Bonds Total Cost at 12/31/03 7,443,987 $7,443,987 Market at 12/31/03 8,118,921 $8,118,921 Unrealized Gain/(Loss) 674,934 $ 674,934 These accounts include funds held in separate accounts for the following: Endowment Challenge Grant--Title III General Endowment Fund Eminent Scholarship Fund Goizueta Foundation Grant Fund Total Market Value 12/31/03 4,642,621 2,067,208 1,070,277 338,815 $8,118,921 The following schedule summarizes investment income: Interest & Dividends Net Realized Gains and Losses Total Gross Gains Less: Management Fees Net Realized Gains and Losses Unrestricted $ 114,113 533,360 647,473 10,597 $ 636,876 Temporarily Restricted $ 87,161 432,316 519,477 15,866 $ 503,611 Permanently Restricted $ -0- 73 73 -0$ 73 Total $ 201,274 965,749 1,167,023 26,463 $1,140,560 Investment income has been reported as an increase in unrestricted net assets unless the donor placed restrictions on the income's use. If the income is restricted, it is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restrictions. Investment in land consists of 76.70 acres of land in Hall County, Georgia valued at $8,400 by the Foundation at the time of receipt in December 1980. Long Term Liabilities for Component Units: The Gainesville College Foundation had no long term liabilities or debt service obligations as of December 31, 2003. Gordon College Gordon College Foundation (foundation) is a legally separate, tax-exempt component unit of Gordon College (College). The foundation is set up to provide support to students attending Annual Financial Report FY 2004 168 Gordon College. The organization solicits Gordon College Foundation donations for the use of scholarships to eligible students. The 49 members of the Gordon College Foundation are elected to three-year terms of service. The Board of Trustees is composed of business and civic leaders from the Gordon College service area. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or incomes thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31. During the year ended June 30, 2004, the foundation distributed $121,980 to the college for restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 419 College Drive, Barnesville, GA 30204. Investments for Component Units: Gordon College Foundation investments Certificates of deposit in banks are carried at face value. Corporate bonds are recorded at fair market value as shown by the holder of the securities. The Common Fund is an equity-income fund and is carried at Market Value as shown by the funds. Charles Schwab consists of cash, money market funds, stock and mutual funds. It is carried at Market Value as shown on the Charles Schwab statement for December 31, 2003. The various stocks held by the Foundation are carried at market value. Gordon College Foundation received a charitable gift annuity. With a charitable gift annuity, the donor contributes assets in exchange for distributions of a fixed amount for specified period of time. The assets were contributed directly to the organization and are held as general assets of the organization. The related liability for annuity payments is recorded as a general obligation of the organization. Gordon College Foundation, Inc. received various stocks with a fair market value of $137,660. In exchange for the stock, the Foundation agreed to pay the donor quarterly payments of $2,621.44 until the donor's death or until the donor's wife's death if she survives him. The estimated present value of these payments over an actuarially determine life of the donor is recorded as a liability. At December 31, 2003, the estimated present value of annuity payments was $77,697. Interest paid during 2003 was $4,363. Long Term Liabilities for Component Units: Gordon College Foundation had no long term liabilities as of June 3, 2004. Annual Financial Report FY 2004 169 Middle Georgia College Middle Georgia College Foundation, Inc. (foundation) is a legally separate, tax-exempt component unit of Middle Georgia College (college). The foundation acts primarily as a fundraising organization to supplement the resources that are available to the college in support of its programs. The foundation is supported primarily from alumni and public contributions. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including SB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $63,633 to the college or on the college's behalf for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Foundation Office at 1100 Second Street., SE, Cochran, GA 31014. Investments for Component Units: Middle Georgia College Foundation holds endowment investments in the amount of $707,343. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Middle Georgia College Foundation has established a spending plan whereby 100% of the realized income earned is available for current and future expenditures, except where restricted by the donor. Long Term Liabilities for Component Units: Middle Georgia College Foundation had no long-term liabilities at June 30, 2004. South Georgia College South Georgia College Foundation (foundation) is a legally separate, tax-exempt component unit of South Georgia College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is Annual Financial Report FY 2004 170 considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $247,711 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the office of the Vice President for Business Affairs at South Georgia College. Investments for Component Units: South Georgia College Foundation holds endowment investments in the amount of $1.9 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long-Term Investments for Component Units: South Georgia College Foundation had no long-term investments as of 6-30-04. Waycross College Waycross College Foundation (foundation) is a legally separate, tax-exempt component unit of Waycross College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the college in support of its programs. The twenty four-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Annual Financial Report FY 2004 171 During the year ended June 30, 2004, the foundation distributed $ 74,059.00 to the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 2001 South Georgia Parkway, Waycross, GA 31502. Investments for Component Units: Waycross College Foundation holds endowment investments in the amount of $1.1 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Waycross College Foundation, in conjunction with the donors, has established a spending plan whereby an amount equivalent to 5% of the endowed corpus may be paid from cash earnings for academic scholarships. All gains from investments are set aside as a reserve. Long Term Liabilities for Component Units: Waycross College Foundation had no long-term liabilities at June 30, 2004. Annual Financial Report FY 2004 172 Board or Regents of The University System of Georgia Office of Internal Audit 270 Washington Street, SW., Atlanta, Georgia 30334 404-656-2237 www.usg.edu "Creating a More Educated Georgia" ABRAHAM BALDWIN AGRICULTURAL COLLEGE Financial Report For the Year Ended June 30, 2004 Abraham Baldwin Agricultural College Atlanta, Georgia Tom Call Interim President Floyd E. Wright Vice President for Fiscal Affairs ABRAHAM BALDWIN AGRICULTURAL COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Abraham Baldwin Agricultural College Foundations Balance Sheet ..........................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 First ABAC L.L. C. Statement of Activities .....................................................12 Abraham Baldwin Agricultural College Foundation Statement of Activities ...............13 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 22 Note 3 Accounts Receivable............................................................................................. 25 Note 4 Inventories............................................................................................................. 25 Note 5 Notes/Loans Receivable........................................................................................ 25 Note 6 Capital Assets........................................................................................................ 26 Note 7 Deferred Revenue.................................................................................................. 27 Note 8 Long-Term Liabilities ........................................................................................... 27 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 28 Note 11 Risk Management................................................................................................ 31 Note 12 Contingencies...................................................................................................... 32 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 32 Note 14 Natural Classifications With Functional Classifications..................................... 33 Note 15 Component Units ........................................................................ 34 ABRAHAM BALDWIN AGRICULTURAL COLLEGE Management's Discussion and Analysis Introduction Abraham Baldwin Agricultural College is one of the 34 institutions of the University System of Georgia. The College, located in Tifton, Georgia, was founded in 1969 and has become known for its state-of-the-art agricultural and nursing programs. The College offers associate degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,000 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 140 3,407 139 3,033 137 2,857 Overview of the Financial Statements and Financial Analysis Abraham Baldwin Agricultural College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Abraham Baldwin Agricultural College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Abraham Baldwin Agricultural College Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $3,864,208.07 25,104,369.54 526,560.52 29,495,138.13 June 30, 2003 $4,057,680.27 15,666,107.66 632,333.37 20,356,121.30 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 1,498,699.20 403,331.34 1,902,030.54 1,254,261.65 438,534.24 1,692,795.89 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 25,104,369.54 994,165.84 1,494,572.21 $27,593,107.59 15,666,107.66 886,856.16 2,110,361.59 $18,663,325.41 The total assets of the institution increased by $9,139,016.83. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase in non-current capital assets, net of accumulated depreciation. This was the addition of the new Agricultural Sciences Building and a major renovation to Howard Auditorium. The total liabilities for the year increased by $209,234.65. The primary cause for the increase was in current liabilities resulting from increased deferred revenue, primarily from Continuing Education course Deferred Revenues, and an increase in Deposits Held for Other Organizations. The combination of the increase in total assets of $9,139,016.83 and the increase in total liabilities of $209,234.65 yields an increase in total net assets of $8,929,782.18. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $9,438,261.88. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $15,068,840.35 June 30, 2003 $13,487,375.49 Operating Expenses Operating Loss 28,512,052.35 (13,443,212.00) 26,433,839.59 (12,946,464.10) Nonoperating Revenues and Expenses 11,430,012.02 12,439,976.65 Income (Loss) Before other revenues, expenses, gains or losses (2,013,199.98) (506,487.45) Other revenues, expenses, gains or losses 8,473,355.19 1,087,020.03 Increase in Net Assets 6,460,155.21 580,532.58 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 18,663,325.41 2,469,626.97 21,132,952.38 16,578,197.99 1,504,594.84 18,082,792.83 Net Assets at End of Year $27,593,107.59 $18,663,325.41 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Abraham Baldwin Agricultural College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2004 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm A ux ilia r y O the r $2,520,459.74 6,430,456.11 199,540.78 5,597,080.45 321,303.27 Total Operating Revenue 15,068,840.35 Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue 11,617,728.07 20,137.81 (207,853.86) 11,430,012.02 C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants 8,473,355.19 8,473,355.19 Total Revenues $34,972,207.56 June 30, 2003 $2,331,705.90 5,661,143.41 191,281.92 5,134,508.24 168,736.02 13,487,375.49 12,448,846.00 47,328.54 (56,197.89) 12,439,976.65 1,087,020.03 1,087,020.03 $27,014,372.17 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $9,496,687.69 996,293.98 2,624,159.41 2,145,831.29 3,935,906.46 2,111,465.71 1,670,572.51 5,531,135.30 28,512,052.35 0.00 $28,512,052.35 June 30, 2003 $9,049,933.63 770,318.84 1,542,022.18 1,802,151.65 3,818,956.03 2,043,768.78 1,513,613.07 4,985,615.38 907,460.03 26,433,839.59 0.00 $26,433,839.59 The revenues statement reflects an increase of $7,957,835.39. Of this amount, $8,473,355.19 is from State Capital Gifts and Grants. This is revenue received from the Georgia State Financing and Investment Commission (GSFIC) for building projects. The expenditure statement reflects an increase of $2,078,212.76. This was the result of various items including the purchase of a new telephone system called Telephony, the upgrade of several student computer labs, and the installation of new signage for the campus. The compensation and employee benefits category increased by approximately $253,502.24. The compensation to employees remained basically the same as the prior year due to not receiving a pay raise. The increase is primarily the result of the addition of new personnel in sponsored programs such as the ICAPP Nursing Program and the Upward Bound program. Utilities increased by approximately $155,258.97 during the past year. The increase was primarily associated with an increase in natural gas costs as well as electricity. Under non-operating revenues (expenses) state appropriations decreased by approximately ($831,117.93). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Abraham Baldwin Agricultural College. We are hopeful that the economy is now on an upward trend. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Abraham Baldwin Agricultural College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 0 ,9 2 4 ,6 2 9 .0 1 ) 1 1 ,7 3 9 ,1 3 5 .2 7 (2 9 1 ,9 9 4 .8 8 ) 2 0 ,1 3 7 .8 1 5 4 2 ,6 4 9 .1 9 1 ,3 0 3 ,4 4 7 .8 0 $ 1 ,8 4 6 ,0 9 6 .9 9 June 30, 2003 ($ 1 2 ,2 7 3 ,2 9 3 .9 6 ) 1 1 ,9 1 3 ,1 1 9 .0 7 (4 8 0 ,2 2 1 .1 8 ) 4 7 ,3 2 8 .5 4 (7 9 3 ,0 6 7 .5 3 ) 2 ,0 9 6 ,5 1 5 .3 3 $ 1 ,3 0 3 ,4 4 7 .8 0 Capital Assets The College had two significant capital asset additions for facilities in fiscal year 2004. The Howard Auditorium renovation was completed and the Auditorium was reopened for the 20032004 academic year. The cost of this project was $1,101,161.14. The Howard Auditorium renovation was funded by MRR funds that were administered by the Georgia State Finance and Investment Commission (GSFIC). Construction of the New Agricultural Sciences Building was completed and the building was placed into service early in fiscal year 2004. The cost of this project was $7,372,194.05 as of June 30, 2004. This project was funded by GSFIC. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Abraham Baldwin Agricultural College has included the financial statements and notes for all required component units for FY2004. The Abraham Baldwin Agricultural College Annual Financial Report FY 2004 6 Abraham Baldwin Agricultural College Foundation had endowment investments of $5.5 M as of June 30, 2004. The First ABAC, L.L.C. had long-term debt of $32.6 M in the form of two bond issues. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is making a major change in the operations of Auxiliary Enterprises for next year. All of the existing student housing will be demolished and new student apartments are being constructed. These units are to be completed for Fall Semester FY2004. These apartments are being built through the ABAC Foundation. These units will be furnished with full kitchens which will have a major impact on our food service operations as well. Revenues and expenditures for these operations will decrease significantly. We are not aware of any other known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will we maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Tom Call, Interim President Abraham Baldwin Agricultural College Abraham Baldwin Agricultural College Annual Financial Report FY 2004 7 Statement of Net Assets ABRAHAM BALDWIN AGRICULTURAL COLLEGE STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $1,846,096.99 Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance 672,633.48 Receivables - State General Appropriations Allotment Receivables - Other 999,166.29 I n v e nto r ie s 326,738.86 Other Assets 19,572.45 Total C urrent Assets 3,864,208.07 Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D eposits Deferred Revenue Other Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 526,560.52 25,104,369.54 25,630,930.06 29,495,138.13 483,130.45 250.00 335,628.95 (79,093.73) 368,031.64 0.00 390,751.89 1,498,699.20 403,331.34 403,331.34 1,902,030.54 25,104,369.54 994,165.84 1,494,572.21 $27,593,107.59 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 8 Abraham Baldwin Agricultural College Foundation Balance Sheet Abraham Baldwin Agricultural C ollege Foundation Balance Sheet (F ASB) June 30, 2004 F irst ABAC L.L.C . ABAC F o und a tio n A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net O ther A ssets Total A ssets $68,969.00 35,217,256.00 1,154,288.00 36,440,513.00 $708,822.00 5,519,055.00 454,228.00 1,873,728.00 8,555,833.00 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 3,463,567.00 32,624,519.00 36,088,086.00 24,023.00 12,885.00 36,908.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 352,427.00 $352,427.00 1,013,618.00 1,379,547.00 6,125,760.00 $8,518,925.00 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets ABRAHAM BALDWIN AGRIC ULTURAL C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $5,199,602.22 2,679,142.48 6,062,803.49 87,008.49 280,644.13 199,540.78 1,398,525.03 1,874,533.48 1,333,147.71 55,285.53 344,497.08 394,667.27 196,424.35 321,303.27 15,068,840.35 5,062,055.21 6,562,947.73 3,479,432.23 178,023.00 2,119,011.49 1,142,285.48 8,471,137.79 1,497,159.42 28,512,052.35 (13,443,212.00) Abraham Baldwin Agricultural College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O the r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O the r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 11,617,728.07 20,137.81 (207,853.86) 11,430,012.02 (2,013,199.98) 8,473,355.19 8,473,355.19 6,460,155.21 18,663,325.41 2,469,626.97 21,132,952.38 $27,593,107.59 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 11 Abraham Baldwin Agricultural College - First ABAC L.L.C. Statement of Activities First ABAC L.L.C. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev e nues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $0.00 $0.00 267,051.00 190,831.00 0.00 457,882.00 $0.00 0.00 $0.00 267,051.00 0.00 0.00 190,831.00 0.00 0.00 0.00 0.00 457,882.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 105,455.00 0.00 0.00 105,455.00 352,427.00 0.00 0.00 0.00 0.00 105,455.00 0.00 0.00 0.00 0.00 105,455.00 352,427.00 Net Assets Beginning Net Assets Ending Net Assets 0.00 $0.00 0.00 $352,427.00 0.00 $0.00 0.00 $352,427.00 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 12 Abraham Baldwin Agricultural College Foundation Statement of Activities Abraham Baldwin Agricultural College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $289,366.00 8,830.00 50,000.00 (179,122.00) 169,074.00 $927,858.00 435,718.00 179,122.00 1,542,698.00 $483,725.00 483,725.00 $1,700,949.00 0.00 435,718.00 8,830.00 0.00 50,000.00 0.00 0.00 0.00 2,195,497.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 132,879.00 314,434.00 86,839.00 219,718.00 (50,644.00) 172,853.00 487,287.00 1,055,411.00 0.00 483,725.00 0.00 0.00 447,313.00 0.00 0.00 172,853.00 86,839.00 707,005.00 1,488,492.00 Net Assets Beginning Net Assets Ending Net Assets 1,064,262.00 $1,013,618.00 324,136.00 $1,379,547.00 5,642,035.00 $6,125,760.00 7,030,433.00 $8,518,925.00 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 13 Statement of Cash Flows ABRAHAM BALDWIN AGRIC ULTURAL COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL A ND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $5,218,119.74 7,272,603.30 221,125.07 (12,980,467.15) (11,585,459.09) (4,806,199.97) (725,840.58) 506,855.47 1,345,829.66 1,878,549.41 1,525,702.63 55,285.53 347,994.08 398,324.27 196,424.35 206,524.27 (10,924,629.01) 11,617,728.07 121,407.20 11,739,135.27 (291,994.88) (291,994.88) 20,137.81 20,137.81 542,649.19 1,303,447.80 $1,846,096.99 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($13,443,212.00) 1,497,159.42 978,727.88 (116,853.16) 126,537.24 57,285.19 131,095.55 (168,863.89) 13,494.76 ($10,924,629.01) ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS C hange in fair value of investm ents recognized as a com ponent of interest i $20,137.81 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 15 ABRAHAM BALDWIN AGRICULTURAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Abraham Baldwin Agricultural College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Abraham Baldwin Agricultural College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Abraham Baldwin Agricultural College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Abraham Baldwin Agricultural College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Abraham Baldwin Agricultural College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Abraham Baldwin Agricultural College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Abraham Baldwin Agricultural College is reporting the activity for the Abraham Baldwin Agricultural College Foundation, and the First ABAC, L.L.C. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Abraham Baldwin Agricultural College Annual Financial Report FY 2004 16 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 17 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Abraham Baldwin Agricultural College when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $7,372,194.05 to Abraham Baldwin Agricultural College. The Howard Auditorium renovation was funded by MRR funds that were administered by the Georgia State Financing and Investment Commission. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 18 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Abraham Baldwin Agricultural College had accrued liability for compensated absences in the amount of $780,588.47 as of 7-1-2003. For FY2004, $534,816.40 was earned in compensated absences and employees were paid $521,321.64, for a net increase of $13,494.76. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $794,083.23. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 19 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $0.00 965,653.73 28,512.11 $994,165.84 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $465,924.91 531,656.67 496,990.63 $1,494,572.21 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Abraham Baldwin Agricultural 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 College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Abraham Baldwin Agricultural College Annual Financial Report FY 2004 20 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Abraham Baldwin Agricultural 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Abraham Baldwin Agricultural College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 22 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $450,534.59 Bank Balances $450,534.59 Risk C ategories 1 2 3 $185,585.25 $0.00 $264,949.34 $450,534.59 $450,534.59 $185,585.25 $0.00 $264,949.34 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 23 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 20, 2004, the College's investments consisted of the following: Type of Investments Risk C ategories 1 2 3 C ommon Stock C orporate Bonds Securities and C orporate Obligations C arrying Amount $0.00 0.00 0.00 Totals $0.00 Investments Not Subject to C ategorizations: Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments Total Investments $0.00 $0.00 $0.00 1,395,562.40 $1,395,562.40 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $84,156.36 47,952.76 672,633.48 867,057.17 1,671,799.77 $1,671,799.77 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $326,738.86 $326,738.86 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $67,441.25 67,441.25 Additions $67,441.25 780,034.30 847,475.55 Reductions $67,441.25 67,441.25 Ending Balance 6/30/2004 $67,441.25 780,034.30 847,475.55 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 26,528,000.00 607,439.00 2,944,878.44 2,664,064.43 136,700.00 32,881,081.87 12,683,681.32 546,695.10 1,859,090.18 2,180,264.00 12,684.86 17,282,415.46 15,598,666.41 $15,666,107.66 38,470,143.98 607,439.00 3,466,509.54 29,424,898.00 607,439.00 3,008,855.66 57,452.22 156,200.00 42,757,744.74 2,747.14 136,700.00 33,180,639.80 0.00 35,573,245.98 607,439.00 3,402,532.32 0.00 2,718,769.51 156,200.00 42,458,186.81 11,835,726.32 607,439.00 2,382,953.29 11,152,986.64 607,439.00 2,257,762.11 117,662.00 19,984.17 14,963,764.78 14,018.00 12,681.67 14,044,887.42 0.00 13,366,421.00 546,695.10 1,984,281.36 0.00 2,283,908.00 19,987.36 18,201,292.82 27,793,979.96 19,135,752.38 24,256,893.99 $28,641,455.51 $19,203,193.63 $25,104,369.54 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $80,127.00 255,501.95 $335,628.95 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 780,588.47 534,816.40 780,588.47 534,816.40 $780,588.47 $534,816.40 521,321.64 521,321.64 794,083.23 0.00 794,083.23 $521,321.64 $794,083.23 Current Portion $0.00 390,751.89 390,751.89 $390,751.89 Note 9. Lease Obligations Abraham Baldwin Agricultural College does not have any operating leases for the use of real property (land, buildings, and office facilities) and equipment. The College also is not obligated under any capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES Abraham Baldwin Agricultural College does not have any capital leases at this time. OPERATING LEASES Abraham Baldwin Agricultural College does not have any operating leases at this time. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 27 Note 10. Retirement Plans Teachers Retirement System Of Georgia Plan Description Abraham Baldwin Agricultural College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Abraham Baldwin Agricultural College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Abraham Baldwin Agricultural College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $752,741.88 $768,875.05 $780,721.91 Employees' Retirement System of Georgia Plan Description Abraham Baldwin Agricultural 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 28 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2004, for employees covered by ERS was $184,603.80. The College's total payroll for all employees was $12,099,057.47. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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 College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the College amount to 6% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $20,612.02, of which $12,364.44 was made by the College and $8,247.58 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 29 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Abraham Baldwin Agricultural College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Abraham Baldwin Agricultural College and the covered employees made the required contributions of $199,956.99 (10.03%) and $57,102.30 (5%), respectively. Georgia Defined Contribution Plan Plan Description Abraham Baldwin Agricultural 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. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 30 Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $33,617.19 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Abraham Baldwin Agricultural College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Abraham Baldwin Agricultural College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the Abraham Baldwin Agricultural College Annual Financial Report FY 2004 31 performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Abraham Baldwin Agricultural College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Abraham Baldwin Agricultural College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 137 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Abraham Baldwin Agricultural College recognized as incurred $546,589.79 of expenditures, which was net of $715,804.05 of participant contributions. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 32 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below. Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $5,051,238.21 1,236,550.21 1,547,318.80 87,330.22 168,658.67 110,669.00 946,336.00 348,586.58 $0.00 $11,817.00 381,059.37 116,829.25 10,070.07 23,701.19 5,189.06 447,628.04 $0.00 1,047,871.54 275,551.51 18,146.19 16,252.97 1,073,450.07 192,887.13 ($1,000.00) 1,078,767.75 286,560.55 34,583.51 46,224.75 21,144.55 679,550.18 $0.00 1,538,291.80 900,782.34 21,870.95 38,112.94 784,633.70 652,214.73 Total Expenses $9,496,687.69 $0.00 $996,293.98 $2,624,159.41 $2,145,831.29 $3,935,906.46 Natural C lassification Plant Operations & Maintenance Func tional Classific ation FY 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e p r e c ia tio n $ 0.00 648,454.83 204,315.11 (264,358.67) 416.31 814,676.00 621,642.05 86,320.08 $ 0.00 1,670,572.51 $ 0.00 631,952.23 148,074.67 264,358.67 5,605.75 209,854.37 136,240.96 3,917,897.75 217,150.90 $ 0.00 Total Expenses $ 2,111,465.71 $ 1,670,572.51 $ 5,531,135.30 $ 0.00 Total Expenses $ 5,062,055.21 6,562,947.73 3,479,432.23 0.00 178,023.00 2,119,011.49 1,142,285.48 8,471,137.79 1,497,159.42 $ 28,512,052.35 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 33 Note 15. Component Units Component Unit Notes Abraham Baldwin Agricultural College Foundation (foundation) is a legally separate, taxexempt component unit of Abraham Baldwin Agricultural College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The twenty-seven-member board of the foundation is selfperpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $812,460 to or on behalf of the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at ABAC 13, 2802 Moore Highway, Tifton, GA. 31793. Investments for Component Units: Abraham Baldwin Agricultural College Foundation holds endowment investments in the amount of $5.5 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: Student Housing Bonds are issued by the First ABAC, L.L.C. to finance student housing on College property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Abraham Baldwin Agricultural College and are covered by a financial guaranty insurance policy issued by AMBAC Assurance Corporation. The bonds carry an interest rate ranging from 1.75% to 4.25%. Abraham Baldwin Agricultural College Annual Financial Report FY 2004 34 Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Real Estate Foundation Student Housing Res. Instr. & Research Athletic Foundation Athletic Facilities Beginning Balance July 1, 2003 Additions Reductions Ending Amounts due Balance within June 30, 2004 One Year $0.00 $32,664,632.00 $23,205.00 $32,641,427.00 0.00 0.00 $4,023.00 Total Long TermDebt $0.00 $32,664,632.00 $23,205.00 $32,641,427.00 $4,023.00 Debt Service Obligations for Component Units Annual debt servic e requirement s t o mat urit y for St udent Housing (First ABAC, L.L.C.) revenue bonds payable are as follow s: Bonds Payable Y ear Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Princ ipal $0.00 685,000.00 725,000.00 785,000.00 870,000.00 4,790,000.00 5,635,000.00 7,065,000.00 9,005,000.00 2,055,000.00 Int erest T ot al $1,314,231.00 1,306,344.00 1,289,394.00 1,270,519.00 1,249,831.00 5,834,100.00 4,949,691.00 3,460,812.00 1,488,962.00 43,669.00 $1,314,231.00 1,991,344.00 2,014,394.00 2,055,519.00 2,119,831.00 10,624,100.00 10,584,691.00 10,525,812.00 10,493,962.00 2,098,669.00 0.00 0.00 $31,615,000.00 $22,207,553.00 $53,822,553.00 Abraham Baldwin Agricultural College Annual Financial Report FY 2004 35 ALBANY STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Albany State University Atlanta, Georgia President Dr Portia Shields Senior Vice President for Fiscal Affairs Mr. Stanley Williams ALBANY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Assets ................................8 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 21 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 27 Note 12 Contingencies...................................................................................................... 28 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 14 Natural Classifications With Functional Classifications..................................... 29 ALBANY STATE UNIVERSITY Management's Discussion and Analysis Introduction Albany State University is one of the 34 institutions of the University System of Georgia. The University, located in Albany, Georgia, was founded in 1903 and has become known as a leader in teacher education, nursing, criminal justice, business, public administration and the sciences. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,500 students. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 149 3638 137 3553 132 3466 Overview of the Financial Statements and Financial Analysis Albany State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the university's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the university as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Albany State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major Albany State University Annual Financial Report FY 2004 1 categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net Other A ssets Total A ssets June 30, 2004 $2,757,139.07 106,289,535.42 355,244.31 109,401,918.80 June 30, 2003 $6,573,678.71 111,069,626.96 352,618.03 117,995,923.70 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 1,942,194.96 595,114.10 2,537,309.06 5,086,857.39 824,702.50 5,911,559.89 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net Assets 106,289,535.42 19,212.56 555,861.76 $106,864,609.74 111,069,626.96 1,014,736.85 $112,084,363.81 The total assets of the institution decreased by ($8,594,004.90). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($4,780,091.54) in the University's capital assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($3,374,250.83). The primary cause for the increase was due to a decrease in accounts payable, accrued liabilities and deferred revenue. The combination of the decrease in total assets of ($8,594,004.90) and the decrease in total liabilities of ($3,374,250.83) yields a net decrease in total net assets of ($5,219,754.07). The decrease in total net assets is primarily in the category of invested in capital assets, net of related debt in the amount of ($4,780,091.54). Albany State University Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $28,211,361.93 June 30, 2003 $39,460,127.48 Operating Expenses Operating Loss 50,841,034.26 (22,629,672.33) 65,821,834.22 (26,361,706.74) Nonoperating Revenues and Expenses 18,683,403.91 21,597,044.80 Income (Loss) Before other revenues, expenses, gains or losses (3,946,268.42) (4,764,661.94) Other revenues, expenses, gains or losses (333,544.80) Increase in Net Assets (3,946,268.42) (5,098,206.74) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 112,084,363.81 (1,273,485.65) 110,810,878.16 61,870,346.37 55,312,224.18 117,182,570.55 Net Assets at End of Year $106,864,609.74 $112,084,363.81 The Statement of Revenues, Expenses, and Changes in Net Assets reflect 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: Albany State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $5,780,129.52 14,710,549.98 151,623.25 7,044,077.82 524,981.36 28,211,361.93 18,778,595.98 (1,416.13) 26,577.67 (120,353.61) 18,683,403.91 0.00 $46,894,765.84 June 30, 2003 $4,848,021.39 27,536,353.58 183,873.15 549,654.50 33,117,902.62 21,560,291.89 36,752.91 21,597,044.80 (333,544.80) (333,544.80) $54,381,402.62 Albany State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $20,793,416.35 552,745.18 3,193,224.31 2,391,273.04 5,812,863.45 2,858,359.28 8,155,744.72 7,083,407.93 50,841,034.26 0.00 $50,841,034.26 June 30, 2003 $19,216,796.86 658,410.31 3,393,624.33 2,444,588.18 9,440,312.19 7,133,474.56 16,484,049.10 7,050,578.69 65,821,834.22 0.00 $65,821,834.22 The compensation and employee benefits category decreased by approximately ($1,615,429.05). This decrease is a result of Albany State University's restructure plan as a result of state budget reductions. Utility costs remain constant showing a slight increase of $939.83 during the past year. Under non-operating revenues (expenses) state appropriations decreased by approximately ($2,781,695.91). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia as well as Albany State University. Statement of Cash Flows The final statement presented by the Albany State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Albany State University Annual Financial Report FY 2004 5 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: O perating A ctivities Non-capital Financing A ctivities C apital and Related Financing A ctivities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 7 ,0 5 2 ,4 9 6 .5 6 ) 1 8 ,1 4 6 ,1 8 0 .4 3 (2 8 2 ,0 3 8 .6 7 ) 1 9 ,4 0 7 .8 8 8 3 1 ,0 5 3 .0 8 6 ,7 9 6 .5 6 $ 8 3 7 ,8 4 9 .6 4 June 30, 2003 ($ 2 0 ,8 4 3 ,2 5 1 .0 4 ) 2 1 ,7 1 7 ,1 4 1 .2 6 (3 2 1 ,7 9 8 .5 5 ) 3 6 ,7 5 2 .9 1 5 8 8 ,8 4 4 .5 8 (5 8 2 ,0 4 8 .0 2 ) $ 6 ,7 9 6 .5 6 Capital Assets For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be a stable year and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ President, Portia Holmes Shields Albany State University Albany State University Annual Financial Report FY 2004 6 Statement of Net Assets Albany State University STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D eposits Deferred Revenue Other Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Un r e s tr ic te d TOTAL NET ASSETS June 30, 2004 $837,849.64 1,212,429.87 218,159.47 484,674.81 4,025.28 2,757,139.07 355,244.31 106,289,535.42 106,644,779.73 109,401,918.80 255,431.25 381,848.44 202,167.21 489,383.33 613,364.73 1,942,194.96 595,114.10 595,114.10 2,537,309.06 106,289,535.42 19,212.56 555,861.76 $106,864,609.74 Albany State University Annual Financial Report FY 2004 7 Statement of Revenues, Expenses and Changes in Net Assets Albany State University STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $9,690,147.19 3,910,017.67 13,341,887.57 342,946.04 1,025,716.37 151,623.25 1,726,757.15 1,384,752.75 1,941,764.00 113,971.13 360,934.54 1,375,426.82 140,471.43 524,981.36 28,211,361.93 10,213,918.71 13,450,691.72 5,729,839.55 625,639.86 259,914.25 5,239,945.44 1,541,444.58 10,234,937.55 3,544,702.60 50,841,034.26 (22,629,672.33) Albany State University Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O the r G ifts Investment Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O the r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 18,778,595.98 (1,416.13) 26,577.67 (120,353.61) 18,683,403.91 (3,946,268.42) 0.00 (3,946,268.42) 112,084,363.81 (1,273,485.65) 110,810,878.16 $106,864,609.74 Albany State University Annual Financial Report FY 2004 9 Statement of Cash Flows Albany State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2004 $5,752,776.19 16,542,931.16 151,623.25 (18,329,692.83) (23,771,193.26) (5,239,945.44) (28,099.54) 25,653.93 1,928,924.36 1,317,400.83 1,941,764.00 113,971.13 360,934.54 1,407,962.62 140,471.43 632,021.07 (17,052,496.56) 18,778,595.98 (630,999.42) (1,416.13) 18,146,180.43 (282,038.67) (282,038.67) 19,407.88 19,407.88 831,053.08 6,796.56 $837,849.64 Albany State University Annual Financial Report FY 2004 10 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities June 30, 2004 ($22,629,672.33) 3,544,702.60 1,495,403.00 79,075.49 (6,470.89) (9,503.90) 381,848.44 229,880.70 (137,759.67) ($17,052,496.56) Albany State University had no Non-Cash Investing, Non-Capital Financing, or Capital and Related Financing Transactions Albany State University Annual Financial Report FY 2004 11 ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Albany State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Albany State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Albany State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Albany State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Albany State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Albany State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2004, Albany State University does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 Albany State University Annual Financial Report FY 2004 12 required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and Albany State University Annual Financial Report FY 2004 13 local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Albany State University when complete. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Albany State University Annual Financial Report FY 2004 14 Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Albany State University had accrued liability for compensated absences in the amount of $1,342,213.73 as of 7-1-2003. For FY2004, $864,210.39 was earned in compensated absences and employees were paid $997,945.29, for a net decrease of ($137,759.67). The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,208,478.83. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Restricted - E&G and Other Organized A ctivities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Expendable June 30, 2004 $19,212.56 $19,212.56 Albany State University Annual Financial Report FY 2004 15 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserv e for Inv entory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $0.00 555,861.76 $555,861.76 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Albany State University, 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 University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Albany State University Annual Financial Report FY 2004 16 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Albany State University Annual Financial Report FY 2004 17 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Albany State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Albany State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Albany State University Annual Financial Report FY 2004 18 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $837,849.64 Bank Balances $996,049.43 Risk C ategories 1 2 3 $100,000.00 $0.00 $737,849.64 $837,849.64 $996,049.43 $100,000.00 $0.00 $737,849.64 Albany State University Annual Financial Report FY 2004 19 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. At June 30, 2004, the University had no investments. Albany State University Annual Financial Report FY 2004 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $596,017.55 686,261.18 (26,349.92) (156,882.12) 331,542.65 1,430,589.34 $1,430,589.34 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O ther T o ta l June 30, 2004 $464,421.58 20,253.23 $484,674.81 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Albany State University Annual Financial Report FY 2004 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $2,795,780.85 2,795,780.85 Additions $126,585.00 126,585.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $2,922,365.85 0.00 2,922,365.85 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 11,508,546.00 115,718,423.00 8,694,815.00 6,066,951.76 5,524,430.24 147,513,166.00 1,112,790.00 196,453.69 85,584.98 1,394,828.67 4,377,174.00 120,539.44 4,497,713.44 12,621,336.00 115,718,423.00 4,317,641.00 6,142,866.01 0.00 5,610,015.22 0.00 144,410,281.23 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 1,342,664.00 25,192,266.00 4,388,835.68 3,881,126.21 4,434,428.00 39,239,319.89 523,776.00 2,603,665.00 322,765.97 128,622.53 272,289.00 3,851,118.50 1,985,993.51 61,333.22 2,047,326.73 1,866,440.00 27,795,931.00 2,725,608.14 3,948,415.52 0.00 4,706,717.00 0.00 41,043,111.66 Total Capital Assets, Being Depreciated, Net Capital Assets, net 108,273,846.11 $111,069,626.96 (2,456,289.83) 2,450,386.71 103,367,169.57 ($2,329,704.83) $2,450,386.71 $106,289,535.42 Albany State University Annual Financial Report FY 2004 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Pre paid Tuition and Fe es Research O the r D e ferre d R e v e nue T o ta ls June 30, 2004 $381,848.44 $381,848.44 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Current Portion $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 1,342,213.73 1,342,213.73 864,210.39 864,210.39 997,945.29 997,945.29 1,208,478.83 0.00 1,208,478.83 613,364.73 613,364.73 Total Long Term Obligations $1,342,213.73 $864,210.39 $997,945.29 $1,208,478.83 $613,364.73 Note 9. Lease Obligations Albany State University did not have lease obligations during the year ending June 30, 2004. . Albany State University Annual Financial Report FY 2004 23 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Albany State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Albany State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Albany State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,418,086.58 $1,505,056.28 $1,455,490.27 Employees' Retirement System of Georgia Plan Description Albany State University 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Albany State University Annual Financial Report FY 2004 24 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $2,990.58. The University's total payroll for all employees was $23,786,827.27. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University 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 University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University amount to 10.41 % of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $4,031.25, of which $3,528.39 was made by the University and $502.86 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Albany State University Annual Financial Report FY 2004 25 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Albany State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Albany State University and the covered employees made the required contributions of $1,294,524.61 (10.03%) and $763,874.86 (5%), respectively. Georgia Defined Contribution Plan Plan Description Albany State University 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. Contributions 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 Albany State University Annual Financial Report FY 2004 26 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. Total contributions made by employees during fiscal year 2004 amounted to $39,971.32 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Albany State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Albany State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Albany State University Annual Financial Report FY 2004 27 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure that is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Albany State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Albany State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 154 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Albany State University recognized as incurred $526,236.86 of expenditures, which was net of $183,748.24 of participant contributions. Albany State University Annual Financial Report FY 2004 28 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses $9,588,670.88 2,846,947.23 2,906,875.36 81,548.89 209,683.43 199,325.14 1,763,405.38 3,196,960.04 $20,793,416.35 $0.00 $0.00 $63,993.70 210,598.57 39,921.93 $124,723.13 1,770,331.35 514,253.09 $0.00 1,353,951.13 369,066.89 6,819.57 30,870.56 199,019.85 1,521.00 $552,745.18 28,484.97 30,670.44 688,860.63 35,900.70 . $3,193,224.31 21,613.97 35,760.39 31,927.00 576,112.80 2,840.86 $2,391,273.04 $266,400.00 4,627,963.73 1,739,834.59 3,090.00 86,215.64 (3,424,833.74) 110,291.48 2,375,267.41 28,634.34 $5,812,863.45 Natural C lassification Plant Operations & Maintenance Func tional Classific ation FY 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 1,625,900.14 (94,038.08) 799.50 1,045,532.63 55,325.97 224,839.12 $ 170,131.00 31,445.24 46,451.97 3,387.23 7,791,892.62 667.00 109,051.60 2,718.06 $ 0.00 983,554.33 207,473.80 622,549.86 31,044.48 596,572.18 123,030.89 4,467,893.91 51,288.48 $ 0.00 Total Expenses $ 2,858,359.28 $ 8,155,744.72 $ 7,083,407.93 $ 0.00 Total Expenses $ 10,213,918.71 13,450,691.72 5,729,839.55 625,639.86 259,914.25 5,239,945.44 1,541,444.58 10,234,937.55 3,544,702.60 $ 50,841,034.26 Albany State University Annual Financial Report FY 2004 29 ARMSTRONG ATLANTIC STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Armstrong Atlantic State University Savannah, Georgia Thomas Z. Jones President James M. Brignati Vice President for Business and Finance ARMSTRONG ATLANTIC STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Armstrong Atlantic State University Foundations Balance Sheet ............................. 9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Armstrong Atlantic State University Foundation Statement of Activities ..................12 Armstrong Atlantic State Univ. Educ. Properties Found., Inc. Statement of Activities ...13 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 22 Note 3 Accounts Receivable............................................................................................. 25 Note 4 Inventories............................................................................................................. 25 Note 5 Notes/Loans Receivable........................................................................................ 25 Note 6 Capital Assets........................................................................................................ 26 Note 7 Deferred Revenue.................................................................................................. 27 Note 8 Long-Term Liabilities ........................................................................................... 27 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 28 Note 11 Risk Management................................................................................................ 31 Note 12 Contingencies...................................................................................................... 32 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 32 Note 14 Natural Classifications With Functional Classifications..................................... 33 Note 15 Component Units ........................................................................ 34 ARMSTRONG ATLANTIC STATE UNIVERSITY Management's Discussion and Analysis Introduction Armstrong Atlantic State University is one of the 34 institutions of the University System of Georgia. The University, located in Savannah, Georgia, was founded in 1935 and has become known for its health professions, education, technology and liberal arts programs. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 6,600 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 204 6,653 189 6,026 186 5,668 Overview of the Financial Statements and Financial Analysis Armstrong Atlantic State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Armstrong Atlantic State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major Armstrong Atlantic State University Annual Financial Report FY 2004 1 categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $12,253,256.14 46,565,636.94 1,964,940.88 60,783,833.96 June 30, 2003 $8,930,667.31 48,897,900.94 3,602.42 57,832,170.67 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 8,510,659.69 468,749.59 8,979,409.28 4,328,238.35 466,969.64 4,795,207.99 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 46,565,636.94 2,213,350.66 209,175.10 2,816,261.98 $51,804,424.68 48,897,900.94 1,926,081.88 96,523.57 2,116,456.29 $53,036,962.68 The total assets of the institution increased by $2,951,663.29. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase in additional deferred revenue, additional funds held for others, and additional receivables. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $4,184,201.29. The primary causes for the increase was additional deferred revenue and deposits held for others. The combination of the increase in total assets of $2,951,663.29 and the increase in total liabilities of $4,184,201.29 yields a decrease in total net assets of ($1,232,538.00). The decrease in total net assets is primarily in the category of investments in capital assets, net of debt in the amount of ($2,332,264.00). Armstrong Atlantic State University Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $27,194,390.52 June 30, 2003 $23,827,217.34 Operating Expenses Operating Loss 54,725,816.96 (27,531,426.44) 58,011,495.11 (34,184,277.77) Nonoperating Revenues and Expenses 25,720,026.21 25,708,665.09 Income (Loss) Before other revenues, expenses, gains or losses (1,811,400.23) (8,475,612.68) Other revenues, expenses, gains or losses 4,390,671.71 Increase in Net Assets (1,811,400.23) (4,084,940.97) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 53,036,962.68 578,862.23 53,615,824.91 54,832,514.63 2,289,389.02 57,121,903.65 Net Assets at End of Year $51,804,424.68 $53,036,962.68 Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Armstrong Atlantic State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $13,340,373.71 7,703,805.21 1,461,454.35 4,503,357.39 185,399.86 27,194,390.52 25,678,920.47 61,674.69 (20,568.95) 25,720,026.21 0.00 $52,914,416.73 June 30, 2003 $11,206,443.35 6,634,000.02 1,380,001.85 4,000,924.23 605,847.89 23,827,217.34 25,482,429.23 181,398.00 88,183.33 (43,345.47) 25,708,665.09 4,390,671.71 4,390,671.71 $53,926,554.14 Armstrong Atlantic State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $23,941,563.28 1,062,911.16 5,736,673.13 3,298,298.08 6,306,262.62 4,124,993.18 3,337,577.50 3,952,722.70 2,964,815.31 54,725,816.96 0.00 $54,725,816.96 June 30, 2003 $21,399,487.34 84.50 1,156,049.69 5,294,793.32 2,846,132.90 6,240,085.29 3,503,201.81 8,306,541.44 3,451,822.30 5,813,296.52 58,011,495.11 0.00 $58,011,495.11 Residential life constructed nearly 300 beds of additional housing on the campus using a third party developer in a construction and leasing relationship. The new construction of residential life units on the campus, due to the third party relationship with the privatized vendor, does not show on the University's financial statements due to the activity being an off-balance sheet activity for financial reporting purposes. Since the University does not own or lease these units, the revenue or expenses are also not reflected in the University's financial statements. An independent foundation, Educational Properties, Inc., owns the units. An outside firm is managing these units for the owner, and receives a fee for its services. The compensation and employee benefits category increased by approximately $1,630,257.10. The increase reflects an increased cost of recently hired employees of the institution. Utilities increased by approximately $381,101.29 during the past year. The increase was primarily associated with the increased square footage added by a new building and the reopening of two buildings undergoing renovation. Under non-operating revenues (expenses) state appropriations increased by approximately $196,491.24. Armstrong Atlantic State University Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Armstrong Atlantic State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 2 3 ,5 4 8 ,8 3 1 .4 3 ) 2 7 ,6 6 9 ,9 1 9 .7 4 (3 6 3 ,6 9 4 .1 4 ) (1 ,8 9 7 ,9 3 6 .1 9 ) 1 ,8 5 9 ,4 5 7 .9 8 5 ,4 1 8 ,4 7 5 .5 0 $ 7 ,2 7 7 ,9 3 3 .4 8 June 30, 2003 ($ 2 8 ,0 3 7 ,0 0 2 .1 8 ) 2 7 ,6 2 0 ,8 0 0 .3 8 3 ,1 5 3 ,6 4 2 .5 0 8 8 ,1 8 3 .3 3 2 ,8 2 5 ,6 2 4 .0 3 2 ,5 9 2 ,8 5 1 .4 7 $ 5 ,4 1 8 ,4 7 5 .5 0 Capital Assets For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Armstrong Atlantic State University has included the financial statements and notes for the Armstrong Atlantic State University Foundation and the Armstrong Atlantic State University Educational Properties Foundation, Inc. for FY2004. The Armstrong Atlantic State University Foundation had endowment investments of $4,222,935.00 as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Armstrong Atlantic State University Annual Financial Report FY 2004 6 Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Thomas Z. Jones, President Armstrong Atlantic State University Armstrong Atlantic State University Annual Financial Report FY 2004 7 Statement of Net Assets ARMSTRONG ATLANTIC STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets June 30, 2004 $7,277,933.48 1,311,153.59 4,381.63 3,195,698.08 464,089.36 12,253,256.14 Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x pe nd a b le Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 1,959,610.88 5,330.00 46,565,636.94 48,530,577.82 60,783,833.96 992,572.30 3,563,600.92 (1,133.41) 3,089,540.76 866,079.12 8,510,659.69 468,749.59 468,749.59 8,979,409.28 46,565,636.94 2,213,350.66 209,175.10 2,816,261.98 $51,804,424.68 Armstrong Atlantic State University Annual Financial Report FY 2004 8 Armstrong Atlantic State University Foundations Balance Sheet Arm strong Atlantic State Univ ersity Foundations Balance Sheet (FASB) June 30, 2004 AASU F o und a tio n AASU Educational Pro p e rt ie s Foundation, Inc. A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets $695,441.00 4,222,935.00 117,165.00 5,035,541.00 $2,683,756.00 4,222,935.00 140,444.00 15,521,360.00 22,568,495.00 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 8,000.00 8,000.00 244,018.00 17,455,000.00 17,699,018.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently R estricted Total Net A ssets 170,432.00 1,788,456.00 3,068,653.00 $5,027,541.00 12,368.00 1,788,456.00 3,068,653.00 $4,869,477.00 Armstrong Atlantic State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets ARMSTRONG ATLANTIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $15,448,010.21 2,107,636.50 6,237,285.41 468,346.41 998,173.39 1,461,454.35 1,545.40 2,774,130.13 1,239.10 (161.59) 1,672,144.98 54,459.37 185,399.86 27,194,390.52 14,569,537.25 12,938,383.00 7,034,840.76 337,284.16 4,274,546.33 2,358,703.03 9,955,406.95 3,257,115.48 54,725,816.96 (27,531,426.44) Armstrong Atlantic State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 25,678,920.47 61,674.69 (20,568.95) 25,720,026.21 (1,811,400.23) 0.00 (1,811,400.23) 53,036,962.68 578,862.23 53,615,824.91 $51,804,424.68 Armstrong Atlantic State University Annual Financial Report FY 2004 11 Armstrong Atlantic State University Foundation Statement of Activities Armstrong Atlantic State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $623,730.00 20,335.00 62,144.00 535,865.00 (50,616.00) 1,191,458.00 $534,005.00 75,515.00 218,823.00 $314,120.00 (535,865.00) 50,616.00 343,094.00 314,120.00 $1,471,855.00 95,850.00 280,967.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,848,672.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 374,974.00 456,070.00 144,143.00 171,047.00 1,146,234.00 45,224.00 0.00 343,094.00 0.00 314,120.00 0.00 0.00 374,974.00 456,070.00 0.00 144,143.00 171,047.00 1,146,234.00 702,438.00 Net Assets Beginning Net Assets Ending Net Assets 125,208.00 $170,432.00 1,445,362.00 $1,788,456.00 2,754,533.00 $3,068,653.00 4,325,103.00 $5,027,541.00 Armstrong Atlantic State University Annual Financial Report FY 2004 12 Armstrong Atlantic State University Educational Properties Foundation, Inc. Statement of Activities Armstrong Atlantic State University Educational Properties Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $623,730.00 29,534.00 62,144.00 1,832,019.00 18,078.00 535,865.00 (50,616.00) 3,050,754.00 $534,005.00 75,515.00 218,823.00 (535,865.00) 50,616.00 343,094.00 $314,120.00 314,120.00 $1,471,855.00 105,049.00 280,967.00 0.00 1,832,019.00 18,078.00 0.00 0.00 0.00 0.00 3,707,968.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 374,974.00 456,070.00 1,987,331.00 144,143.00 171,047.00 3,133,565.00 (82,811.00) 0.00 343,094.00 0.00 314,120.00 0.00 0.00 374,974.00 456,070.00 1,987,331.00 144,143.00 171,047.00 3,133,565.00 574,403.00 Net Assets Beginning Net Assets Ending Net Assets 95,179.00 $12,368.00 1,445,362.00 $1,788,456.00 2,754,533.00 $3,068,653.00 4,295,074.00 $4,869,477.00 Armstrong Atlantic State University Annual Financial Report FY 2004 13 Statement of Cash Flows ARMSTRONG ATLANTIC STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CT IVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVE STING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $15,525,160.35 8,158,566.12 1,472,886.04 (19,611,372.98) (27,517,187.55) (6,382,182.83) 1,545.40 2,918,327.30 1,239.10 (161.59) 1,682,960.76 54,459.37 146,929.08 (23,548,831.43) 25,678,920.47 1,990,999.27 27,669,919.74 (312,744.59) (50,949.55) (363,694.14) 61,674.69 (1,959,610.88) (1,897,936.19) 1,859,457.98 5,418,475.50 $7,277,933.48 Armstrong Atlantic State University Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($27,531,426.44) 3,257,115.48 383,427.43 (7,782.06) 22,500.00 80,137.09 260,526.17 (61,387.01) 48,057.91 ($23,548,831.43) Arm strong Atlantic State University had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions for FY2004 Armstrong Atlantic State University Annual Financial Report FY 2004 15 ARMSTRONG ATLANTIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Armstrong Atlantic State University serves the local and state communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Armstrong Atlantic State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Armstrong Atlantic State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Armstrong Atlantic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Armstrong Atlantic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Armstrong Atlantic State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Armstrong Atlantic State University is reporting the activity for the Armstrong Atlantic State University Foundation and the Armstrong Atlantic State University Educational Properties Foundation, Inc. See Note 15. Component Units, for foundation notes. Armstrong Atlantic State University Annual Financial Report FY 2004 16 Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are Armstrong Atlantic State University Annual Financial Report FY 2004 17 reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Armstrong Atlantic State University when complete. For the year ended June 30, 2004, GSFIC transferred no additions to Armstrong Atlantic State University. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Armstrong Atlantic State University Annual Financial Report FY 2004 18 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Armstrong Atlantic State University had accrued liability for compensated absences in the amount of $1,286,770.80 as of 7-1-2003. For FY2004, $1,017,773.24 was earned in compensated absences and employees were paid $969,715.33, for a net increase of $48,057.91. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,334,828.71. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Armstrong Atlantic State University Annual Financial Report FY 2004 19 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $165,550.44 10,559.16 33,065.50 $209,175.10 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $548,952.92 155,272.40 73,802.75 2,038,233.91 $2,816,261.98 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Armstrong Atlantic State University, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Armstrong Atlantic State University Annual Financial Report FY 2004 20 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Armstrong Atlantic State University Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Armstrong Atlantic State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Armstrong Atlantic State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Armstrong Atlantic State University Annual Financial Report FY 2004 22 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $7,012,076.86 Bank Balances $7,063,857.57 Risk Categories 1 2 3 $200,254.88 $200,000.00 $6,663,602.69 $7,012,076.86 $7,063,857.57 $200,254.88 $200,000.00 $6,663,602.69 Armstrong Atlantic State University Annual Financial Report FY 2004 23 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 265,856.62 1,959,610.88 $2,225,467.50 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Armstrong Atlantic State University Annual Financial Report FY 2004 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $207,775.25 574,542.29 1,311,153.59 4,381.63 2,413,917.54 4,511,770.30 537.00 $4,511,233.30 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $409,932.58 54,156.78 $464,089.36 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Armstrong Atlantic State University Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $258,253.82 258,253.82 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $258,253.82 0.00 258,253.82 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 1,147,460.00 57,337,998.57 1,560,820.00 5,033,983.87 8,263,217.68 10,500.00 73,353,980.12 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 893,045.48 12,349,390.43 1,322,287.41 3,825,626.68 6,321,883.00 2,100.00 24,714,333.00 Total Capital Assets, Being Depreciated, Net 48,639,647.12 Capital Assets, net $48,897,900.94 157,872.12 479,444.31 637,316.43 862,418.86 141,367.00 1,003,785.86 1,147,460.00 57,337,998.57 1,560,820.00 4,329,437.13 0.00 8,601,294.99 10,500.00 72,987,510.69 19,581.71 2,651,362.48 15,534.31 412,494.38 439,093.00 262.50 3,538,328.38 (2,901,011.95) ($2,901,011.95) 1,958.17 265,136.25 1,553.48 841,849.91 462,036.00 1,572,533.81 910,669.02 14,735,616.66 1,336,268.24 3,396,271.15 0.00 6,298,940.00 2,362.50 26,680,127.57 (568,747.95) 46,307,383.12 ($568,747.95) $46,565,636.94 Armstrong Atlantic State University Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $2,550,910.25 1,012,690.67 $3,563,600.92 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 1,286,770.80 1,017,773.24 1,286,770.80 1,017,773.24 969,715.33 969,715.33 1,334,828.71 0.00 1,334,828.71 Total Long Term Obligations $1,286,770.80 $1,017,773.24 $969,715.33 $1,334,828.71 Current Portion $0.00 866,079.12 866,079.12 $866,079.12 Note 9. Lease Obligations Armstrong Atlantic State University had no capital leases at June 30, 2004. Armstrong Atlantic State University Annual Financial Report FY 2004 27 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Armstrong Atlantic State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Armstrong Atlantic State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Armstrong Atlantic State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,968,445.96 $1,234,346.11 $1,240,640.63 Employees' Retirement System of Georgia Plan Description Armstrong Atlantic State University 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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 Armstrong Atlantic State University Annual Financial Report FY 2004 28 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $71,552.04. The University's total payroll for all employees was $27,652,519.61. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University 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 University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University amount to 10.66% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $8,553.72, of which $7,480.41 was made by the University and $1,073.31 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Armstrong Atlantic State University Annual Financial Report FY 2004 29 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Armstrong Atlantic State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Armstrong Atlantic State University and the covered employees made the required contributions of $1,051,453.00 (10.03%) and $524,156.05 (5%), respectively. Georgia Defined Contribution Plan Plan Description Armstrong Atlantic State University 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. Armstrong Atlantic State University Annual Financial Report FY 2004 30 Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $78,332.43 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Armstrong Atlantic State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Armstrong Atlantic State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the Armstrong Atlantic State University Annual Financial Report FY 2004 31 performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Armstrong Atlantic State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Armstrong Atlantic State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 127 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Armstrong Atlantic State University recognized as incurred $485,864.23 of expenditures, which was net of $207,833.02 of participant contributions. Armstrong Atlantic State University Annual Financial Report FY 2004 32 Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $14,400,085.26 2,442,091.33 3,961,648.68 189,385.78 231,810.70 163,966.38 2,477,990.00 74,585.15 $0.00 $54,631.40 510,598.08 105,190.60 26,872.71 1,600.34 5,273.67 353,936.16 4,808.20 $94,610.00 3,420,982.15 817,857.30 47,246.46 187,238.40 732,876.83 435,861.99 $16,964.00 1,881,399.70 440,176.32 9,687.93 19,035.00 43,782.39 887,252.74 ($1,211.06) 3,468,735.77 1,358,325.09 63,894.30 89,705.05 1,314,361.34 12,452.13 Total Expenses $23,941,563.28 $0.00 $1,062,911.16 $5,736,673.13 $3,298,298.08 $6,306,262.62 Natural C lassification Plant Operations & Maintenance Func tional Classification F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 643,192.40 199,500.78 196.98 1,855,464.72 1,685,941.70 (259,303.40) $ 0.00 3,335,827.50 1,750.00 $ 4,457.65 571,383.57 152,141.99 0.00 0.00 686,272.79 13,272.42 2,518,742.68 6,451.60 $ 0.00 (17,444.50) 2,982,259.81 Total Expenses $ 4,124,993.18 $ 3,337,577.50 $ 3,952,722.70 $ 2,964,815.31 Total Expenses $ 14,569,537.25 12,938,383.00 7,034,840.76 0.00 337,284.16 4,274,546.33 2,358,703.03 9,955,406.95 3,257,115.48 $ 54,725,816.96 Armstrong Atlantic State University Annual Financial Report FY 2004 33 Note 15. Component Units Component Unit Note #1 Armstrong Atlantic State University Foundation (foundation) is a legally separate, tax-exempt component unit of Armstrong Atlantic State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The 22-member board of the foundation is selfperpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $1,146,234.00 to the university for unrestricted purposes. Complete financial statements for the foundation can be obtained from the Office of External Affairs, Armstrong Atlantic State University, Savannah, GA. Component Unit Notes #2 Armstrong Atlantic State University Educational Properties Foundation, Inc. (EPFI) (foundation) is a legally separate, tax-exempt component unit of Armstrong Atlantic State University (university). The foundation buys buildings and leases them to the university, manages an apartment complex, and operates student housing. The five-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for Armstrong Atlantic State University Annual Financial Report FY 2004 34 external financial reporting purposes. The foundation's fiscal year is January 1 through December 31. Investments for Component Units: Armstrong Atlantic State University Foundation holds endowment investments in the amount of $4.2 million. Armstrong Atlantic State University Educational Properties holds real estate assets that have been purchased through bonds and bridge financing. There are no endowments in EPI. Long-Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable EPFI Foundation Student Housing Res. Instr. & Research Total Long Term Debt Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year $9,000,000.00 $8,455,000.00 $9,000,000.00 $8,455,000.00 $0.00 $0.00 $17,455,000.00 0.00 $205,000.00 $17,455,000.00 $205,000.00 Armstrong Atlantic State University Annual Financial Report FY 2004 35 Debt Service Obligation: Annual debt service requirements to maturity for student housing bonds (Educational Properties Foundation, Inc.) Bonds Payable Year Ending June 30: Year Prin c ip a l Interes t Total 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $205,000.00 450,000.00 475,000.00 495,000.00 520,000.00 3,015,000.00 3,840,000.00 4,890,000.00 3,565,000.00 $0.00 $205,000.00 450,000.00 475,000.00 495,000.00 520,000.00 3,015,000.00 3,840,000.00 4,890,000.00 3,565,000.00 0.00 0.00 0.00 $17,455,000.00 $0.00 $17,455,000.00 Note: The two bond issues are variable interest rate bonds; therefore, the interest amounts on this table cannot be completed. Armstrong Atlantic State University Annual Financial Report FY 2004 36 ATLANTA METROPOLITAN COLLEGE Financial Report For the Year Ended June 30, 2004 Atlanta Metropolitan College Atlanta, Georgia Dr. Harold E. Wade President Freddie L. Johnson Vice President for Fiscal Affairs ATLANTA METROPOLITAN COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ........................................................................................................7 Statement of Revenues, Expenses, and Changes in Net Assets ................................ 8 Statement of Cash Flows ....................................................................................................10 Note 1 Summary of Significant Accounting Policies .......................................................12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments ..............................17 Note 3 Accounts Receivable ..............................................................................................19 Note 4 Inventories..............................................................................................................19 Note 5 Notes/Loans Receivable.........................................................................................19 Note 6 Capital Assets ..............................................................................20 Note 7 Deferred Revenue...................................................................................................21 Note 8 Long Term Liabilities .................................................................. 21 Note 9 Lease Obligations...................................................................................................21 Note 10 Retirement Plans ..........................................................................22 Note 11 Risk Management.................................................................................................24 Note 12 Contingencies ..............................................................................24 Note 13 Post-Employment Benefits Other than Pension Benefits ............................24 Note 14 Natural Classifications With Functional Classifications.......................................26 ATLANTA METROPOLITAN COLLEGE Management's Discussion and Analysis Introduction Atlanta Metropolitan College is one of the 34 institutions of the University System of Georgia. The College was founded in 1974 and is located in the southwest quadrant of Atlanta, Georgia. The College, among its many attributes, has become known for its commitment to a high-quality general education program which supports a variety of well chosen associate degree and certificate and learning support programs designed to ensure access and opportunity for a diverse student group at an affordable cost. This variety of educational programs attracts a highly qualified faculty and a student body of approximately 1900 students per semester. The faculty and student enrollment count for each of the last three successive fall semesters shows the following pattern. Faculty Students FY2004 FY2003 FY2002 77 1,907 92 1,995 85 1,940 Overview of the Financial Statements and Financial Analysis Atlanta Metropolitan College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Atlanta Metropolitan College. The Statement of Net Assets presents end-ofyear data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Atlanta Metropolitan College Annual Financial Report FY 2004 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asset s: Current Asset s Capit al Asset s, net Ot her Asset s T ot al Asset s June 30, 2004 $2,045,172.48 12,128,587.40 14,173,759.88 June 30, 2003 $1,753,435.01 12,682,640.96 14,436,075.97 Liabilit ies: Current Liabilit ies Noncurrent Liabilit ies T ot al Liabilit ies 1,351,261.07 203,428.00 1,554,689.07 1,368,805.36 286,046.94 1,654,852.30 Net Asset s: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P roject s Unrest rict ed T ot al Net Asset s 12,128,587.40 490,483.41 $12,619,070.81 12,682,640.96 (932.00) 99,514.71 $12,781,223.67 The total assets of the institution decreased by ($262,316.09). A review of the Statement of Net Assets reveals that the decrease was primarily due to a decrease of ($554,053.56) of investment in plant, net of accumulated depreciation. This decrease was offset by an increase in cash and cash equivalents of $344,056.32. The increase in cash and cash equivalents was partly the result of improved collections. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($100,163.23). The primary reason for the decrease was the pay down of long-term liabilities in the amount of $74,092.42 in accordance with the terms of the promissory note. The combination of the decrease in total assets of ($262,316.09) and the decrease in total liabilities of ($100,163.23) yields a decrease in total net assets of ($162,152.86). Atlanta Metropolitan College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $7,723,093.44 June 30, 2003 $6,696,255.58 Operating Expenses Operating Loss 15,248,140.48 (7,525,047.04) 15,727,187.78 (9,030,932.20) Nonoperating Revenues and Expenses 7,397,655.66 8,145,185.72 Income (Loss) Before other revenues, expenses, gains or losses (127,391.38) (885,746.48) Other revenues, expenses, gains or losses Increase in Net Assets (127,391.38) (885,746.48) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 12,781,223.67 (34,761.48) 12,746,462.19 13,281,811.42 385,158.73 13,666,970.15 Net Assets at End of Year $12,619,070.81 $12,781,223.67 The Statement of Revenues, Expenses, and Changes in Net Assets reflects 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: Atlanta Metropolitan College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $2,445,381.37 4,117,310.75 95,794.40 983,030.65 81,576.27 7,723,093.44 7,380,482.45 304.90 16,868.31 7,397,655.66 0.00 $15,120,749.10 June 30, 2003 $1,985,593.73 3,471,795.87 74,567.90 999,126.97 165,171.11 6,696,255.58 8,106,538.82 124.24 38,522.66 8,145,185.72 0.00 $14,841,441.30 Atlanta Metropolitan College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $4,537,794.98 2,260.82 1,073,946.11 769,854.10 1,508,945.13 2,905,280.04 1,837,554.34 1,680,850.37 931,654.59 15,248,140.48 0.00 $15,248,140.48 June 30, 2003 $5,017,421.52 768,121.35 838,939.12 1,650,075.32 3,012,753.38 1,989,092.23 1,439,851.36 1,010,933.50 15,727,187.78 0.00 $15,727,187.78 Federal grants and contracts increased by approximately $866,000. This was primarily the result of an increase of approximately $320,000 in awards made to students under the PELL program as well as an increase in funding in excess of $300,000 from the Department of Education for the Upward Bound program. The decrease in supplies and other services is a direct result of the cost containment measures taken in the form of elimination, consolidation and/or reduction of certain programs. The compensation and employee benefits category decreased by ($234,948.01). The decrease was due in part to attrition as well as the elimination of some non-critical positions in an effort to streamline costs. Utilities increased by approximately $41,657.80 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004. The College also experienced increase water and sewer costs. These increases were slightly offset by a reduction in telephone charges. State appropriations decreased by approximately ($726,056.37). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Atlanta Metropolitan College. We are hopeful that the economy is now on an upward trend. Atlanta Metropolitan College Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Atlanta Metropolitan College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 6 ,9 1 3 ,3 0 8 .5 3 ) 7 ,3 4 0 ,0 6 2 .8 5 (9 9 ,5 6 6 .3 1 ) 1 6 ,8 6 8 .3 1 3 4 4 ,0 5 6 .3 2 1 ,0 6 6 ,2 8 9 .9 4 $ 1 ,4 1 0 ,3 4 6 .2 6 June 30, 2003 ($ 8 ,8 9 1 ,9 2 9 .3 0 ) 8 ,0 8 3 ,9 0 7 .9 5 (2 7 6 ,8 6 5 .1 0 ) 3 8 ,5 5 2 .6 6 (1 ,0 4 6 ,3 3 3 .7 9 ) 2 ,1 1 2 ,6 2 3 .7 3 $ 1 ,0 6 6 ,2 8 9 .9 4 Capital Assets The College had no significant capital asset additions for facilities during the fiscal year ended June 30, 2004. For additional information concerning Capital Assets, see Notes 1 and 5 in the notes to the financial statements. Economic Outlook The College anticipates that the current fiscal year will present similar challenges as faced last year. With the uncertainty of state revenues and the rising cost of health care and utility cost, the College will approach the coming year cautiously. The College will continue to closely monitor its resources and look at all strategic cost containment measures to ensure a balanced budget at year end. The College will continue in its efforts to improve enrollment growth through a combination of intensive recruiting and the implementation of a strategic retention plan. Any enrollment growth will also translate into additional tuition revenue dollars. _______________________, President Atlanta Metropolitan College Atlanta Metropolitan College Annual Financial Report FY 2004 6 Statement of Net Assets ATLANTA METROPOLITAN COLLEGE STATEMENT OF NET ASSETS June 30, 2004 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Investments Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St ate General Appropriat ions Allot ment Receivables - Other Invent ories Other Asset s T otal Current Assets June 30, 2004 $1,410,346.26 217,794.77 219,218.33 195,641.12 2,172.00 2,045,172.48 Noncurre nt Asse ts Noncurrent Cash In v est m en t s Not es Receivable, net Capit al Assets, net T otal Noncurrent Assets TO TAL AS S ETS LIAB ILITIES C u rre n t Li abi li tie s Account s P ayable and Accrued Liabilities Dep o sit s Deferred Revenue Other Liabilit ies Deposits Held for Ot her Organizations Current P ortion of Long-term Debt Compensated Absences (current port ion) T otal Current Liabilities Non cu rre n t Liabil itie s Compensated Absences Long-t erm Liabilit ies T otal Noncurrent Liabilities TO TAL LIABILITIES NET AS S ETS Invested in Capit al Assets, net of related debt Restricted for N o n ex p en dable E x p en dable Capit al P rojects Unrest rict ed TO TAL NET AS S ETS 12,128,587.40 12,128,587.40 14,173,759.88 600,224.99 135,772.69 (113.55) 251,380.35 68,449.78 295,546.81 1,351,261.07 203,428.00 203,428.00 1,554,689.07 12,128,587.40 490,483.41 $12,619,070.81 Atlanta Metropolitan College Annual Financial Report FY 2004 7 Statement of Revenues, Expenses and Changes in Net Assets ATLANTA METROPOLITAN C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $3,436,278.01 913,278.56 77,618.08 4,028,393.78 35,108.04 53,808.93 95,794.40 731,148.98 229,831.65 22,050.02 81,576.27 7,723,093.44 2,716,742.98 5,165,984.41 1,982,280.04 69,145.78 1,884,150.00 537,635.36 2,238,582.04 653,619.87 15,248,140.48 (7,525,047.04) Atlanta Metropolitan College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 7,380,482.45 304.90 16,868.31 7,397,655.66 (127,391.38) 0.00 (127,391.38) 12,781,223.67 (34,761.48) 12,746,462.19 $12,619,070.81 Atlanta Metropolitan College Annual Financial Report FY 2004 9 Statement of Cash Flows ATLANTA METROPOLITAN COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $2,477,582.23 4,157,134.40 101,819.20 (4,893,108.27) (7,899,290.13) (1,884,150.00) 725,677.27 238,192.25 22,103.44 40,731.08 (6,913,308.53) 7,380,482.45 (40,724.50) 304.90 7,340,062.85 (99,566.31) (99,566.31) 16,868.31 16,868.31 344,056.32 1,066,289.94 $1,410,346.26 Atlanta Metropolitan College Annual Financial Report FY 2004 10 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities Depreciation C hange in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($7,525,047.04) 653,619.87 47,372.83 (1,517.22) 6,463.24 (81,651.41) 55,148.01 (63,618.82) (4,077.99) ($6,913,308.53) Atlanta Metropolitan College had no Non-Cash Investing, Non-Capital Financing, and Capital and Related Financing Transactions for FY2004. Atlanta Metropolitan College Annual Financial Report FY 2004 11 ATLANTA METROPOLITAN COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Atlanta Metropolitan College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Atlanta Metropolitan College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Atlanta Metropolitan College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Atlanta Metropolitan College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Atlanta Metropolitan College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Atlanta Metropolitan College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2004, Atlanta Metropolitan College does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 Atlanta Metropolitan College Annual Financial Report FY 2004 12 by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) require reporting summer school revenues and expenses between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash and demand deposits. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at cost using the weighted average method. Resale Inventories are valued at cost using the average-cost basis. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 Atlanta Metropolitan College Annual Financial Report FY 2004 13 of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Atlanta Metropolitan College when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Atlanta Metropolitan College. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Atlanta Metropolitan College had accrued liability for compensated absences in the amount of $503,052.80 as of 7-1-2003. For FY2004, $360,530.15 was earned in compensated absences and employees were paid $364,608.14, for a net decrease of $4,077.99. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $498,974.81 Noncurrent Liabilities Noncurrent liabilities include liabilities that will not be paid within the next fiscal year. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with Atlanta Metropolitan College Annual Financial Report FY 2004 14 restrictions imposed by external third parties. Atlanta Metropolitan College had no expendable restricted net assets for FY2004. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O the r Unre stricte d Total Unrestricted Net A ssets June 30, 2004 $0.00 647,022.52 195,641.12 (352,180.23) $490,483.41 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Atlanta Metropolitan 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Atlanta Metropolitan College Annual Financial Report FY 2004 15 Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Atlanta Metropolitan College Annual Financial Report FY 2004 16 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Atlanta Metropolitan 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Atlanta Metropolitan College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Atlanta Metropolitan College Annual Financial Report FY 2004 17 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash D eposits Investm ent Portfolio A ccounts Total C ash D eposits C arrying Amount $ 1,410,346.26 Bank B a la nc e s $ 1,817,744.09 $ 1,410,346.26 $ 1,817,744.09 Risk C ategories 1 2 3 $ 100,000.00 $ 0.00 $ 1,308,387.79 $ 100,000.00 $ 0.00 $ 1,308,387.79 Atlanta Metropolitan College had no investments as of 6-30-04. Atlanta Metropolitan College Annual Financial Report FY 2004 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $144,822.21 14,742.19 217,794.77 66,605.93 443,965.10 6,952.00 $437,013.10 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $140,645.89 54,995.23 $195,641.12 Note 5. Notes/Loans Receivable Atlanta Metropolitan College had no notes/loans receivable for FY2004. Atlanta Metropolitan College Annual Financial Report FY 2004 19 Note 6. Capital Assets Following are the changes in capital assets for the years ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,647,568.37 1,647,568.37 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 15,069,000.00 863,547.00 2,488,689.06 1,931,463.40 20,352,699.46 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 5,578,096.88 510,123.18 1,589,106.81 1,640,300.00 9,317,626.87 Total Capital Assets, Being Depreciated, Net 11,035,072.59 Capital Assets, net $12,682,640.96 Additions $0.00 30,000.00 30,000.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $1,647,568.37 30,000.00 1,677,568.37 68,880.86 685.45 69,566.31 0.00 0.00 15,069,000.00 863,547.00 2,557,569.92 0.00 1,932,148.85 0.00 20,422,265.77 357,232.49 44,956.28 191,520.10 59,911.00 653,619.87 (584,053.56) ($554,053.56) 0.00 0.00 $0.00 0.00 5,935,329.37 555,079.46 1,780,626.91 0.00 1,700,211.00 0.00 9,971,246.74 10,451,019.03 $12,128,587.40 Atlanta Metropolitan College Annual Financial Report FY 2004 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $0.00 135,772.69 $135,772.69 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Current Portion $0.00 503,052.80 135,545.25 638,598.05 360,530.15 360,530.15 $638,598.05 $360,530.15 364,608.14 67,095.47 431,703.61 498,974.81 68,449.78 567,424.59 $431,703.61 $567,424.59 295,546.81 68,449.78 363,996.59 $363,996.59 Note 9. Lease Obligations Atlanta Metropolitan College had no lease obligations for FY2004. Atlanta Metropolitan College Annual Financial Report FY 2004 21 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Atlanta Metropolitan College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Atlanta Metropolitan College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Atlanta Metropolitan College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 570,996.52 $ 557,061.80 $ 505,443.41 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible College system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Atlanta Metropolitan College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, Atlanta Metropolitan College Annual Financial Report FY 2004 22 the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Atlanta Metropolitan College and the covered employees made the required contributions of $95,362.24 (10.03%) and $47,538.73 (5%), respectively. Georgia Defined Contribution Plan Plan Description Atlanta Metropolitan 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $34,175.35 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Atlanta Metropolitan College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Atlanta Metropolitan College Annual Financial Report FY 2004 23 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Atlanta Metropolitan College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Atlanta Metropolitan College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Atlanta Metropolitan College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Atlanta Metropolitan College Annual Financial Report FY 2004 24 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 44 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Atlanta Metropolitan College recognized as incurred $140,405.37 of expenditures, which was net of $59,787.24 of participant contributions. Atlanta Metropolitan College Annual Financial Report FY 2004 25 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $2,716,473.86 709,981.95 778,885.74 7,549.84 32,320.00 45,694.58 217,838.89 29,050.12 $0.00 2,000.00 260.82 $0.00 584,855.62 131,720.45 25,363.36 31,984.49 5,159.13 292,654.14 2,208.92 $0.00 492,047.20 122,418.01 1,845.50 31,646.80 57,826.53 64,070.06 $269.12 1,066,412.34 249,826.98 18,130.64 41,909.40 29,148.57 97,232.68 6,015.40 $0.00 1,456,129.24 467,034.33 15,714.15 42,455.00 818,724.16 105,223.16 Total Expenses $4,537,794.98 $2,260.82 $1,073,946.11 $769,854.10 $1,508,945.13 $2,905,280.04 Natural C lassification Plant O p e r a tio ns & Maintenance Func tional Classific ation FY 2004 S c ho la rs hips Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowships Utilitie s Supplies and Others Services D e p r e c ia tio n $ 0.00 662,658.88 198,639.33 310.15 378,801.79 150,091.98 447,052.21 $ 0.00 1,680,850.37 $ 0.00 193,899.18 33,755.20 232.14 95,085.74 4,729.49 603,952.84 $ 0.00 Total Expenses $ 1,837,554.34 $ 1,680,850.37 $ 931,654.59 $ 0.00 Total Expenses $ 2,716,742.98 5,165,984.41 1,982,280.04 0.00 69,145.78 1,884,150.00 537,635.36 2,238,582.04 653,619.87 $ 15,248,140.48 Atlanta Metropolitan College Annual Financial Report FY 2004 26 AUGUSTA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Augusta State University Augusta, Georgia William A. Bloodworth, Jr. President Fred Barnabei V P for Business & Student Services AUGUSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets.............................. 10 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 22 Note 3 Accounts Receivable............................................................................................. 25 Note 4 Inventories............................................................................................................. 25 Note 5 Notes/Loans Receivable........................................................................................ 25 Note 6 Capital Assets........................................................................................................ 26 Note 7 Deferred Revenue.................................................................................................. 27 Note 8 Long-Term Liabilities ........................................................................................... 27 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 28 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 32 Note 15 Component Units ........................................................................ 33 AUGUSTA STATE UNIVERSITY Management's Discussion and Analysis Introduction Augusta State University is one of the 34 institutions of the University System of Georgia. Augusta State is the primary public institution of higher learning in the state's second largest city. While it shares the technological and innovative resources of the University System, Augusta State University maintains its historical roots that make the learning experience as unique as the campus itself. The University is well known for its dedication to expanding education opportunities for people of all ages and backgrounds, with a specific emphasis on service to Georgians in the Central Savannah River Area. Augusta State continues to grow as Fall 2003 enrollment was 6,135 versus 5,909 in the fall of 2002, an increase of 4 percent. In the past two years, enrollment has grown by 13 percent. Augusta State has a teaching faculty of 204 persons, included as part of 520 total positions. Faculty Students FY2004 FY2003 FY2002 204 6,135 203 5,909 202 5,407 During FY 2004, the University conferred a total of 564 bachelors degrees and 130 masters degrees. The number of undergraduate degrees awarded increased by 7 percent versus last year while the number of graduate degrees was up 3 percent. Overview of the Financial Statements and Financial Analysis Augusta State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Augusta State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Augusta State University Annual Financial Report FY 2004 1 Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $12,031,169.01 51,548,517.25 1,250,034.64 64,829,720.90 June 30, 2003 $10,105,649.64 51,436,802.36 1,159,818.22 62,702,270.22 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 7,777,137.16 505,576.70 8,282,713.86 6,688,610.47 478,286.89 7,166,897.36 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 51,548,517.25 312,957.90 1,541,475.29 3,144,056.60 $56,547,007.04 51,436,802.36 298,173.98 2,830,976.93 969,419.59 $55,535,372.86 The total assets of the institution increased by $2,127,450.68. The increase in assets was primarily in Cash, up $1,586,436.74. Cash was up in a large part due to the growing use of early registration for the upcoming fall semester. The total liabilities for the year increased by $1,115,816.50 due primarily to higher Deferred Revenue related to the early registration activity discussed above. Augusta State University Annual Financial Report FY 2004 2 Total Net Assets increased $1,011,634.18 or 1.8 percent. Capital Assets represent 91 percent of Total Net Assets and increased only marginally in FY 2004. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $23,172,297.65 June 30, 2003 $22,724,122.34 Operating Expenses Operating Loss 47,712,852.58 (24,540,554.93) 47,875,512.79 (25,151,390.45) Nonoperating Revenues and Expenses 24,389,180.07 23,785,778.93 Income (Loss) Before other revenues, expenses, gains or losses (151,374.86) (1,365,611.52) Other revenues, expenses, gains or losses 952,913.40 16,866,103.14 Increase in Net Assets 801,538.54 15,500,491.62 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 55,535,372.86 210,095.64 55,745,468.50 38,574,473.56 1,460,407.68 40,034,881.24 Net Assets at End of Year $56,547,007.04 $55,535,372.86 The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with an increase 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: Augusta State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $10,794,814.97 6,987,084.85 482,075.53 4,443,106.58 465,215.72 23,172,297.65 23,085,480.00 717,454.57 493,866.72 92,378.78 24,389,180.07 930,772.07 22,141.33 952,913.40 $48,514,391.12 June 30, 2003 $9,278,472.87 8,554,499.18 453,829.26 4,128,162.95 309,158.08 22,724,122.34 23,472,649.53 21,143.00 171,021.33 120,965.07 23,785,778.93 16,014,659.96 851,443.18 16,866,103.14 $63,376,004.41 Operating Revenues increased by $448,175.31, or 2 percent. Tuition and Fees revenue was up $1,516,342.10, or 16 percent due to a 10 percent increase in tuition and higher enrollment. This increase was partially offset by reduced Grants and Contracts revenue as FY 2003 included a large, one-time, grant for the History Walk project, and certain Grants and Contracts were reclassified as Nonoperating Revenue. Nonoperating Revenues were up $603,401.14, or 2.5 percent reflecting the change in Grants and Contracts noted above. In total, Grants and Contracts in FY 2004 were $7,704,539.42, down $871,101.76 as FY 2003 benefited from the one-time History Walk project. State appropriations decreased $387, 169.53 due to budget cuts. Capital Gifts and Grants were substantially lower in FY 2004 as the prior year included the addition of Allgood Hall, a new classroom building. Augusta State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $18,973,791.26 101,238.75 380,117.72 4,987,396.74 2,934,370.12 5,801,339.52 6,839,347.09 3,448,540.58 4,246,710.80 47,712,852.58 June 30, 2003 $18,562,156.97 86,233.79 353,711.94 5,382,352.74 2,903,461.76 6,204,488.45 5,746,555.67 3,255,763.85 3,955,088.00 1,425,699.62 47,875,512.79 0.00 $47,712,852.58 0.00 $47,875,512.79 The University's Total Operating Expenses, as shown above, decreased by $162,660.21, or 0.4 percent versus FY 2003. Expenses were contained in an environment of ongoing budget cuts and the results reflect the absence of a merit increase in salaries and wages for the year. The total compensation and employee benefits category (which represents 67 percent of total expenses), increased by $471,209.52 or 1.5 percent. Most of this increase was in Instruction due to some growth in the use of part-time faculty to meet the demands of higher enrollment. Academic Support expense declined 7 percent versus last year due to reduced levels of spending for supplies and other services. Institutional Support expense was also down 7 percent versus FY 2003 primarily due to reduced insurance premiums and an insurance claim. Plant Operations and Maintenance expense, as shown, appears to be up significantly from last year. However, in FY 2003, depreciation expense was shown as Unallocated Expense while in FY 2004 depreciation is included in each of the functional categories. From an operations standpoint, Plant Operations and Maintenance spending increased 2.8 percent year to year, primarily due to spending to support new classroom space. Utilities increased by $105,133.83 during the past year. Statement of Cash Flows The final statement presented by the Augusta State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with Augusta State University Annual Financial Report FY 2004 5 operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 2 1 ,8 5 1 ,0 7 3 .4 9 ) 2 4 ,6 0 3 ,0 3 7 .4 2 (1 ,2 4 3 ,1 2 2 .0 5 ) (2 0 6 ,3 4 8 .1 0 ) 1 ,3 0 2 ,4 9 3 .7 8 4 ,6 1 4 ,7 6 4 .2 0 $ 5 ,9 1 7 ,2 5 7 .9 8 June 30, 2003 ($ 2 4 ,2 0 8 ,2 4 6 .3 2 ) 2 3 ,5 0 7 ,0 5 0 .5 2 (1 ,0 5 3 ,4 2 4 .4 3 ) 1 2 0 ,9 6 5 .0 7 (1 ,6 3 3 ,6 5 5 .1 6 ) 6 ,2 4 8 ,4 1 9 .3 6 $ 4 ,6 1 4 ,7 6 4 .2 0 Capital Assets There were no major additions to the University's Capital Assets in FY 2004. A second new classroom building, University Hall, is nearing completion and will add some $20 million to the University's asset base in FY 2005. Once University Hall is occupied, the six old classroom buildings will be demolished. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Augusta State University has included the financial statements and notes for all required component units for FY2004. The component units shown are the Augusta State University Foundation and the Augusta State University Athletic Association. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Augusta State University Annual Financial Report FY 2004 6 Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during the new fiscal year. The University's overall financial position is strong as cost control measures have enabled the University to fulfill its mission against an environment of rising enrollment during a period of ongoing budget cuts. The University anticipates the current fiscal year will be much like last and will require continued close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ William A. Bloodworth, Jr., President Augusta State University Augusta State University Annual Financial Report FY 2004 7 Statement of Net Assets AUGUSTA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $5,903,026.96 83,056.78 4,274,088.61 514,480.94 1,256,515.72 12,031,169.01 14,231.02 298,726.88 937,076.74 51,548,517.25 52,798,551.89 64,829,720.90 714,936.67 1,208.25 6,026,340.29 (4,291.46) 371,760.44 667,182.97 7,777,137.16 505,576.70 505,576.70 8,282,713.86 51,548,517.25 312,957.90 1,541,475.29 3,144,056.60 $56,547,007.04 Augusta State University Annual Financial Report FY 2004 8 Augusta State University Foundation Balance Sheet Augusta State Univ ersity Foundations Balance Sheet (F ASB) June 30, 2004 Fund Raising F o und a tio n A t hle tic A s s o c ia t io n A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets $811,517.00 1,540,688.00 12,509,314.00 849,897.00 20,000.00 15,731,416.00 $219,648.00 84,890.00 1,531,372.00 1,835,910.00 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 10,894.00 1,528,888.00 1,539,782.00 76,563.00 1,586,665.00 1,663,228.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 2,832,958.00 794,940.00 10,563,736.00 $14,191,634.00 172,682.00 $172,682.00 Augusta State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets AUGUSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $13,954,691.74 3,062,382.00 97,494.77 6,796,568.95 2,094.66 188,421.24 482,075.53 2,669,509.84 140,255.25 1,571,764.90 61,576.59 465,215.72 23,172,297.65 13,316,595.68 11,929,092.17 6,530,284.65 3,114.00 216,736.27 3,980,442.21 1,572,122.02 7,875,493.43 2,288,972.15 47,712,852.58 (24,540,554.93) Augusta State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 23,085,480.00 264.10 717,190.47 493,866.72 92,378.78 24,389,180.07 (151,374.86) 930,772.07 22,141.33 952,913.40 801,538.54 55,535,372.86 210,095.64 55,745,468.50 $56,547,007.04 Augusta State University Annual Financial Report FY 2004 11 Augusta State University Foundation Statement of Activities Augusta State University Fund Raising Foundation Statem ent of Activ ities (Functional Display) (FASB) For the Year Ended June 30, 2004 U nre stricte d Temporarily Restricted P e r ma ne ntly Restricted Total Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e O ther Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Revenues $279,885.00 139,317.00 244,410.00 50,445.00 $475,426.00 965,049.00 (556,066.00) 1,679,106.00 (80,640.00) $295,758.00 100,335.00 714,894.00 (408,983.00) 702,004.00 $1,051,069.00 239,652.00 959,304.00 50,445.00 0.00 0.00 0.00 0.00 0.00 2,300,470.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is ing Total Expenses C hange in Net A ssets 226,308.00 63,690.00 33,678.00 773,531.00 132,929.00 90,141.00 1,320,277.00 358,829.00 0.00 (80,640.00) 0.00 702,004.00 226,308.00 63,690.00 33,678.00 773,531.00 132,929.00 0.00 90,141.00 1,320,277.00 980,193.00 Net Assets B eginning Net Assets Ending Net A ssets 2,474,129.00 $2,832,958.00 875,580.00 $794,940.00 9,861,732.00 $10,563,736.00 13,211,441.00 $14,191,634.00 Augusta State University Annual Financial Report FY 2004 12 Augusta State University Foundation Statement of Activities Augusta State University Athletic Association Statem ent of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted P e r ma ne ntly Restricted Total Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Revenues $0.00 664,042.00 664,042.00 $0.00 0.00 $0.00 0.00 $0.00 0.00 0.00 0.00 0.00 664,042.00 0.00 0.00 0.00 664,042.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is ing Total Expenses C hange in Net A ssets 1,136,850.00 1,136,850.00 (472,808.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,136,850.00 0.00 0.00 1,136,850.00 (472,808.00) Net Assets B eginning Net A ssets Ending Net A ssets 645,490.00 $172,682.00 $0.00 $0.00 645,490.00 $172,682.00 Augusta State University Annual Financial Report FY 2004 13 Statement of Cash Flows AUGUSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from S ales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $13,923,386.07 7,417,220.38 580,546.59 (16,060,264.29) (25,214,615.57) (7,042,824.21) (344,672.40) 269,239.90 2,608,321.70 (535.25) 143,836.17 1,571,586.73 61,701.30 235,999.39 (21,851,073.49) 23,085,480.00 306,236.13 1,211,321.29 24,603,037.42 (1,243,122.05) (1,243,122.05) (206,348.10) (206,348.10) 1,302,493.78 4,614,764.20 $5,917,257.98 Augusta State University Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Incom e (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Non cash gift Assets added in capital ledger June 30, 2004 ($24,540,554.93) 2,288,972.15 (426,400.23) (65,887.35) (86,629.45) 3,864.96 1,028,266.01 (69,344.23) 16,639.58 ($21,851,073.49) $362,369.36 $2,624,490.36 Augusta State University Annual Financial Report FY 2004 15 AUGUSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Augusta State University serves the second largest metropolitan area in Georgia. With a broad array of undergraduate programs and a select offering of graduate programs, it functions as a metropolitan University for the Central Savannah River Area. Reporting Entity Augusta State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Augusta State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Augusta State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Augusta State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Augusta State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Augusta State University is reporting the activity for the Augusta State University Fund Raising Foundation and the Augusta State University Athletic Association. See Note 15. Component Units, for foundation notes. Augusta State University Annual Financial Report FY 2004 16 Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are Augusta State University Annual Financial Report FY 2004 17 reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Augusta State University when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $79,794.55 to Augusta State University. Augusta State University Annual Financial Report FY 2004 18 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Augusta State University had accrued liability for compensated absences in the amount of $1,156,120.09 as of 7-1-2003. For FY2004, $846,551.87 was earned in compensated absences and employees were paid $829,912.29, for a net increase of $16,639.58. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,172,759.67 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Augusta State University Annual Financial Report FY 2004 19 Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A cti $439,401.31 Federal Loans 869,326.73 Institutional Loans 232,747.25 Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable $1,541,475.29 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O the r Unre stricte d Total Unre stricte d Ne t A sse ts June 30, 2004 $645,634.99 130,146.54 33,016.68 2,335,258.39 $3,144,056.60 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Augusta State University, 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. Augusta State University Annual Financial Report FY 2004 20 Classification of Revenues The University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Augusta State University Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Augusta State University) 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 50-1759: 1. Bonds, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Augusta State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Augusta State University Annual Financial Report FY 2004 22 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $5,610,987.01 Bank Balances $5,610,987.01 Risk C ategories 1 2 $5,610,987.01 $0.00 $5,610,987.01 $5,610,987.01 $5,610,987.01 $0.00 3 $0.00 $0.00 Augusta State University Annual Financial Report FY 2004 23 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Ty pe of Inv estm ents C om m on S tock C orporate B onds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: B oard of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 223,309.10 298,726.88 82,961.87 $604,997.85 Augusta State University Annual Financial Report FY 2004 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $3,224,823.57 459,931.11 83,056.78 655,070.51 4,422,881.97 65,736.58 Net A ccounts Receiv able $4,357,145.39 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $485,180.63 16,833.13 12,467.18 $514,480.94 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 Augusta State University had no allowance for uncollectible loans. Augusta State University Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $2,152,770.49 718,719.90 2,871,490.39 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 1,782,696.82 54,846,357.55 2,748,832.54 5,275,919.87 7,053,514.50 75,005.00 71,782,326.28 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 144,393.11 12,501,345.62 1,089,280.92 3,737,487.66 5,744,507.00 23,217,014.31 Total Capital Assets, Being Depreciated, Net 48,565,311.97 Capital Assets, net $51,436,802.36 Additions $0.00 1,628,975.48 1,628,975.48 Reductions $0.00 1,851,056.75 1,851,056.75 Ending Balance 6/30/2004 $2,152,770.49 496,638.63 2,649,409.12 9,786.30 978,134.10 1,057,161.29 446,695.97 132,711.70 1.00 2,624,490.36 17,539.39 23,698.00 41,237.39 1,792,483.12 55,824,491.65 3,805,993.83 5,705,076.45 0.00 7,162,528.20 75,006.00 74,365,579.25 70,958.16 1,325,872.94 150,801.43 441,273.67 301,788.00 2,290,694.20 333,796.16 $1,962,771.64 17,539.39 23,698.00 41,237.39 0.00 $1,851,056.75 215,351.27 13,827,218.56 1,240,082.35 4,161,221.94 0.00 6,022,597.00 0.00 25,466,471.12 48,899,108.13 $51,548,517.25 Augusta State University Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $5,882,852.69 143,487.60 $6,026,340.29 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004. Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 1,156,120.09 1,156,120.09 846,551.87 846,551.87 829,912.29 829,912.29 1,172,759.67 0.00 1,172,759.67 Total Long Term Obligations $1,156,120.09 $846,551.87 $829,912.29 $1,172,759.67 Current Portion $0.00 667,182.97 667,182.97 $667,182.97 Note 9. Lease Obligations OPERATING LEASES Augusta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2006. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Augusta State University Annual Financial Report FY 2004 27 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Augusta State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Augusta State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Augusta State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,262,302.30 $1,290,111.42 $1,271,931.26 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Augusta State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in Augusta State University Annual Financial Report FY 2004 28 accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Augusta State University and the covered employees made the required contributions of $941,242.09 (10.03%) and $469,213.35 (5%), respectively. Georgia Defined Contribution Plan Plan Description Augusta State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $59,498.05, which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Augusta State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Augusta State University Annual Financial Report FY 2004 29 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Augusta State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Augusta State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Augusta State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Augusta State University Annual Financial Report FY 2004 30 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 138 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Augusta State University recognized as incurred $668,669.74 of expenditures, which was net of $163,652.36 of participant contributions. Augusta State University Annual Financial Report FY 2004 31 Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $13,297,950.92 1,244,017.84 3,191,433.36 80,972.56 17,177.44 108,388.14 958,594.06 75,256.94 $15,000.00 44,890.62 3,151.89 27,962.45 289.46 9,944.33 $0.00 123,829.97 33,728.30 4,019.13 216,752.61 1,787.71 $8,395.50 2,625,713.68 619,011.31 29,001.06 54,576.17 1,244,941.10 405,757.92 $700.00 1,689,353.42 436,149.46 20,388.94 37,305.25 39,333.01 695,810.95 15,329.09 ($5,450.74) 3,285,168.17 1,396,708.55 3,114.00 23,588.55 1,660.00 63,304.67 860,973.19 172,273.13 Total Expenses $18,973,791.26 $101,238.75 $380,117.72 $4,987,396.74 $2,934,370.12 $5,801,339.52 Natural C lassification Plant O p e r a tio ns & Maintenance Func tional Classific ation FY 2004 S c ho la r s hip s Auxiliary & Fellowships Enterprises Unallocated Expenses Faculty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e pr e c ia tio n $ 0.00 2,094,629.72 630,833.32 (68,136.61) 2,541.61 1,274,615.67 1,291,984.46 1,612,878.92 $ 0.00 1,353.00 3,447,187.58 $ 0.00 820,135.75 219,268.46 68,136.61 32,281.10 477,111.94 27,595.77 2,596,492.73 5,688.44 $ 0.00 Total Expenses $ 6,839,347.09 $ 3,448,540.58 $ 4,246,710.80 $ 0.00 Total Expenses $ 13,316,595.68 11,929,092.17 6,530,284.65 3,114.00 216,736.27 3,980,442.21 1,572,122.02 7,875,493.43 2,288,972.15 $ 47,712,852.58 Augusta State University Annual Financial Report FY 2004 32 Note 15. Component Units Augusta State University Foundation (foundation) is a legally separate, tax-exempt component unit of Augusta State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The foundation board is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $1,089,296.60 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 2500Walton Way, Augusta, GA 30904 or from the foundation's website at www.aug.edu/alumni Augusta State University Athletic Association (foundation) is a legally separate, tax-exempt component unit of Augusta State University (university). The foundation manages all extramural athletic activities. The board of the foundation is self-perpetuating and consists of university employees, graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Augusta State University Annual Financial Report FY 2004 33 The principal assets and revenue producer for the Athletic Association is the Forest Hills Golf Club. Complete financial statements for the foundation can be obtained from the Vice President for Business and Student Services Office at 2500 Walton Way, Augusta, GA 30904 or from the foundation's website at www.aug.edu/athletics/ Investments for Component Units: Augusta State University Foundation holds endowment investments in the amount of $2.5 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: The Augusta State University Athletic Association has a long term liability of 1.6 million dollars in the form of a bank loan to finance a major golf course renovation project. Augusta State University Annual Financial Report FY 2004 34 BAINBRIDGE COLLEGE Financial Report For the Year Ended June 30, 2004 Bainbridge College Bainbridge, Georgia _______________________________ Dr. Clifford Brock President _______________________________ Ms. Nancy E. Kin Vice President for Business Affairs BAINBRIDGE COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Assets ................................ 9 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 20 Note 3 Accounts Receivable............................................................................................. 23 Note 4 Inventories............................................................................................................. 23 Note 5 Notes/Loans Receivable........................................................................................ 23 Note 6 Capital Assets........................................................................................................ 24 Note 7 Deferred Revenue.................................................................................................. 25 Note 8 Long-Term Liabilities ........................................................................................... 25 Note 9 Lease Obligations.................................................................................................. 25 Note 10 Retirement Plans ................................................................................................. 26 Note 11 Risk Management................................................................................................ 27 Note 12 Contingencies...................................................................................................... 28 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 14 Natural Classifications With Functional Classifications..................................... 30 Note 15 Component Units ........................................................................ 31 BAINBRIDGE COLLEGE Management's Discussion and Analysis Introduction Bainbridge College is one of the 34 institutions of the University System of Georgia. The College, located in Bainbridge, Georgia, was founded in 1970 with construction of the original five buildings beginning in July 1972; classes began October 1, 1973. The Division of Vocational/Technical Education and the Department of Development Education were added during the academic year 1973-74. A unique agreement, which continues to this day, between the Board of Regents and Georgia Department of Technical and Adult Education, made the addition of the vocational/technical programs possible. Bainbridge College is the only comprehensive community college in southwest Georgia and is fully accredited by the Commission on Colleges of the Southern Association of Colleges and Schools. The College has experienced phenomenal growth as shown by the following chart. Faculty Average Students FY2004 FY2003 FY2002 126 2,354 116 2,241 111 1,929 Overview of the Financial Statements and Financial Analysis Bainbridge College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Bainbridge College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Bainbridge College Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $3,755,765.28 4,035,793.30 3,846.69 7,795,405.27 June 30, 2003 $2,513,099.41 4,072,169.20 14,966.12 6,600,234.73 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 1,560,631.53 84,429.91 1,645,061.44 1,031,631.86 169,377.92 1,201,009.78 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 4,035,793.30 508,884.27 95,317.66 1,510,348.60 $6,150,343.83 4,072,169.20 509,602.25 95,497.94 721,955.56 $5,399,224.95 The total assets of the institution increased by $1,195,170.54. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,242,665.87 in current assets, primarily $777,603.80 in cash and cash equivalents. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $444,051.66. The combination of the increase in total assets of $1,195,170.54 and the increase in total liabilities of $444,051.66 yields an increase in total net assets of $751,118.88. Bainbridge College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $7,763,035.32 June 30, 2003 $6,432,927.17 Operating Expenses Operating Loss 12,556,901.90 (4,793,866.58) 11,108,237.33 (4,675,310.16) Nonoperating Revenues and Expenses 5,520,392.35 4,696,475.64 Income (Loss) Before other revenues, expenses, gains or losses 726,525.77 21,165.48 Other revenues, expenses, gains or losses 0.00 377,132.69 Increase in Net Assets 726,525.77 398,298.17 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 5,399,224.95 24,593.11 5,423,818.06 4,615,246.50 385,680.28 5,000,926.78 Net Assets at End of Year $6,150,343.83 $5,399,224.95 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Bainbridge College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $1,523,717.19 5,283,102.03 242,967.18 642,496.56 70,752.36 7,763,035.32 5,441,158.05 84,684.08 (5,449.78) 5,520,392.35 0.00 $13,283,427.67 June 30, 2003 $1,362,458.90 4,305,723.66 182,719.49 559,262.70 22,762.42 6,432,927.17 4,662,495.27 33,980.37 4,696,475.64 377,132.69 377,132.69 $11,506,535.50 Bainbridge College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $4,922,132.59 716,270.90 739,632.70 1,819,933.41 1,171,983.32 2,618,287.81 568,661.17 12,556,901.90 0.00 $12,556,901.90 June 30, 2003 $4,701,441.45 752,320.35 622,436.72 1,688,449.48 1,156,642.67 1,681,107.95 505,838.71 11,108,237.33 0.00 $11,108,237.33 All student driven revenue depicts increases. Student Tuition and Fees increased $407,743.51, while Sponsored and Unsponsored Scholarships increased in the amount of 236,626.70, Federal Grants and Contracts increased $1,097,413.59, and Auxiliary Enterprises increased $83,233.86; all depicting the continued increase in enrollment. Other operating revenues also saw an increase of $47,989.94. The compensation and employee benefits category increased by approximately $353,310.99. The increase reflects an increased cost of health insurance for the employees of the institution. Under non-operating revenues (expenses) state appropriations increased by approximately $778,662.78. Statement of Cash Flows The final statement presented by the Bainbridge College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, Bainbridge College Annual Financial Report FY 2004 5 proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 ,3 5 5 ,0 7 2 .1 5 ) 5 ,3 3 5 ,4 2 4 .0 1 (2 9 0 ,2 8 8 .7 2 ) 8 7 ,5 4 0 .6 6 7 7 7 ,6 0 3 .8 0 6 8 0 ,2 9 5 .4 6 $ 1 ,4 5 7 ,8 9 9 .2 6 June 30, 2003 ($ 4 ,8 9 0 ,3 2 8 .5 7 ) 4 ,5 2 2 ,4 4 4 .2 8 (7 7 ,6 4 4 .6 1 ) 2 4 ,2 9 4 .5 7 (4 2 1 ,2 3 4 .3 3 ) 1 ,1 0 1 ,5 2 9 .7 9 $ 6 8 0 ,2 9 5 .4 6 Capital Assets For information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Dr. Clifford Brock, President Bainbridge College Bainbridge College Annual Financial Report FY 2004 6 Statement of Net Assets BAINBRIDGE COLLEGE STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $1,457,899.26 Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance 997,030.49 Receivables - State General Appropriations Allotment 67,193.00 Receivables - Other 1,026,575.89 I n v e nto r ie s 206,296.81 Other Assets 769.83 Total C urrent Assets 3,755,765.28 Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 3,846.69 4,035,793.30 4,039,639.99 7,795,405.27 478,283.75 791,627.30 14,529.22 76,706.89 199,484.37 1,560,631.53 84,429.91 84,429.91 1,645,061.44 4,035,793.30 508,884.27 95,317.66 1,510,348.60 $6,150,343.83 Bainbridge College Annual Financial Report FY 2004 7 Bainbridge College Foundation Balance Sheet Bainbridge C ollegeFoundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $40,536.00 40,536.00 0.00 40,536.00 $40,536.00 Bainbridge College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets BAINBRIDGE C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $2,993,742.35 1,460,166.73 9,858.43 4,664,270.85 545,865.62 72,965.56 242,967.18 640,622.96 1,873.60 70,752.36 7,763,035.32 2,831,360.72 2,593,915.93 1,462,071.60 88,684.84 2,666,933.05 272,204.75 2,299,248.30 342,482.71 12,556,901.90 (4,793,866.58) Bainbridge College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 5,441,158.05 84,684.08 (5,449.78) 5,520,392.35 726,525.77 0.00 726,525.77 5,399,224.95 24,593.11 5,423,818.06 $6,150,343.83 Bainbridge College Annual Financial Report FY 2004 10 Bainbridge College Foundation Statement of Activities Bainbridge C ollege Foundation Statem ent of Activities (Functional Display ) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized Gain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Revenues $18,526.00 18,526.00 $0.00 0.00 $0.00 0.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is ing Total Expenses C hange in Net A ssets 12,182.00 12,182.00 6,344.00 0.00 0.00 0.00 0.00 Net Assets B eginning Net A ssets Ending Net A ssets 34,192.00 $40,536.00 $0.00 $0.00 To t a l $18,526.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 18,526.00 12,182.00 0.00 0.00 0.00 0.00 0.00 0.00 12,182.00 6,344.00 34,192.00 $40,536.00 Bainbridge College Annual Financial Report FY 2004 11 Statement of Cash Flows BAINBRIDGE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal A ppropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CT IVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $3,695,840.74 4,702,436.40 243,994.34 (4,041,041.28) (5,413,416.93) (4,127,099.78) (1,261.00) 607,354.08 1,757.55 (23,636.27) (4,355,072.15) 5,373,965.05 (39,253.54) 712.50 5,335,424.01 (290,288.72) (290,288.72) 87,540.66 87,540.66 777,603.80 680,295.46 $1,457,899.26 Bainbridge College Annual Financial Report FY 2004 12 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D e p r e c ia tio n C hange in Assets and Liabilities: Receivables, net I nv e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($4,793,866.58) 342,482.71 (159,954.42) (60,709.13) 854.17 58,653.98 182,192.41 40,295.62 34,979.09 ($4,355,072.15) Bainbridge College had no non-cash investing, non-capital financing, or capital and related financing transactions for FY2004. Bainbridge College Annual Financial Report FY 2004 13 BAINBRIDGE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Bainbridge College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Bainbridge College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Bainbridge College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Bainbridge College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Bainbridge College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Bainbridge College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Bainbridge College is reporting the activity for the Bainbridge College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Bainbridge College Annual Financial Report FY 2004 14 Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statements of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Bainbridge College Annual Financial Report FY 2004 15 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Bainbridge College when complete. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Bainbridge College Annual Financial Report FY 2004 16 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Bainbridge College had accrued liability for compensated absences in the amount of $248,935.19 as of 7-1-2003. For FY2004, $199,484.37 was earned in compensated absences and employees were paid $164,505.28, for a net increase of $34,979.09. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $283,914.28 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A cti Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable $17,915.02 15,480.86 61,921.78 $95,317.66 Bainbridge College Annual Financial Report FY 2004 17 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances R e se rv e for Inv e ntory O the r Unre stricte d Total Unrestricted Net A ssets June 30, 2004 $0.00 539,115.79 14,706.33 956,526.48 $1,510,348.60 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Bainbridge 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Bainbridge College Annual Financial Report FY 2004 18 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Bainbridge College Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Bainbridge 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Bainbridge College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Bainbridge College Annual Financial Report FY 2004 20 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $886,453.32 Bank Balances $1,033,974.13 Risk C ategories 1 2 $200,000.00 $833,974.13 $886,453.32 $1,033,974.13 $200,000.00 $833,974.13 3 $0.00 $0.00 Bainbridge College Annual Financial Report FY 2004 21 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 571,445.94 $571,445.94 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Bainbridge College Annual Financial Report FY 2004 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $56,600.81 65,315.95 997,030.49 971,852.13 2,090,799.38 Net A ccounts Receiv able $2,090,799.38 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $192,773.33 13,523.48 $206,296.81 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 Bainbridge College had no allowance for uncollectible loans. Bainbridge College Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $99,269.00 99,269.00 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 961,540.00 5,671,927.71 650,861.00 1,191,440.33 898,962.31 9,374,731.35 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 399,384.52 3,005,122.96 417,270.52 817,808.15 762,245.00 5,401,831.15 Total Capital Assets, Being Depreciated, Net 3,972,900.20 Capital Assets, net $4,072,169.20 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $99,269.00 0.00 99,269.00 153,621.88 37,716.59 191,338.47 60,997.44 60,997.44 961,540.00 5,671,927.71 650,861.00 1,284,064.77 0.00 936,678.90 0.00 9,505,072.38 26,621.84 122,106.37 27,418.21 105,397.57 27,839.91 309,383.90 (118,045.43) ($118,045.43) 142,666.97 142,666.97 (81,669.53) ($81,669.53) 426,006.36 3,127,229.33 444,688.73 780,538.75 0.00 790,084.91 0.00 5,568,548.08 3,936,524.30 $4,035,793.30 Bainbridge College Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $791,627.30 $791,627.30 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004. Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 248,935.19 0.00 248,935.19 199,484.37 199,484.37 $248,935.19 $199,484.37 164,505.28 164,505.28 283,914.28 0.00 283,914.28 $164,505.28 $283,914.28 Current Portion $0.00 199,484.37 199,484.37 $199,484.37 Note 9. Lease Obligations CAPITAL LEASES Bainbridge College had no capital leases in fiscal year 2004. OPERATING LEASES Bainbridge College had no operating leases in fiscal year 2004. Bainbridge College Annual Financial Report FY 2004 25 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Bainbridge College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Bainbridge College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Bainbridge College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $311,236.18 $303,042.28 $281,795.15 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et. seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible University system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Bainbridge College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance Bainbridge College Annual Financial Report FY 2004 26 with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Bainbridge College and the covered employees made the required contributions of $107,897.74 (10.03%) and $53,787.50 (5%), respectively. Georgia Defined Contribution Plan Plan Description Bainbridge 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $38,573.34 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Bainbridge College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured Bainbridge College Annual Financial Report FY 2004 27 healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Bainbridge College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Bainbridge College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Bainbridge College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Bainbridge College Annual Financial Report FY 2004 28 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 40 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Bainbridge College recognized as incurred $169,591.00 of expenditures, which was net of $70,994.14 of participant contributions. Bainbridge College Annual Financial Report FY 2004 29 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification are shown on this page and the following pages (FY 2004 and FY 2003) Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $2,829,960.04 606,258.05 768,980.37 59,331.20 42,016.27 28,132.97 584,053.29 3,400.40 $0.00 $0.00 $0.00 405,519.37 106,888.88 4,576.41 22,662.49 146,643.89 29,979.86 $1,400.68 381,666.59 114,184.93 5,635.09 8,565.97 12,019.44 213,711.27 2,448.73 $0.00 837,716.10 364,560.93 18,494.56 26,842.51 542,453.33 29,865.98 Total Expenses $4,922,132.59 $0.00 $0.00 $716,270.90 $739,632.70 $1,819,933.41 Natural C lassification Plant O p e r a tio ns & Maintenance Functional C lassification FY2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e p r e c ia tio n $ 0.00 334,168.50 101,343.58 (4,355.12) 242.00 0.00 181,981.68 281,814.94 276,787.74 $ 0.00 1,937.00 2,616,350.81 $ 0.00 28,587.32 4,175.91 4,355.12 405.58 565.66 530,571.58 $ 0.00 Total Expenses $ 1,171,983.32 $ 2,618,287.81 $ 568,661.17 $ 0.00 Total Expenses $ 2,831,360.72 2,593,915.93 1,462,071.60 0.00 88,684.84 2,666,933.05 272,204.75 2,299,248.30 342,482.71 $ 12,556,901.90 Bainbridge College Annual Financial Report FY 2004 30 Note 15. Component Units Component Unit Notes Bainbridge College Foundation (foundation) is a legally separate, tax-exempt component unit of Bainbridge College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The eleven-member board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $12,182 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 2500 E. Shotwell Street Bainbridge, GA 39819. Long Term Liabilities for Component Units Bainbridge College Foundation had no long term liabilities for FY2004. Bainbridge College Annual Financial Report FY 2004 31 CLAYTON COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Clayton College & State University Morrow, Georgia Thomas K. Harden President Bruce R. Spratt Executive Director of Budget and Finance CLAYTON COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Clayton College & State University Foundations Balance Sheet ..............................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Clayton College & State Univ. Walter & Emilie Spivey Found. Statement of Activities.12 Clayton College & State University Foundation Statement of Activities ...................13 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 22 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 25 Note 5 Notes/Loans Receivable........................................................................................ 25 Note 6 Capital Assets........................................................................................................ 26 Note 7 Deferred Revenue.................................................................................................. 27 Note 8 Long-Term Liabilities ........................................................................................... 27 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 28 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 14 Natural Classifications With Functional Classifications..................................... 32 Note 15 Component Units ........................................................................ 33 CLAYTON COLLEGE & STATE UNIVERSITY Management's Discussion and Analysis Introduction Clayton College & State University, located in Morrow, Georgia, is one of the 34 institutions of the University System of Georgia. Established in 1969 in a park-like setting 15 minutes from downtown Atlanta, Clayton State serves the metro Atlanta area as a hub for undergraduate education. After five years of steady enrollment growth, and the fall 2004 opening of the $19 million University Center, Clayton State's fall 2004 enrollment was just under 6,000 students and has twice been ranked by U.S. News & World Report as having the most diverse student population among comprehensive baccalaureate-level colleges and universities in the Southeastern United States. In 2004, Clayton State established an Office for International Studies to foster study abroad programs for students, and recently received its first Fulbright-Hays grant, allowing faculty members to participate in a four week professional development program in Argentina and Chile. The Fulbright grant was far from Clayton State's only faculty venture abroad in 2004. During the summer, Clayton State faculty members taught courses in Italy, London, Hungary, the Baltic Republics and Russia. University President Dr. Thomas K. Harden helped lead an economic/cultural/educational mission to the Czech Republic, Romania and Hungary that resulted in the University signing several partnerships and exchange programs with major universities from those countries. Clayton State is the only academic institution in the Southeast with a world-class recital hall (Spivey Hall) on campus. Clayton State is also the only university in the country adjacent to both state and national archives facilities. The University currently offers 28 baccalaureate degree programs with several new programs under development. The University's Athletics program features 10 sports and competes at the NCAA Division II-level in the Peach Belt Athletic Conference. Faculty Students FY2004 FY2003 FY2002 297 5,661 293 5,212 286 4,675 Clayton College & State University Annual Financial Report FY 2004 1 Overview of the Financial Statements and Financial Analysis Clayton College & State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Clayton College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Clayton College & State University Annual Financial Report FY 2004 2 Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets June 30, 2004 $8,814,916.23 27,869,202.35 808,419.37 37,492,537.95 4,218,505.73 664,088.51 4,882,594.24 27,869,202.35 1,008,847.66 72,120.92 3,659,772.78 $32,609,943.71 June 30, 2003 $8,043,027.47 28,393,299.11 956,618.13 37,392,944.71 3,469,487.41 577,603.63 4,047,091.04 28,393,299.11 952,329.08 41,976.19 3,958,249.29 $33,345,853.67 The total assets of the institution increased by $99,593.24. A review of the Statement of Net Assets will reveal that the increase was the result of an increase in cash and cash equivalents caused by the carry-forward of prior year funds for purchase orders ($616,774.43) that were canceled and left unspent netted against the decrease in net assets ($524,096.76) of investment in plant, net of accumulated depreciation arising from an adjustment to the capitalization threshold for equipment. The total liabilities for the year increased by $835,503.20. The combination of the increase in total assets of $99,593.24 and the increase in total liabilities of $835,503.20 yields a decrease in total net assets of ($735,909.96). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($524,096.76) combined with the increase in deferred revenue generated when the University changed their accounting procedures for the recognition of summer semester revenue to comply with the Generally Accepted Accounting Principals (GAAP). The GAAP procedures require the summer revenue to be divided over the fiscal year based on the amount of time the summer semester occupied in the two fiscal years. In the past, the University recognized all of the summer revenue in the first half of the semester and accrued the estimated salary expenses for the second half of the semester as an offset. This change resulted in an increase to deferred revenue of $1,108,264.91 and a decrease in salaries payable of ($225,974.07) (net liability increase of $882,290.84). Clayton College & State University Annual Financial Report FY 2004 3 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 June 30, 2003 Operating Revenues Operating Expenses Operating Loss Nonoperating Revenues and Expenses Income (Loss) Before other revenues, expenses, gains or losses Other revenues, expenses, gains or losses Increase in Net Assets Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated Net Assets at End of Year $25,183,113.04 43,474,901.42 (18,291,788.38) 17,555,878.42 (735,909.96) (735,909.96) 33,345,853.67 33,345,853.67 $32,609,943.71 $25,411,050.41 42,378,937.09 (16,967,886.68) 17,646,285.13 678,398.45 115,055.00 793,453.45 31,454,443.15 1,097,957.07 32,552,400.22 $33,345,853.67 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in net assets in the current fiscal year. The two key factors that created this decrease were the result of the change in accounting principal for recognition of summer revenue and the removal of small value equipment from the capitalized inventory. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Clayton College & State University Annual Financial Report FY 2004 4 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2004 June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses $10,253,938.11 9,164,823.81 2,516,883.87 3,043,334.90 204,132.35 25,183,113.04 $9,799,431.27 9,351,538.08 3,132,770.18 3,036,010.09 91,300.79 25,411,050.41 17,528,350.56 7,985.78 69,207.15 (49,665.07) 17,555,878.42 17,434,681.36 125,237.87 32,252.00 27,477.53 26,636.37 17,646,285.13 0.00 $42,738,991.46 110,055.00 5,000.00 115,055.00 $43,172,390.54 June 30, 2004 June 30, 2003 $16,208,967.84 1,131,203.08 5,508,037.90 3,061,676.46 7,633,557.32 3,513,996.23 3,551,113.81 2,866,348.78 $16,923,954.19 1,763,046.55 5,671,966.14 2,313,704.23 7,119,533.73 2,781,282.43 3,321,392.35 2,484,057.47 43,474,901.42 42,378,937.09 0.00 $43,474,901.42 0.00 $42,378,937.09 Clayton College & State University Annual Financial Report FY 2004 5 Continuing education course fees decreased in the amount of approximately $600,000.00. However, that decrease was offset with an equivalent decrease in course expenditures and that variance is evident when comparing the change in the Public Service expenditures in the fiscal year. In addition, the majority of the furnishings and supplies used to outfit the new University Center were purchased at the end of fiscal year 2004. The certificate of occupancy was issued for the University Center at the very beginning of fiscal year 2005. These items were non-capital purchases that were expensed in fiscal year 2004. The compensation and employee benefits category increased by approximately $200,867.90. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $106,792.94 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004, and from startup of systems associated with the University's new University Center facility. Under non-operating revenues (expenses) state appropriations increased by approximately $93,669.20. The minimal increase to state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Clayton College & State University. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by Clayton College & State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Clayton College & State University Annual Financial Report FY 2004 6 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating A ctivities Non-capital Financing Activities C apital and Related Financing A ctivities Investing A ctivities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 5 ,7 7 2 ,8 5 1 .0 0 ) 1 7 ,1 9 7 ,8 8 1 .2 9 (1 ,0 4 2 ,9 3 4 .1 7 ) 4 ,2 6 2 .2 4 3 8 6 ,3 5 8 .3 6 1 ,3 8 2 ,5 8 3 .7 3 $ 1 ,7 6 8 ,9 4 2 .0 9 June 30, 2003 ($ 1 7 ,1 3 1 ,4 1 6 .5 4 ) 1 7 ,5 1 0 ,0 3 9 .0 6 (1 ,3 1 8 ,8 4 5 .3 4 ) 3 8 ,8 6 2 .4 0 (9 0 1 ,3 6 0 .4 2 ) 2 ,2 8 3 ,9 4 4 .1 5 $ 1 ,3 8 2 ,5 8 3 .7 3 Capital Assets The University had no significant capital asset additions for facilities in fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Clayton College & State University has included the financial statements and notes for all required component units for FY2004. The Clayton College & State University Foundation, Inc. had endowment investments of $1,842,140.00 as of June 30, 2004. The Walter and Emilie Spivey Foundation had investments of $7,387,135.62. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last year and we will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Thomas K. Harden, President Clayton College & State University Clayton College & State University Annual Financial Report FY 2004 7 Statement of Net Assets CLAYTON COLLEGE & STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets June 30, 2004 $1,760,942.09 1,948,530.23 4,644,291.77 238,445.75 222,706.39 8,814,916.23 Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Ex p e nd a b le C apital Projects Un r e s tr ic te d TOTAL NET ASSETS 8,000.00 785,916.50 14,502.87 27,869,202.35 28,677,621.72 37,492,537.95 786,753.43 2,630,845.28 (80,304.32) 143,649.43 737,561.91 4,218,505.73 664,088.51 664,088.51 4,882,594.24 27,869,202.35 1,008,847.66 72,120.92 3,659,772.78 $32,609,943.71 Clayton College & State University Annual Financial Report FY 2004 8 Clayton College & State University Foundations Balance Sheet Balance Sheet (F ASB) June 30, 2004 W alter & Emilie S pivey Clayton College & S tate F o unda tio n University Foundation A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets $68,563.96 33,021.42 7,249,617.46 137,518.16 155,266.46 7,643,987.46 $810,800.00 3,300.00 1,842,140.00 166,428.00 2,822,668.00 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 0.00 20,500.00 20,500.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 394,370.00 7,249,617.46 $7,643,987.46 28,930.00 1,608,844.00 1,164,394.00 $2,802,168.00 Clayton College & State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets C LAYTON C OLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 RE VE NU E S June 30, 2004 Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s: Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $12,697,484.09 2,285,797.19 157,748.79 7,843,511.29 763,711.81 557,600.71 2,516,883.87 747,478.95 297,087.10 200,861.35 1,530,775.48 267,132.02 204,132.35 25,183,113.04 10,252,834.27 12,989,303.26 4,989,725.47 323,457.77 4,249,930.04 975,519.32 8,042,796.32 1,651,334.97 43,474,901.42 (18,291,788.38) Clayton College & State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O the r G ifts Investment Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O the r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 17,528,350.56 7,985.78 69,207.15 (49,665.07) 17,555,878.42 (735,909.96) 0.00 (735,909.96) 33,345,853.67 33,345,853.67 $32,609,943.71 Clayton College & State University Annual Financial Report FY 2004 11 Clayton College & State University Walter & Emilie Spivey Foundation Statement of Activities Walter & Emilie Spivey Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 39,600.93 112,278.24 151,879.17 $0.00 0.00 $0.00 0.00 $0.00 39,600.93 112,278.24 0.00 0.00 0.00 0.00 0.00 0.00 151,879.17 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 77,295.76 42,374.50 9,023.99 128,694.25 23,184.92 0.00 0.00 0.00 0.00 0.00 0.00 77,295.76 0.00 0.00 42,374.50 9,023.99 128,694.25 23,184.92 Net Assets Beginning Net Assets Ending Net Assets 7,620,802.54 $7,643,987.46 $0.00 $0.00 7,620,802.54 $7,643,987.46 Clayton College & State University Annual Financial Report FY 2004 12 Clayton College & State University Foundation Statement of Activities Clayton College & State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $14,311.00 4,536.00 (1,949.00) (4,777.00) 503,216.00 515,337.00 $641,333.00 45,118.00 75,949.00 $58,757.00 (503,216.00) 259,184.00 58,757.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 36,101.00 120,900.00 77,273.00 159,384.00 159,746.00 553,404.00 (38,067.00) 0.00 259,184.00 0.00 58,757.00 Net Assets Beginning Net Assets Ending Net Assets 66,997.00 $28,930.00 1,349,660.00 $1,608,844.00 1,105,637.00 $1,164,394.00 Total $714,401.00 49,654.00 74,000.00 0.00 0.00 (4,777.00) 0.00 0.00 0.00 833,278.00 36,101.00 0.00 120,900.00 77,273.00 0.00 159,384.00 159,746.00 553,404.00 279,874.00 2,522,294.00 $2,802,168.00 Clayton College & State University Annual Financial Report FY 2004 13 Statement of Cash Flows CLAYTON COLLEGE & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2004 $11,425,164.52 9,618,782.59 2,037,520.82 (15,038,412.93) (23,493,848.02) (4,249,930.04) (2,077.35) 1,016.15 790,331.81 290,910.95 219,974.06 1,715,753.29 228,468.45 683,494.70 (15,772,851.00) 17,528,350.56 (338,455.05) 7,985.78 17,197,881.29 (1,042,934.17) (1,042,934.17) 4,262.24 4,262.24 386,358.36 1,382,583.73 $1,768,942.09 Clayton College & State University Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities June 30, 2004 ($18,291,788.38) 1,651,334.97 (375,903.42) 1,631.02 208,101.63 (804,635.69) 1,997,571.82 (161,886.61) 2,723.66 ($15,772,851.00) ** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS Change in fair value of investments recognized as a component of interest income $60,313.97 Clayton College & State University Annual Financial Report FY 2004 15 CLAYTON COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Clayton College & State University serves the state and national communities by providing its students with academic and technical instruction. The University's focus on advancing the students fundamental knowledge provides the students with the tools necessary to achieve success in their future careers. Clayton College & State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Clayton College & State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Clayton College & State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Clayton College & State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Clayton College & State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Clayton College & State University is reporting the activity for the Clayton College & State University Foundation, Inc., and the Walter and Emilie Spivey Foundation, Inc. See Note 15. Component Units, for foundation notes. Clayton College & State University Annual Financial Report FY 2004 16 Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Clayton College & State University Annual Financial Report FY 2004 17 Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Clayton College & State University when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Clayton College & State University. However, subsequent to the end of fiscal year 2004, GSFIC issued Clayton College & State University Annual Financial Report FY 2004 18 the official occupancy certificate for the University Center. The capital asset addition for this structure will be in fiscal year 2005. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Clayton College & State University had accrued liability for compensated absences in the amount of $1,372,401.38 as of 7-1-2003. For FY2004, $2,540,279.38 was earned in compensated absences and employees were paid $2,511,030.34, for a net increase of $29,249.04. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,401,650.42. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Clayton College & State University Annual Financial Report FY 2004 19 Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $59,201.54 12,919.38 $72,120.92 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net A ssets June 30, 2004 $720,382.76 2,327,393.55 238,445.75 373,550.72 $3,659,772.78 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Clayton College & State University Annual Financial Report FY 2004 20 Income Taxes Clayton College & State University, 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 University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Clayton College & State University Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Clayton College & State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Clayton College & State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Clayton College & State University Annual Financial Report FY 2004 22 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $1,176,877.83 $1,176,877.83 Bank Balances $5,401,836.73 0.00 $5,401,836.73 Risk C ategories 1 2 $0.00 $0.00 3 $0.00 $0.00 $0.00 $0.00 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. Clayton College & State University Annual Financial Report FY 2004 23 At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate B onds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: B oard of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 300,000.00 785,916.50 292,064.26 $1,377,980.76 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less Allowance for D oubtful A ccounts Net A ccounts Receivable $475,629.60 68,182.28 1,948,530.23 4,338,001.00 6,830,343.11 237,521.11 $6,592,822.00 Clayton College & State University Annual Financial Report FY 2004 24 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ook store Food Services Physical Plant O ther T o ta l June 30, 2004 $221,424.49 17,021.26 $238,445.75 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was approximately $7,000.00. Clayton College & State University Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $640,501.10 640,501.10 Additions $0.00 418,634.81 418,634.81 Reductions $0.00 0.00 Ending Balance 6/30/2004 $640,501.10 418,634.81 1,059,135.91 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 34,792,703.00 631,565.00 6,887,483.12 4,192,517.82 46,504,268.94 7,818.00 432,598.18 268,117.22 708,533.40 6,601.79 6,601.79 0.00 34,800,521.00 631,565.00 7,320,081.30 0.00 4,454,033.25 0.00 47,206,200.55 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 10,317,522.61 447,558.79 4,942,012.42 3,044,377.11 18,751,470.93 920,020.49 24,984.07 475,401.94 230,858.47 1,651,264.97 6,601.79 6,601.79 0.00 11,237,543.10 472,542.86 5,417,414.36 0.00 3,268,633.79 0.00 20,396,134.11 Total Capital Assets, Being Depreciated, Net 27,752,798.01 Capital Assets, net $28,393,299.11 (942,731.57) ($524,096.76) 0.00 26,810,066.44 $0.00 $27,869,202.35 Clayton College & State University Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Pre paid Tuition and Fe es Research O the r D e ferre d R e v e nue T o ta ls June 30, 2004 $1,186,701.44 1,444,143.84 $2,630,845.28 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 1,372,401.38 2,540,279.38 1,372,401.38 2,540,279.38 2,511,030.34 2,511,030.34 1,401,650.42 0.00 1,401,650.42 Total Long Term Obligations $1,372,401.38 $2,540,279.38 $2,511,030.34 $1,401,650.42 Current Portion $0.00 737,561.91 737,561.91 $737,561.91 Note 9. Lease Obligations CAPITAL LEASES Clayton College & State University did not have any capital leases during Fiscal Year 2004. OPERATING LEASES Clayton College & State University is not obligated by any noncancellable operating leases having remaining terms of more than one year. Clayton College & State University Annual Financial Report FY 2004 27 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Clayton College & State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Clayton College & State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Clayton College & State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 550,680.76 $ 558,389.77 $ 538,568.88 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Clayton College & State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Clayton College & State University Annual Financial Report FY 2004 28 Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Clayton College & State University and the covered employees made the required contributions of $297,896.69 (10.03%) and $148,502.76 (5%), respectively. Georgia Defined Contribution Plan Plan Description Clayton College & State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $51,590.02 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Clayton College & State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. Clayton College & State University Annual Financial Report FY 2004 29 The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Clayton College & State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Clayton College & State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Clayton College & State University (an organizational unit of the Board of Regents of the University 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, 2004. Clayton College & State University Annual Financial Report FY 2004 30 Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 77 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Clayton College & State University recognized as incurred $212,473.80 of expenditures, which was net of $67,482.50 of participant contributions. Clayton College & State University Annual Financial Report FY 2004 31 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $10,015,198.04 1,825,788.10 2,195,837.40 67,877.60 123,576.00 104,231.93 1,787,175.38 89,283.39 $0.00 $56,772.50 786,554.99 168,349.01 35,859.46 10,110.63 69,189.72 4,366.77 $33,093.87 2,824,178.03 549,039.38 29,205.51 31,901.94 1,588,536.50 452,082.67 $45,915.87 1,760,635.86 345,944.09 26,599.87 250.00 26,556.42 855,253.15 521.20 $0.00 3,426,204.56 1,175,585.37 75,105.62 58,710.74 2,800,569.72 97,381.31 Total Expenses $16,208,967.84 $0.00 $1,131,203.08 $5,508,037.90 $3,061,676.46 $7,633,557.32 Natural C lassification Plant O p e r a tio ns & Maintenance Func tional Classific ation F Y 2004 S c ho la r s hips Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowships Utilitie s Supplies and Others Services D e pre c ia tio n $ 0.00 1,279,027.28 315,963.69 (36,930.81) 615.50 728,659.07 329,305.52 897,355.98 $ 0.00 3,551,113.81 $ 101,853.99 1,086,914.44 239,006.53 36,930.81 88,194.21 574,990.23 15,348.59 612,766.33 110,343.65 $ 0.00 Total Expenses $ 3,513,996.23 $ 3,551,113.81 $ 2,866,348.78 $ 0.00 Total Expenses $ 10,252,834.27 12,989,303.26 4,989,725.47 0.00 323,457.77 4,249,930.04 975,519.32 8,042,796.32 1,651,334.97 $ 43,474,901.42 Clayton College & State University Annual Financial Report FY 2004 32 Note 15. Component Units Clayton College & State University Foundation, Inc. (foundation) is a legally separate, taxexempt component unit of Clayton College & State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The foundation board of directors is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $170,577 to the university for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Alumni Affair Office at the Harry Downs Continuing Education Building, Morrow, Georgia 30260. The Walter and Emilie Spivey Foundation, Inc. (foundation) is a legally separate, tax-exempt component unit of Clayton College & State University (university). The foundation provides music scholarships and sponsors programming in Spivey Hall, the university's world class music performance hall. The foundation Board of Directors is self-perpetuating and consists of friends of the university, and the university president. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31. Clayton College & State University Annual Financial Report FY 2004 33 Investments for Component Units: Clayton College & State University Foundation holds endowment investments in the amount of $1.9 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Walter and Emilie Spivey Foundation held investments in the amount of $7.4 million at June 30, 2004. The Walter and Emilie Spivey Foundation Board Members have established a spending plan whereby earnings may be used for music scholarships and Spivey Hall programming. Clayton College & State University Annual Financial Report FY 2004 34 COASTAL GEORGIA COMMUNITY COLLEGE Financial Report For the Year Ended June 30, 2004 Coastal Georgia Community College Brunswick, Georgia President Dr. Dorothy L. Lord Vice President for Business Affairs Mr. C. Tom Saunders COASTAL GEORGIA COMMUNITY COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 28 Note 12 Contingencies...................................................................................................... 29 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 COASTAL GEORGIA COMMUNITY COLLEGE Management's Discussion and Analysis Introduction Coastal Georgia Community College is one of the 34 institutions of the University System of Georgia. The College, located in Brunswick, Georgia, was founded in 1961 and has become known for its comprehensive community college mission. The College offers pre-baccalaureate degrees in a wide variety of subjects. Additionally, the College offers career programs. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 61 2,818 56 2,398 57 2,210 Overview of the Financial Statements and Financial Analysis Coastal Georgia Community College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Coastal Georgia Community College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is Coastal Georgia Community College Annual Financial Report FY 2004 1 restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $2,849,961.99 26,600,211.46 93,796.44 29,543,969.89 June 30, 2003 $2,353,501.56 9,807,332.68 2,655.00 12,163,489.24 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 1,517,344.89 152,749.71 1,670,094.60 1,109,441.94 175,123.41 1,284,565.35 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 26,600,211.46 71,594.30 41,372.09 1,160,697.44 $27,873,875.29 9,807,332.68 66,324.98 39,677.66 965,588.57 $10,878,923.89 The total assets of the institution increased by $17,380,480.65. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $16,792,878.78 of investment in plant, net of accumulated depreciation due to the addition of the Camden Center facility. The consumption of assets follows the institutional philosophy to use available resources to improve all areas of the institution to better serve the instruction and public service mission of the institution. The total liabilities for the year increased by $385,529.25. The primary cause for the increase was in current liabilities, primarily $230,894.82 in deferred revenue due to increased early enrollment for Fall Semester. The combination of the increase in total assets of $17,380,480.65 and the increase in total liabilities of $385,529.25 yields an increase in total net assets of $16,994,951.40. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $16,792,878.78. Coastal Georgia Community College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $9,769,291.17 June 30, 2003 $8,233,549.55 Operating Expenses Operating Loss 17,977,777.37 (8,208,486.20) 16,301,585.22 (8,068,035.67) Nonoperating Revenues and Expenses 7,793,294.70 7,736,899.03 Income (Loss) Before other revenues, expenses, gains or losses (415,191.50) (331,136.64) Other revenues, expenses, gains or losses 17,411,459.90 Increase in Net Assets 16,996,268.40 (331,136.64) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 10,878,923.89 (1,317.00) 10,877,606.89 10,478,179.01 731,881.52 11,210,060.53 Net Assets at End of Year $27,873,875.29 $10,878,923.89 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Coastal Georgia Community College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $2,342,904.66 5,595,944.06 327,353.18 1,393,967.55 109,121.72 9,769,291.17 7,769,759.01 16,571.94 6,963.75 7,793,294.70 17,411,459.90 17,411,459.90 $34,974,045.77 June 30, 2003 $2,144,412.02 4,455,897.63 317,226.39 1,175,236.56 140,776.95 8,233,549.55 7,733,442.00 2,500.00 957.03 7,736,899.03 0.00 $15,970,448.58 Coastal Georgia Community College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $8,128,462.59 190,117.38 794,586.23 1,236,537.64 2,413,331.95 1,408,251.66 1,817,943.13 1,349,456.68 639,090.11 17,977,777.37 0.00 $17,977,777.37 June 30, 2003 $7,393,893.21 184,278.72 949,151.79 1,157,313.11 2,392,341.07 2,005,274.01 1,132,419.42 1,086,923.12 (9.23) 16,301,585.22 0.00 $16,301,585.22 The increase in grants and contracts relates to additional Title IV funding due to increased enrollment, as well as, larger nongovernmental contracts for Adult Education. Revenues associated with the student tuition and auxiliary services increased by over 9% and 18% respectively due to increased enrollment. The compensation and employee benefits category increased by approximately $514,920.77. The increase in faculty and staff was required due to enrollment increases and the opening of the Camden Center facility. Utilities increased by approximately $87,888.49 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004 and the addition of the Camden Center facility. Under non-operating revenues (expenses) state appropriations increased by approximately $36,317.01. The decrease of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Coastal Georgia Community College. Due to enrollment, the College experienced a slight increase in state appropriations. We are hopeful that the economy is now on an upward trend. Coastal Georgia Community College Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Coastal Georgia Community College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 7 ,7 9 9 ,0 6 4 .1 5 ) 8 ,0 0 6 ,1 9 6 .6 9 (2 2 0 ,8 5 1 .5 4 ) (8 3 ,2 9 5 .6 9 ) (9 7 ,0 1 4 .6 9 ) 1 8 4 ,7 1 7 .1 6 $ 8 7 ,7 0 2 .4 7 June 30, 2003 ($ 7 ,3 8 5 ,7 9 0 .5 3 ) 7 ,7 1 8 ,9 6 9 .4 7 (3 4 7 ,5 4 3 .7 1 ) 9 5 7 .0 3 (1 3 ,4 0 7 .7 4 ) 1 9 8 ,1 2 4 .9 0 $ 1 8 4 ,7 1 7 .1 6 Capital Assets The College had a significant capital asset addition for facilities in fiscal year 2004. The addition of the Camden Center facility was completed. This facility opened for use in late spring of this year. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Coastal Georgia Community College has included the financial statements and notes for all required component units for FY2004. The Coastal Georgia Community College Foundation had endowment investments of $2.14 M as of December 31, 2003. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Coastal Georgia Community College Annual Financial Report FY 2004 6 Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a strong increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________, President Dr. Dorothy L. Lord, President Coastal Georgia Community College Coastal Georgia Community College Annual Financial Report FY 2004 7 Statement of Net Assets COASTAL GEORGIA COMMUNITY COLLEGE STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $85,047.47 Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance 317,119.07 Receivables - State General Appropriations Allotment Receivables - Other 2,221,818.40 I n v e nto r ie s 212,984.66 Other Assets 12,992.39 Total C urrent Assets 2,849,961.99 Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 2,655.00 90,259.44 882.00 26,600,211.46 26,694,007.90 29,543,969.89 511,526.82 635,046.25 (42,937.25) 52,106.90 361,602.17 1,517,344.89 152,749.71 152,749.71 1,670,094.60 26,600,211.46 71,594.30 41,372.09 1,160,697.44 $27,873,875.29 Coastal Georgia Community College Annual Financial Report FY 2004 8 Coastal Georgia Community College Foundation Balance Sheet C oastal Georgia C om m unity C ollege Foundation, Inc. Balance Sheet (FASB) Decem ber 31, 2003 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $275,554.00 3,137,295.00 133,915.00 3,546,764.00 0.00 735,617.00 1,127,044.00 1,684,103.00 $3,546,764.00 Coastal Georgia Community College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets C OASTAL GEORGIA C OMMUNITY C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $3,735,540.95 1,389,340.39 3,295.90 4,076,324.30 1,093,042.83 426,576.93 327,353.18 1,180,211.73 203,238.11 10,517.71 109,121.72 9,769,291.17 3,410,985.13 5,123,272.33 2,220,502.49 133.50 151,418.65 1,895,618.13 562,416.79 3,773,997.69 839,432.66 17,977,777.37 (8,208,486.20) Coastal Georgia Community College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 7,769,759.01 16,571.94 6,963.75 7,793,294.70 (415,191.50) 17,411,459.90 17,411,459.90 16,996,268.40 10,878,923.89 (1,317.00) 10,877,606.89 $27,873,875.29 Coastal Georgia Community College Annual Financial Report FY 2004 11 Coastal Georgia Community College Foundation Statement of Activities Coastal Georgia Community College Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended December 31, 2003 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $153,052.00 29,178.00 55,754.00 $478,987.00 51,480.00 3,966.00 $115,886.00 195,321.00 49,488.00 438,222.00 (438,222.00) 725,694.00 96,211.00 311,207.00 $747,925.00 80,658.00 255,041.00 0.00 0.00 49,488.00 0.00 0.00 0.00 1,133,112.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 273,113.00 73,203.00 36,688.00 3,100.00 96,085.00 41,520.00 523,709.00 201,985.00 13,600.00 13,600.00 82,611.00 (13,600.00) (13,600.00) 324,807.00 273,113.00 0.00 73,203.00 36,688.00 3,100.00 96,085.00 41,520.00 523,709.00 609,403.00 Net Assets Beginning Net Assets Ending Net Assets 533,632.00 $735,617.00 1,044,433.00 $1,127,044.00 1,359,296.00 $1,684,103.00 2,937,361.00 $3,546,764.00 Coastal Georgia Community College Annual Financial Report FY 2004 12 Statement of Cash Flows COASTAL GEORGIA C OMMUNITY COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPE RA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PIT A L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing A ctivities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $3,833,259.80 5,510,823.26 327,695.18 (6,751,488.83) (8,458,073.71) (3,284,958.52) (628.00) 3,463.46 1,191,458.79 210,773.11 10,517.71 (391,906.40) (7,799,064.15) 7,769,759.01 219,865.74 16,571.94 8,006,196.69 284,790.15 (505,641.69) (220,851.54) 1,694.43 (84,990.12) (83,295.69) (97,014.69) 184,717.16 $87,702.47 Coastal Georgia Community College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDED (USED) BY OPERA TING ACTIVITIES: Operating Income (loss) Adjustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other A ssets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($8,208,486.20) 839,432.66 (659,381.52) (16,752.09) (7,366.39) 46,000.88 230,894.82 (11,692.13) (11,714.18) ($7,799,064.15) C oastal G eorgia C ommunity does not have any Non-C ash Investing, Non-C apital Financing, and C api Related Financing Transactions Coastal Georgia Community College Annual Financial Report FY 2004 14 COASTAL GEORGIA COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Coastal Georgia Community College serves the state by providing students with academic instruction that advances fundamental knowledge to Georgia citizens. Reporting Entity Coastal Georgia Community College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Coastal Georgia Community College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Coastal Georgia Community College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Coastal Georgia Community College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Coastal Georgia Community College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Coastal Georgia Community College is reporting the activity for the Coastal Georgia Community College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the Coastal Georgia Community College Annual Financial Report FY 2004 15 State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Coastal Georgia Community College Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are valued at cost using the average-cost basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Coastal Georgia Community College when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $16,817,565.60 to Coastal Georgia Community College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Coastal Georgia Community College Annual Financial Report FY 2004 17 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Coastal Georgia Community College had accrued liability for compensated absences in the amount of $526,066.06 as of 7-1-2003. For FY2004, $386,836.28 was earned in compensated absences and employees were paid $398,550.46, for a net decrease of $11,714.18. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $514,351.88 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Coastal Georgia Community College Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A cti Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable $34,741.11 6,630.98 $41,372.09 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances R e se rv e for Inv e ntory O the r Unre stricte d Total Unrestricte d Ne t A sse ts June 30, 2004 $396,074.67 609,344.09 21,000.00 134,278.68 $1,160,697.44 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Coastal Georgia Community 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 College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Coastal Georgia Community College Annual Financial Report FY 2004 19 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Coastal Georgia Community College Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Coastal Georgia Community 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Coastal Georgia Community College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Coastal Georgia Community College Annual Financial Report FY 2004 21 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $87,702.47 Bank Balances $273,972.28 Risk C ategories 1 2 $100,000.00 $173,972.28 $87,702.47 $273,972.28 $100,000.00 $173,972.28 3 $0.00 $0.00 Coastal Georgia Community College Annual Financial Report FY 2004 22 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 90,259.44 $90,259.44 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Coastal Georgia Community College Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $692,430.65 121,859.59 317,119.07 1,407,528.16 2,538,937.47 Net A ccounts Receiv able $2,538,937.47 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $183,970.49 29,014.17 $212,984.66 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. Coastal Georgia Community College had no allowance for uncollectible loans at June 30, 2004. Coastal Georgia Community College Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,578,016.36 1,578,016.36 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 998,920.00 12,933,781.00 600,318.00 3,083,879.07 1,779,370.33 19,396,268.40 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 574,245.63 6,366,096.95 484,983.11 2,470,224.36 1,271,402.03 11,166,952.08 Total Capital Assets, Being Depreciated, Net 8,229,316.32 Capital Assets, net $9,807,332.68 Additions $0.00 0.00 16,688,953.04 845,186.63 98,171.77 17,632,311.44 36,671.10 442,802.90 17,154.14 237,572.52 105,232.00 839,432.66 16,792,878.78 $16,792,878.78 Reductions $0.00 0.00 Ending Balance 6/30/2004 $1,578,016.36 0.00 1,578,016.36 18,603.46 5,895.00 24,498.46 998,920.00 29,622,734.04 600,318.00 3,910,462.24 0.00 1,871,647.10 0.00 37,004,081.38 18,603.46 5,895.00 24,498.46 0.00 $0.00 610,916.73 6,808,899.85 502,137.25 2,689,193.42 0.00 1,370,739.03 0.00 11,981,886.28 25,022,195.10 $26,600,211.46 Coastal Georgia Community College Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $611,871.00 23,175.25 $635,046.25 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 526,066.06 526,066.06 386,836.28 386,836.28 398,550.46 398,550.46 514,351.88 0.00 514,351.88 Total Long Term Obligations $526,066.06 $386,836.28 $398,550.46 $514,351.88 Current Portion $0.00 361,602.17 361,602.17 $361,602.17 Note 9. Lease Obligations CAPITAL LEASES The College has no capital leases. OPERATING LEASES The College has no operating leases. Coastal Georgia Community College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Coastal Georgia Community College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Coastal Georgia Community College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Coastal Georgia Community College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $453,937.33 $430,091.25 $427,017.62 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Coastal Georgia Community College Annual Financial Report FY 2004 27 Funding Policy Coastal Georgia Community College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Coastal Georgia Community College and the covered employees made the required contributions of $247,313.01 (10.03%) and $123,286.83 (5%), respectively. Georgia Defined Contribution Plan Plan Description Coastal Georgia Community 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $41,768.63 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Coastal Georgia Community College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. Coastal Georgia Community College Annual Financial Report FY 2004 28 The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Coastal Georgia Community College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Coastal Georgia Community College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Coastal Georgia Community College (an organizational unit of the Board of Regents of the University 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, 2004. Coastal Georgia Community College Annual Financial Report FY 2004 29 Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 65 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Coastal Georgia Community College recognized as incurred $175,140.20 of expenditures, which was net of $63,749.12 of participant contributions. Coastal Georgia Community College Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $3,550,013.13 1,662,237.08 1,172,152.80 69,604.31 115,129.25 1,507,263.59 52,062.43 $0.00 ($139,028.00) 205,092.08 11,637.94 812.50 69,249.01 40,905.52 1,448.33 $0.00 489,058.83 114,052.50 13,941.28 4,841.57 67,460.05 105,232.00 $0.00 714,357.03 188,862.28 26,501.17 4,545.00 11,497.88 289,513.28 1,261.00 $0.00 1,318,208.75 506,182.20 133.50 35,050.08 17,437.78 533,143.86 3,175.78 Total Expenses $8,128,462.59 $0.00 $190,117.38 $794,586.23 $1,236,537.64 $2,413,331.95 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 579,809.85 184,324.52 (18,339.21) 1,454.66 340,443.08 293,892.55 26,666.21 $ 0.00 1,817,943.13 $ 0.00 154,508.71 43,290.25 18,339.21 4,054.65 73,130.00 3,818.22 1,041,818.84 10,496.80 $ 0.00 639,090.11 Total Expenses $ 1,408,251.66 $ 1,817,943.13 $ 1,349,456.68 $ 639,090.11 Total Expenses $ 3,410,985.13 5,123,272.33 2,220,502.49 133.50 151,418.65 1,895,618.13 562,416.79 3,773,997.69 839,432.66 $ 17,977,777.37 Coastal Georgia Community College Annual Financial Report FY 2004 31 Note 15. Component Units Component Unit Notes (example 1) Coastal Georgia Community College Foundation (foundation) is a legally separate, tax-exempt component unit of Coastal Georgia Community College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the college in support of its programs. The 43-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $674,312 to the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Business Affairs office at 3700 Altama Avenue, Brunswick, GA 31520. Investments for Component Units: Coastal Georgia Community College Foundation holds endowment investments in the amount of $2.14 million. The corpus of the endowment is nonexpendable, but the earnings on the investment are expended as restricted by the donors. Approximately 80% of endowment funds generate earnings for scholarships while 20% generate unrestricted earnings. Endowment fund investments are currently managed by Trusco Capital Management via the Total Return Fund. Long Term Liabilities for Component Units: Coastal Georgia Community College Foundation does not have any Long Term Liabilities. Coastal Georgia Community College Annual Financial Report FY 2004 32 COLUMBUS STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Columbus State University Columbus, Georgia President Frank D. Brown Vice President for Business & Finance Charles D. Pattillo COLUMBUS STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Columbus State University Foundations Balance Sheet ........................................ 9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Columbus State University Foundation Statement of Activities ..............................12 Columbus State University Alumni Association Statement of Activities ...................13 Columbus State University Foundation Properties, Inc. Statement of Activities ............14 Columbus State University Athletic Fund, Inc. Statement of Activities .....................15 Statement of Cash Flows ................................................................................................... 16 Note 1 Summary of Significant Accounting Policies ...................................................... 18 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 24 Note 3 Accounts Receivable............................................................................................. 27 Note 4 Inventories............................................................................................................. 27 Note 5 Notes/Loans Receivable........................................................................................ 27 Note 6 Capital Assets........................................................................................................ 28 Note 7 Deferred Revenue.................................................................................................. 29 Note 8 Long-Term Liabilities ........................................................................................... 29 Note 9 Lease Obligations.................................................................................................. 30 Note 10 Retirement Plans ................................................................................................. 31 Note 11 Risk Management................................................................................................ 32 Note 12 Contingencies...................................................................................................... 33 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 34 Note 14 Natural Classifications With Functional Classifications..................................... 35 Note 15 Component Units ........................................................................ 36 COLUMBUS STATE UNIVERSITY Management's Discussion and Analysis Introduction Columbus State University is one of the 34 institutions of the University System of Georgia. The University, located in Columbus, Georgia, was founded in 1958 and has become known for its state-of-the-art technology and technology-related programs. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 6,900 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 224 6,937 218 6,250 219 5,552 Overview of the Financial Statements and Financial Analysis Columbus State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Columbus State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Columbus State University Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $16,793,255.95 35,943,213.34 3,913,410.47 56,649,879.76 June 30, 2003 $17,963,591.39 38,005,684.39 1,011,299.67 56,980,575.45 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 10,548,763.95 920,875.55 11,469,639.50 10,545,525.98 1,040,565.93 11,586,091.91 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 35,943,213.34 1,533,796.46 2,532,690.93 5,170,539.53 $45,180,240.26 38,009,397.53 1,650,830.49 2,220,247.54 3,514,007.98 $45,394,483.54 The total assets of the institution decreased by ($330,695.69). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a combination of a decrease in capital assets and an increase in investments. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($116,452.41). The primary cause for the decrease was in non-current liabilities, primarily ($116,480.09) in compensated absences. The combination of the decrease in total assets of ($330,695.69) and the decrease in total liabilities of ($116,452.41) yields a decrease in total net assets of ($214,243.28). The decrease in total net assets is primarily in the category of Invested in Capital Assets, net of debt and offset by an increase in unrestricted net assets. Columbus State University Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $27,619,399.99 June 30, 2003 $39,791,765.54 Operating Expenses Operating Loss 55,216,876.94 (27,597,476.95) 67,253,472.09 (27,461,706.55) Nonoperating Revenues and Expenses 29,169,182.74 26,538,275.65 Income (Loss) Before other revenues, expenses, gains or losses 1,571,705.79 (923,430.90) Other revenues, expenses, gains or losses Increase in Net Assets 1,571,705.79 (923,430.90) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 45,394,483.54 (1,785,949.07) 43,608,534.47 44,753,898.40 1,564,016.04 46,317,914.44 Net Assets at End of Year $45,180,240.26 $45,394,483.54 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a slight 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: Columbus State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $12,840,656.78 8,716,043.49 1,255,363.44 4,581,049.77 226,286.51 27,619,399.99 26,373,080.69 1,574,633.22 860,050.97 467,993.33 (105,731.14) 29,170,027.07 0.00 $56,789,427.06 June 30, 2003 $7,581,780.08 26,521,346.69 1,364,225.28 4,087,106.34 237,307.15 39,791,765.54 26,393,296.85 149,518.09 (4,539.29) 26,538,275.65 0.00 $66,330,041.19 Columbus State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $23,784,544.59 5,858,419.96 3,631,414.53 7,357,192.94 6,206,108.32 4,187,588.80 3,889,934.13 301,673.67 55,216,876.94 844.33 $55,217,721.27 June 30, 2003 $23,417,958.63 4,926,257.76 3,311,506.26 6,782,107.03 5,701,845.33 17,138,634.26 3,281,893.78 2,693,269.04 67,253,472.09 $67,253,472.09 Revenues associated with the residential life, net of sponsored and unsponsored scholarships, category increased approximately $100,707.65 during the year. This increase reflects a moderate increase in fees per semester. The compensation and employee benefits category increased by approximately $762,062.88. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities decreased by approximately ($33,581.69) during the past year. The decrease was primarily associated with a decrease in natural gas costs that were experienced in the winter of fiscal year 2004. For FY2004, Federal Direct Student Loans were reclassified from a sponsored account to an agency account. This reclassification resulted in a drastic reduction in Federal Grants and Contract Revenue and in the associated expenses for scholarships and fellowships. In FY2003, $16,617,543 was disbursed in Federal Direct Student Loans; $18,434,391 was disbursed in FY2004. Under non-operating revenues (expenses) state appropriations decreased by approximately ($20,216.16). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Columbus State University. We are hopeful that the economy is now on an upward trend. Columbus State University Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Columbus State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($27,450,636.99) 28,729,317.37 (417,208.13) (1,931,171.56) (1,069,699.31) 10,063,514.90 $8,993,815.59 June 30, 2003 ($22,614,345.28) 26,147,069.67 (785,963.15) 14,045.74 2,760,806.98 7,302,707.92 $10,063,514.90 Capital Assets The University had no significant capital asset additions for facilities in fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Columbus State University has included the financial statements and notes for all required component units for FY2004. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of Columbus State University Annual Financial Report FY 2004 6 business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Frank D. Brown, President Columbus State University Columbus State University Annual Financial Report FY 2004 7 Statement of Net Assets COLUMBUS STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $8,594,946.25 492,508.77 7,378,626.27 327,174.66 16,793,255.95 398,869.34 2,717,569.70 796,971.43 35,943,213.34 39,856,623.81 56,649,879.76 217,928.46 155,650.00 9,224,741.18 41,877.07 349,307.06 559,260.18 10,548,763.95 920,875.55 920,875.55 11,469,639.50 35,943,213.34 1,533,796.46 2,532,690.93 5,170,539.53 $45,180,240.26 Columbus State University Annual Financial Report FY 2004 8 Columbus State University Foundations Balance Sheet Columbus State University Foundations Balance Sheet (FASB) June 30, 2004 CSU Foundation CSU Alumni Foundation Athletic Assoication Properties, Inc. Foundation Assets Cash and Cash Equivalents Accounts Receivable Notes and Mortgages Receivable Endowment Investments Pledges Receivable, net Investments in Real Estate Inventories Capital Assets, net Other Assets Total Assets $6,159,303.00 3,907,168.00 16,850.00 24,029,163.00 37,054,881.00 128,181.00 71,295,546.00 $162,744.00 49,441.00 49,799.00 3,158.00 4,519.00 150.00 269,811.00 $924,062.00 198,351.00 $167,259.00 4,000.00 56,157,814.00 527,248.00 57,807,475.00 1,432,603.00 1,600.00 3,854.00 738.00 20,770.00 1,630,824.00 Liabilities Accounts Payable and Accrued Liabilities Deferred Revenue Deposits Long-Term Debt Liabilities under Split-Interest Agreements Other Liabilities Total Liabilities 45,210.00 25,282.00 1,204,161.00 1,274,653.00 14,309.00 4,940.00 19,249.00 5,148,474.00 28,578.00 42,638.00 16,589,973.00 15,330,000.00 37,139,663.00 47,780.00 9,384.00 57,164.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 3,434,840.00 45,231,169.00 21,354,884.00 $70,020,893.00 171,575.00 78,987.00 $250,562.00 20,667,812.00 $20,667,812.00 (51,860.00) 404,388.00 1,221,132.00 $1,573,660.00 Columbus State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets C OLUMBUS STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $16,209,469.74 3,368,812.96 7,525,281.16 45,340.03 1,145,422.30 1,255,363.44 1,880,325.65 208,970.93 203,285.74 273,752.66 350,470.22 1,599,721.09 64,523.48 226,286.51 27,619,399.99 14,413,976.20 14,921,595.88 7,510,410.80 14,487.00 323,543.82 4,790,733.44 2,119,769.16 10,570,041.76 552,318.88 55,216,876.94 (27,597,476.95) Columbus State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 26,373,080.69 28,356.36 284,885.00 1,261,391.86 860,050.97 467,993.33 (844.33) (105,731.14) 29,169,182.74 1,571,705.79 0.00 1,571,705.79 45,394,483.54 (1,785,949.07) 43,608,534.47 $45,180,240.26 Columbus State University Annual Financial Report FY 2004 11 Columbus State University Foundation Statement of Activities Columbus State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $663,430.00 32,508.00 225,083.00 499.00 7,966,548.00 8,888,068.00 $7,114,246.00 565,794.00 $4,510,276.00 4,710.00 $12,287,952.00 603,012.00 833,857.00 333,189.00 142,229.00 13,711.00 1,201,169.00 0.00 0.00 347,399.00 (9,874,832.00) (1,027,746.00) 1,908,284.00 6,579,210.00 0.00 0.00 0.00 14,439,532.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 7,974,766.00 33,260.00 753,748.00 300,079.00 9,061,853.00 (173,785.00) 0.00 (1,027,746.00) 0.00 6,579,210.00 0.00 0.00 0.00 7,974,766.00 33,260.00 753,748.00 300,079.00 9,061,853.00 5,377,679.00 Net Assets Beginning Net Assets Ending Net Assets 3,332,080.00 $3,158,295.00 46,535,460.00 $45,507,714.00 14,775,674.00 $21,354,884.00 64,643,214.00 $70,020,893.00 Columbus State University Annual Financial Report FY 2004 12 Columbus State University Alumni Association Statement of Activities Columbus State University Alumni Association Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $130,622.00 1,349.00 47,797.00 179,768.00 $0.00 $0.00 5,664.00 0.00 5,664.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fu n d r a is in g Total Expenses C hange in Net Assets 7,750.00 131,527.00 139,277.00 40,491.00 0.00 0.00 65.00 65.00 5,599.00 Net Assets Beginning Net Assets Ending Net Assets 131,085.00 $171,576.00 $0.00 73,387.00 $78,986.00 Total $130,622.00 7,013.00 0.00 0.00 0.00 47,797.00 0.00 0.00 0.00 185,432.00 0.00 0.00 0.00 0.00 0.00 7,750.00 131,592.00 139,342.00 46,090.00 204,472.00 $250,562.00 Columbus State University Annual Financial Report FY 2004 13 Columbus State University Foundation Properties, Inc. Statement of Activities Foundation Properties, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $6,135,344.00 554,428.00 $411,685.00 23,809.00 3,115,279.00 (167,228.00) 2,993,726.00 (2,993,726.00) 12,631,549.00 (2,558,232.00) $0.00 0.00 $6,547,029.00 578,237.00 0.00 0.00 3,115,279.00 0.00 (167,228.00) 0.00 0.00 0.00 10,073,317.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 3,298,995.00 5,353.00 3,298,995.00 9,332,554.00 5,353.00 (2,563,585.00) 0.00 0.00 0.00 0.00 0.00 0.00 3,304,348.00 0.00 0.00 3,304,348.00 6,768,969.00 Net Assets Beginning Net Assets Ending Net Assets 11,335,258.00 $20,667,812.00 2,563,585.00 $0.00 $0.00 13,898,843.00 $20,667,812.00 Columbus State University Annual Financial Report FY 2004 14 Columbus State University Athletic Fund, Inc. Statement of Activities Columbus State University Athletic Fund, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $48,851.00 194.00 $192,686.00 359,111.00 126,803.00 247,356.00 82,386.00 (247,356.00) 423,204.00 386,827.00 $4,000.00 16,879.00 20,879.00 $245,537.00 376,184.00 0.00 0.00 0.00 209,189.00 0.00 0.00 0.00 830,910.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 154,430.00 125,663.00 138,729.00 418,822.00 4,382.00 870.00 870.00 385,957.00 0.00 20,879.00 0.00 0.00 0.00 0.00 154,430.00 125,663.00 139,599.00 419,692.00 411,218.00 Net Assets Beginning Net Assets Ending Net Assets (56,242.00) ($51,860.00) 17,561.00 $403,518.00 1,201,123.00 $1,222,002.00 1,162,442.00 $1,573,660.00 Columbus State University Annual Financial Report FY 2004 15 Statement of Cash Flows COLUMBUS STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2004 $17,060,279.28 8,355,912.91 1,288,699.59 (20,567,312.94) (29,306,914.00) (8,159,546.40) (968,754.00) 910,707.83 1,815,300.80 208,970.93 203,285.74 273,624.80 350,150.57 1,598,413.73 64,523.48 (577,979.31) (27,450,636.99) 26,373,080.69 (78,447.51) 2,434,684.19 28,729,317.37 (402,695.71) (13,668.09) (844.33) (417,208.13) (2,188,592.20) 268,448.54 (11,027.90) (1,931,171.56) (1,069,699.31) 10,063,514.90 $8,993,815.59 Columbus State University Annual Financial Report FY 2004 16 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Incom e (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($27,597,476.95) 552,318.88 (176,443.49) (47,787.19) (69,618.86) (98,928.32) (24,588.66) 11,887.60 ($27,450,636.99) C olumbus State University had no Non-C ash Investing, Non-C apital Fiancing, or C apital and Related Financing Transactions Columbus State University Annual Financial Report FY 2004 17 COLUMBUS STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Columbus State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Columbus State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Columbus State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Columbus State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Columbus State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Columbus State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Columbus State University is reporting the activity for the Columbus State University Foundation Properties, the Columbus State University Foundation, Columbus State University Alumni Association and the Columbus State University Athletic Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Columbus State University Annual Financial Report FY 2004 18 Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Columbus State University Annual Financial Report FY 2004 19 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories The University does not carry any consumable supplies or resale inventories. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Columbus State University when complete. For the year ended June 30, 2004, GSFIC did not transfer any capital additions to Columbus State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Columbus State University Annual Financial Report FY 2004 20 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Columbus State University had accrued liability for compensated absences in the amount of $1,468,248.13 as of 7-1-2003. For FY2004, $2,073,911.69 was earned in compensated absences and employees were paid $2,062,024.09, for a net increase of $11,887.60. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,480,135.73. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Columbus State University Annual Financial Report FY 2004 21 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $948,046.56 585,892.45 820,962.19 177,789.73 $2,532,690.93 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances R e se rve for Inv e ntory O the r Unre stricte d Total Unre stricte d Ne t A sse ts June 30, 2004 $980.00 586,775.29 214,959.68 4,367,824.56 $5,170,539.53 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Columbus State University, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Columbus State University Annual Financial Report FY 2004 22 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Columbus State University Annual Financial Report FY 2004 23 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Columbus State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Columbus State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Columbus State University Annual Financial Report FY 2004 24 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits Carrying Amount $8,993,815.59 Bank Balances $11,243,061.31 Risk Categories 1 2 $100,000.00 $11,143,061.31 $8,993,815.59 $11,243,061.31 $100,000.00 $11,143,061.31 3 $0.00 $0.00 Columbus State University Annual Financial Report FY 2004 25 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents Risk C ategories 1 2 C om m on S tock C orporate Bonds S ecurities and C orporate O bligations $318,517.13 5,000.00 $0.00 11,382.80 386.55 3 $0.00 C arrying Amount $318,517.13 16,382.80 386.55 T o ta ls $323,517.13 $11,769.35 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $335,286.48 2,382,283.22 $2,717,569.70 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Columbus State University Annual Financial Report FY 2004 26 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $347,550.71 602,372.28 492,508.77 6,413,079.96 7,855,511.72 (15,623.32) $7,871,135.04 Note 4. Inventories Columbus State University had no inventories as of June 30, 2004. Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. At June 30, 2004, no provision has been made for uncollectible loans. Columbus State University Annual Financial Report FY 2004 27 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,968,906.55 1,968,906.55 Additions $0.00 0.00 Reductions $111,066.25 111,066.25 Ending Balance 6/30/2004 $1,857,840.30 0.00 1,857,840.30 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 1,891,596.00 49,400,628.44 2,584,312.00 6,536,648.33 6,745,669.61 67,158,854.38 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 1,065,390.72 19,093,830.83 1,600,023.91 4,439,938.60 6,697,393.22 32,896,577.28 Total Capital Assets, Being Depreciated, Net 34,262,277.10 Capital Assets, net $36,231,183.65 78,450.25 264,338.53 138,357.18 481,145.96 194,173.58 194,173.58 1,891,596.00 49,479,078.69 2,584,312.00 6,606,813.28 0.00 6,884,026.79 0.00 67,445,826.76 100,378.33 1,515,728.42 160,290.72 711,469.04 274,849.78 2,762,716.29 106,539.07 1,909,383.09 160,031.22 122,886.47 2,298,839.85 1,059,229.98 18,700,176.16 1,600,283.41 5,028,521.17 0.00 6,972,243.00 0.00 33,360,453.72 (2,281,570.33) (2,104,666.27) 34,085,373.04 ($2,281,570.33) ($1,993,600.02) $35,943,213.34 Columbus State University Annual Financial Report FY 2004 28 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $8,879,819.49 344,921.69 $9,224,741.18 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $18,072.76 Additions $0.00 Reductions Ending Balance June 30, 2004 $13,668.09 $4,404.67 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 1,468,248.13 2,073,911.69 1,468,248.13 2,073,911.69 2,062,024.09 2,062,024.09 1,480,135.73 0.00 1,480,135.73 $1,486,320.89 $2,073,911.69 $2,075,692.18 $1,484,540.40 Current Portion $4,404.67 559,260.18 559,260.18 $563,664.85 Columbus State University Annual Financial Report FY 2004 29 Note 9. Lease Obligations The capital lease is payable in monthly installments and has a term expiring in 2004. Expenditures for fiscal year 2004 were $14,545.92 of which $844.33 represented interest. The principal paid on the capital was $13,668.09 for the fiscal year ended June 30, 2004. The interest rate is 6.58 percent. The carrying value of the capital lease at June 30, 2004 is $32,398. The capital lease provides for a renewal and/ or purchase option. Generally purchase options at bargain price of one dollar are exercisable at the expiration of the least terms Future commitments for the capital lease were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $4,465.36 4,465.36 60.69 0.00 $4,404.67 $0.00 Columbus State University Annual Financial Report FY 2004 30 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Columbus State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Columbus State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Columbus State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,763,478.86 $1,811,127.48 $1,800,031.65 Employees' Retirement System of Georgia Columbus State University does not participate in the Employees' Retirement System of Georgia. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Columbus State University Annual Financial Report FY 2004 31 Funding Policy Columbus State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Columbus State University and the covered employees made the required contributions of $661,813.01 (10.03%) and $329,918.26 (5%), respectively. Georgia Defined Contribution Plan Plan Description Columbus State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $120,227.09 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Columbus State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Columbus State University Annual Financial Report FY 2004 32 Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Columbus State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Columbus State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Columbus State University (an organizational unit of the Board of Regents of the University 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, 2004. Columbus State University Annual Financial Report FY 2004 33 Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 192 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Columbus State University recognized as incurred $966,536.47 of expenditures, which was net of $337,063.36 of participant contributions. Columbus State University Annual Financial Report FY 2004 34 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $14,325,252.82 3,333,403.75 3,727,039.84 159,033.77 267,094.90 1,827,810.63 144,908.88 $0.00 $0.00 $65,897.12 3,109,479.90 745,064.64 62,858.32 109,105.74 1,265,222.32 500,791.92 $289.80 2,272,772.43 531,126.22 34,075.13 73,269.28 716,210.66 3,671.01 $22,536.46 3,840,973.85 1,871,091.73 14,487.00 18,250.46 230,719.70 1,253,728.79 105,404.95 Total Expenses $23,784,544.59 $0.00 $0.00 $5,858,419.96 $3,631,414.53 $7,357,192.94 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e p r e c ia tio n $ 0.00 1,797,989.50 499,359.60 7,656.54 1,390,657.31 3,015,556.92 (505,111.55) $ 0.00 4,187,588.80 $ 0.00 566,976.45 136,728.77 41,669.60 603,144.64 48,922.23 2,491,512.44 980.00 $ 0.00 301,673.67 Total Expenses $ 6,206,108.32 $ 4,187,588.80 $ 3,889,934.13 $ 301,673.67 Total Expenses $ 14,413,976.20 14,921,595.88 7,510,410.80 14,487.00 323,543.82 4,790,733.44 2,119,769.16 10,570,041.76 552,318.88 $ 55,216,876.94 Columbus State University Annual Financial Report FY 2004 35 Note 15. Component Units Columbus State University Foundation (foundation) is a legally separate, tax-exempt component unit of Columbus State University (university). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $2,004,605 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the CSU Foundation at 4225 University Avenue, Columbus, GA 31907. Component Unit Notes Foundation Properties, Inc. (foundation) is a legally separate, tax-exempt component unit of Columbus State University (university). The foundation constructs auxiliary buildings and facilities for use by the university and then leases the completed buildings to the Board of Regents of the University System of Georgia. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Columbus State University Annual Financial Report FY 2004 36 Complete financial statements for the foundation can be obtained from Foundation Properties, Inc. at 4225 University Avenue, Columbus, GA 31907. Component Unit Notes Columbus State University Athletic Fund, Inc (foundation) is a legally separate, tax-exempt component unit of Columbus State University (university). The foundation supports athletic endeavors of the institution. These endeavors include but not limited to student services and student financial aid. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $257,975 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the CSU Athletic Fund, Inc. at 4225 University Avenue, Columbus, GA 31907. Component Unit Notes Columbus State University Alumni Association, Inc (foundation) is a legally separate, taxexempt component unit of Columbus State University (university). The foundation seeks to promote the mission of the University through mutually beneficial relations between the University and its alumni. The board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Columbus State University Annual Financial Report FY 2004 37 foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from Columbus State University Alumni Association, Inc. at 4225 University Avenue, Columbus, GA 31907. Investments for Component Units: Columbus State University Foundation holds endowment investments in the amount of $24 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Columbus State University Foundation, in conjunction with the donors, has established a spending plan to annually distribute 5% of a trailing three-year average of the endowment's total asset value, with the understanding that this spending rate plus inflation will not normally exceed total return from investments. This trailing three-year average shall be set back six months from the time of current-year calculations for the purposes of spending, with the three year average being that of either calendar or fiscal-year periods according to the requirements of the budgetary process. Columbus State University Athletic Fund holds endowment investments in the amount of $1.4 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Columbus State University Annual Financial Report FY 2004 38 Long Term Liabilities for Component Units: Student Housing Bonds are issued by Foundation Properties, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Columbus State University. Educational Programming Bonds are issued by the Foundation Properties, Inc to finance the purchase of the One Arsenal to be incorporated with the future development of the Uptown campus. Commercial Bonds are issued by the Foundation Properties, Inc to finance the purchase of the Rankin and Oglethorpe buildings in Uptown Columbus. A portion of this property is considered commercial property the remainder of which is utilized for student housing. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Foundation Properties Student Housing Educational Programming Commercial Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year $13,764,970.00 1,982,460.00 $5,556,874.00 $0.00 $7,260,000.00 $372,500.00 142,500.00 54,580.00 $13,392,470.00 9,099,960.00 5,502,294.00 $408,084.00 165,083.00 81,678.00 Total Long Term Debt $21,304,304.00 $7,260,000.00 $569,580.00 $27,994,724.00 $654,845.00 Columbus State University Annual Financial Report FY 2004 39 Debt Service Obligations for Component Units A nnual debt s ervice requirements to maturity for Student Hous ing (Foundation Properties , Inc.) revenue bonds payable are as follows : Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Prin c ip a l $408,083.00 3,696,884.00 368,750.00 4,868,753.00 300,000.00 3,750,000.00 Interes t Total $227,943.00 188,496.00 158,630.00 152,923.00 55,425.00 177,547.00 $636,026.00 3,885,380.00 527,380.00 5,021,676.00 355,425.00 3,927,547.00 0.00 0.00 0.00 0.00 0.00 0.00 $13,392,470.00 $960,964.00 $14,353,434.00 A nnual debt s ervice requirements to maturity for Educational Programming(Foundation Properties , Inc.) revenue bonds payable are as follows : Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Bonds Payable Prin c ip a l Interes t Total $165,083.00 7,079,885.00 27,500.00 1,827,492.00 $711,379.00 356,298.00 37,842.00 37,281.00 $876,462.00 7,436,183.00 65,342.00 1,864,773.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $9,099,960.00 $1,142,800.00 $10,242,760.00 Columbus State University Annual Financial Report FY 2004 40 Debt Service Obligations for Component Units, Cont. Debt S ervice Obligations A nnual debt s ervice requirements to maturity for Commercial (Foundation Properties , Inc.) revenue bonds payable are as follows : Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Prin c ip a l $81,679.00 528,681.00 323,179.00 4,568,755.00 Interes t Total $116,147.00 109,746.00 99,650.00 93,203.00 $197,826.00 638,427.00 422,829.00 4,661,958.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $5,502,294.00 $418,746.00 $5,921,040.00 Columbus State University Annual Financial Report FY 2004 41 DALTON STATE COLLEGE Financial Report For the Year Ended June 30, 2004 Dalton State College Dalton, Georgia President Dr. James A. Burran Vice President for Fiscal Affairs Mr. Scott A. Bailey Dalton State College ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ........................................................................................................7 Dalton State College Foundation Balance Sheet.........................................................8 Statement of Revenues, Expenses, and Changes in Net Assets ................................ 9 Dalton State College Foundation Statement of Activities ....................................11 Statement of Cash Flows ....................................................................................................12 Note 1 Summary of Significant Accounting Policies .......................................................14 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments..............................20 Note 3 Accounts Receivable..............................................................................................22 Note 4 Inventories..............................................................................................................22 Note 5 Notes/Loans Receivable.........................................................................................23 Note 6 Capital Assets.........................................................................................................24 Note 7 Deferred Revenue...................................................................................................25 Note 8 Long-Term Liabilities ............................................................................................25 Note 9 Lease Obligations...................................................................................................26 Note 10 Retirement Plans ..................................................................................................27 Note 11 Risk Management.................................................................................................28 Note 12 Contingencies.......................................................................................................29 Note 13 Post-Employment Benefits Other Than Pension Benefits ...................................29 Note 14 Natural Classifications With Functional Classifications......................................31 Note 15 Component Units....................................................................... 32 Dalton State College Management's Discussion and Analysis Introduction Dalton State College is one of the 34 institutions of the University System of Georgia. The College, located in Dalton, Georgia, was founded in 1967 and has become known for its technical, transfer, health-related, and business programs. The College offers technical, associate, and targeted baccalaureate degrees. This wide range of educational opportunities attracts a highly qualified faculty and a growing student body. Student enrollment increased from fall '03 to fall '04 by 1.6 percent. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 115 4,201 113 4,135 103 3,647 Overview of the Financial Statements and Financial Analysis Dalton State College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the college's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Dalton State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major Dalton State College Annual Financial Report FY 2004 1 categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $6,367,733.81 21,314,470.03 27,682,203.84 June 30, 2003 $4,779,108.01 21,145,225.49 25,924,333.50 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,187,391.74 428,111.85 2,615,503.59 2,172,748.43 151,722.14 2,324,470.57 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 21,314,470.03 331,046.96 3,421,183.26 $25,066,700.25 21,145,225.49 45,932.16 2,408,705.28 $23,599,862.93 The total assets of the institution increased by $1,757,870.34. A review of the Statement of Net Assets will reveal that the increase was primarily due to FY 2004 routine operations. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $291,033.02 with an increase of $276,389.71 in the Non-current Liabilities category. The combination of the increase in total assets of $1,757,870.34 and the increase in total liabilities of $291,033.02 yields an increase in total net assets of $1,466,837.32. This increase is primarily in the category of unrestricted net assets and is due to the increase in accounts receivable. Dalton State College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $12,416,588.32 June 30, 2003 $11,110,234.97 Operating Expenses Operating Loss 21,781,154.82 (9,364,566.50) 26,013,026.96 (14,902,791.99) Nonoperating Revenues and Expenses 10,798,733.15 10,524,032.44 Income (Loss) Before other revenues, expenses, gains or losses 1,434,166.65 (4,378,759.55) Other revenues, expenses, gains or losses Increase in Net Assets 1,434,166.65 (4,378,759.55) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 23,599,862.93 32,670.67 23,632,533.60 23,707,686.36 4,270,936.12 27,978,622.48 Net Assets at End of Year $25,066,700.25 $23,599,862.93 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Dalton State College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $3,767,741.70 6,661,590.03 350,869.48 1,594,341.39 42,045.72 12,416,588.32 10,706,668.79 26,038.34 66,026.02 10,798,733.15 0.00 $23,215,321.47 June 30, 2003 $2,733,446.38 6,435,308.87 349,550.67 1,529,237.13 62,691.92 11,110,234.97 10,402,521.28 41,636.16 79,875.00 10,524,032.44 0.00 $21,634,267.41 Dalton State College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $11,190,139.11 1,453.48 1,437,821.43 1,390,785.19 2,205,652.39 1,539,727.11 1,867,781.22 1,443,788.12 704,006.77 21,781,154.82 0.00 $21,781,154.82 June 30, 2003 $11,842,546.59 1,680.25 1,642,464.42 1,509,163.53 2,773,981.72 3,627,065.05 3,222,226.14 1,393,899.26 26,013,026.96 0.00 $26,013,026.96 The decrease in expenses from June 30, 2003 and June 30, 2004 of ($4,231,872.14) is attributed largely to depreciation, scholarships, fellowships, and supplier and other services. The depreciation difference between the two years was ($963,742.09) and the scholarship and fellowship difference was ($1,299,207.17). Supplier and other services had a difference of ($1,714,686.81) which was due to items being encumbered instead of expended at the end of the fiscal year. Statement of Cash Flows The final statement presented by the Dalton State College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Dalton State College Annual Financial Report FY 2004 5 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 9 ,6 3 3 ,2 5 6 .1 0 ) 1 0 ,7 8 7 ,4 4 9 .8 5 (5 7 6 ,9 3 7 .9 6 ) 2 6 ,0 3 8 .3 4 6 0 3 ,2 9 4 .1 3 2 ,6 0 9 ,0 2 4 .2 8 $ 3 ,2 1 2 ,3 1 8 .4 1 June 30, 2003 ($ 9 ,8 5 0 ,0 7 2 .2 2 ) 9 ,9 6 7 ,1 8 7 .7 3 (3 6 0 ,4 2 9 .5 3 ) 4 1 ,6 3 6 .1 6 (2 0 1 ,6 7 7 .8 6 ) 2 ,8 1 0 ,7 0 2 .1 4 $ 2 ,6 0 9 ,0 2 4 .2 8 Capital Assets The College had no significant capital asset additions for facilities in fiscal year 2004. Component Units In compliance with GASB Statement No. 39, Dalton State College has included the financial statements and notes for all required component units for FY2004. The Dalton State College Foundation had endowment investments of $8.8 M as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _____________________________ James A. Burran, President Dalton State College _____________________________ Date ________________________________ Scott A. Bailey, VP for Fiscal Affairs Dalton State College ________________________________ Date Dalton State College Annual Financial Report FY 2004 6 Statement of Net Assets DALTON STATE COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Un r e s tr ic te d TOTAL NET ASSETS June 30, 2004 $3,212,318.41 729,454.54 2,282,828.03 244,266.84 (101,134.01) 6,367,733.81 21,314,470.03 21,314,470.03 27,682,203.84 559,904.05 1,254,546.94 69,858.68 303,082.07 2,187,391.74 428,111.85 428,111.85 2,615,503.59 21,314,470.03 331,046.96 3,421,183.26 $25,066,700.25 Dalton State College Annual Financial Report FY 2004 7 Dalton State College Foundation Balance Sheet Dalton State C ollege Foundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net-current portion Pledges Receivable, net- noncurrent portion C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $363,600.00 8,842,318.00 174,833.00 518,198.00 9,898,949.00 39,913.00 39,913.00 2,496,850.00 428,484.00 6,933,702.00 $9,859,036.00 Dalton State College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets DALTON STATE C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $5,017,167.83 1,249,426.13 4,437,888.41 1,798,703.71 424,997.91 350,869.48 1,349,386.81 244,954.58 42,045.72 12,416,588.32 6,323,363.78 4,999,568.69 3,252,380.82 111.26 107,465.20 1,923,018.97 614,123.92 3,658,610.80 902,511.38 21,781,154.82 (9,364,566.50) Dalton State College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 10,706,668.79 26,038.34 66,026.02 10,798,733.15 1,434,166.65 1,434,166.65 23,599,862.93 32,670.67 23,632,533.60 $25,066,700.25 Dalton State College Annual Financial Report FY 2004 10 Dalton State College Foundation Statement of Activities Dalton State College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $147,643.00 36,583.00 93,676.00 $16,890.00 8,368.00 25,466.00 193,018.00 470,920.00 200,559.00 251,283.00 $59,241.00 150,064.00 456,673.00 (393,577.00) 272,401.00 $223,774.00 195,015.00 575,815.00 0.00 0.00 0.00 0.00 0.00 0.00 994,604.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 12,820.00 401,751.00 0.00 750.00 34,218.00 18,186.00 467,725.00 3,195.00 63,596.00 978.00 146,083.00 210,657.00 40,626.00 15,759.00 15,759.00 256,642.00 76,416.00 0.00 418,488.00 0.00 750.00 180,301.00 18,186.00 694,141.00 300,463.00 Net Assets Beginning Net Assets Ending Net Assets 2,493,655.00 $2,496,850.00 387,858.00 $428,484.00 6,677,060.00 $6,933,702.00 9,558,573.00 $9,859,036.00 Dalton State College Annual Financial Report FY 2004 11 Statement of Cash Flows DALTON STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $5,084,553.62 5,893,334.84 361,969.98 (8,153,355.66) (10,960,315.87) (3,172,445.10) 1,343,579.06 244,954.58 (275,531.55) (9,633,256.10) 10,706,709.69 3,146.31 77,593.85 10,787,449.85 (576,937.96) (576,937.96) 26,038.34 26,038.34 603,294.13 2,609,024.28 $3,212,318.41 Dalton State College Annual Financial Report FY 2004 12 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D e p r e c ia tio n C hange in Assets and Liabilities: Receivables, net I n v e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($9,364,566.50) 902,511.38 (1,044,608.89) 27,694.87 (166,361.94) (121,672.65) (144,479.02) 23,064.25 255,162.40 ($9,633,256.10) Dalton State C ollege had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions for FY2004. Dalton State College Annual Financial Report FY 2004 13 DALTON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Dalton State College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Dalton State College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Dalton State College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Dalton State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Dalton State College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Dalton State College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. Dalton State College is reporting the activity of Dalton State College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as Dalton State College Annual Financial Report FY 2004 14 amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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, Dalton State College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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. Dalton State College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Dalton State College Annual Financial Report FY 2004 15 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Dalton State College when complete. For the year ended June 30, 2004, there were no GSFIC transfers. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Dalton State College Annual Financial Report FY 2004 16 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Dalton State College had accrued liability for compensated absences in the amount of $476,031.52 as of 7-1-2003. For FY2004, $333,282.00 was earned in compensated absences and employees were paid $78,119.60, for a net increase of $255,162.40. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $731,193.92 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Expendable $331,046.96 $331,046.96 Dalton State College Annual Financial Report FY 2004 17 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances R e se rve for Inv e ntory O the r Unre stricte d Total Unre stricte d Ne t A sse ts June 30, 2004 $557,306.25 1,795,937.79 16,992.17 1,050,947.05 $3,421,183.26 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Dalton State 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Dalton State College Annual Financial Report FY 2004 18 Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Dalton State College Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Dalton State 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Dalton State College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Dalton State College Annual Financial Report FY 2004 20 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C arrying Amount C ash D eposits $3,212,318.41 Inv estm ent Portfolio A ccounts Total C ash D eposits $3,212,318.41 Bank B a la nc e s $3,159,480.84 $3,159,480.84 Risk C ategories 1 2 3 $3,159,480.84 $0.00 $0.00 $3,159,480.84 $0.00 $0.00 Dalton State College Annual Financial Report FY 2004 21 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College had no investments. Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $988,217.20 109,943.26 729,454.54 1,184,667.57 3,012,282.57 Net A ccounts Receiv able $3,012,282.57 Note 4. Inventories Inventories consisted of the following at June 30, 2004 and June 30, 2003. June 30, 2004 B ookstore Food Services Physical Plant O th e r T o ta l $228,161.23 10,278.03 4,084.94 1,742.64 $244,266.84 Dalton State College Annual Financial Report FY 2004 22 Note 5. Notes/Loans Receivable As the College determines that receivables are uncollectible, the College has provided a reserve for uncollectible receivables, which, in management's opinion, is sufficient to absorb uncollectible receivables. At June 30, 2004 the allowance for uncollectible receivables was $49,796.82. DSC will during FY2005 incorporate the new Senate Bill 73 guidelines where appropriate. Dalton State College Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $72,465.30 72,465.30 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 1,346,095.00 22,437,770.98 1,172,871.00 2,986,550.69 4,254,997.51 32,198,285.18 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 894,740.22 6,745,489.53 847,008.86 1,542,067.38 1,096,219.00 11,125,524.99 Total Capital Assets, Being Depreciated, Net 21,072,760.19 Capital Assets, net $21,145,225.49 Additions $362,600.00 362,600.00 Reductions $0.00 0.00 3,411,960.00 693,841.77 216,816.52 4,322,618.29 3,411,960.46 278,527.08 85,744.00 3,776,231.54 58,202.05 828,563.42 41,970.53 520,999.77 27,389.55 488,697.93 23,526.99 379,363.09 210,709.00 1,725.00 1,660,444.77 920,702.56 2,662,173.52 2,855,528.98 $3,024,773.52 $2,855,528.98 Ending Balance 6/30/2004 $435,065.30 0.00 435,065.30 1,346,095.00 22,437,770.52 1,172,871.00 3,401,865.38 0.00 4,386,070.03 0.00 32,744,671.93 925,552.72 7,085,355.02 865,452.40 1,683,704.06 0.00 1,305,203.00 0.00 11,865,267.20 20,879,404.73 $21,314,470.03 Dalton State College Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $1,016,693.26 237,853.68 $1,254,546.94 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions Reductions Ending Balance June 30, 2004 $0.00 $0.00 $0.00 C urrent Portion $0.00 Other Liabilities C ompensated Absences Other Long Term Liabilities Total 476,031.52 476,031.52 333,282.00 333,282.00 78,119.60 78,119.60 731,193.92 731,193.92 303,082.07 303,082.07 Total Long Term Obligations $476,031.52 $333,282.00 $78,119.60 $731,193.92 $303,082.07 Dalton State College Annual Financial Report FY 2004 25 Note 9. Lease Obligations Dalton State College had only one lease obligation, real estate for instructional use, $34,029 annual payment. This is a year by year lease with monthly payments of $2,835.75. Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $34,029.00 0.00 0.00 $0.00 $34,029.00 CAPITAL LEASES Dalton State did not have any capital leases for FY 2004. OPERATING LEASES Dalton State College had only one lease for FY 2004. Leased facility for instructional classes: $2835.75/month, year by year lease, $34,029 annual lease. Dalton State College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Dalton State College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Dalton State College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Dalton State College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $689,275.24 $740,006.73 $748,619.66 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Dalton State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the Dalton State College Annual Financial Report FY 2004 27 employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Dalton State College and the covered employees made the required contributions of $248,447.43 (10.03%) and $123,852.57(5%), respectively. Georgia Defined Contribution Plan Plan Description Dalton State 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $43,721.48 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Dalton State College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Dalton State College Annual Financial Report FY 2004 28 Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Dalton State College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Dalton State College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Dalton State College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the Dalton State College Annual Financial Report FY 2004 29 policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 70 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Dalton State College recognized as incurred $212,502.60 of expenditures, which was net of $92,392.24 of participant contributions. Dalton State College Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $6,325,563.78 1,598,809.17 1,893,552.38 75,754.93 52,837.75 95,995.51 1,126,364.13 21,261.46 $0.00 $0.00 1,453.48 ($2,200.00) 589,540.66 155,685.79 3,643.88 2,400.00 9,272.68 454,818.67 224,659.75 $0.00 695,145.69 214,206.81 13,348.53 20,393.62 444,831.80 2,858.74 $0.00 1,339,601.68 742,749.48 111.26 13,312.78 20,872.66 83,156.88 5,847.65 Total Expenses $11,190,139.11 $0.00 $1,453.48 $1,437,821.43 $1,390,785.19 $2,205,652.39 Natural C lassification Plant O p e r a tio n s & Maintenance Func tional Classific ation FY 2004 S c ho la r s hip s Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty S ta ff B e n e fits Personal Services Travel Scholarships and Fellowships Utilitie s Supplies and Others Services D e p r e c ia tio n $ 0.00 606,291.25 201,489.09 (7,813.04) 1,212.25 464,491.77 338,349.72 (64,293.93) $ 0.00 1,867,781.22 $ 0.00 170,180.24 44,697.27 7,813.04 192.83 3,097.68 1,209,636.12 8,170.94 $ 0.00 704,006.77 Total Expenses $ 1,539,727.11 $ 1,867,781.22 $ 1,443,788.12 $ 704,006.77 T o ta l Expenses $ 6,323,363.78 4,999,568.69 3,252,380.82 111.26 107,465.20 1,923,018.97 614,123.92 3,658,610.80 902,511.38 $ 21,781,154.82 Dalton State College Annual Financial Report FY 2004 31 Note 15. Component Units Component Unit Notes Dalton State College Foundation (foundation) is a legally separate, tax-exempt component unit of Dalton State College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirty-nine member board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $631,681 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 213 N College Drive, Dalton, GA 30720-3797. Investments for Component Units: Dalton State College Foundation holds endowment investments in the amount of $8.8 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: Dalton State College did not have any Long Term Liabilities for Component Units for FY 2004. Debt Service Obligations for Component Units Dalton State College did not have any Debt Service Obligations for Component Units for FY 2004. Dalton State College Annual Financial Report FY 2004 32 DARTON COLLEGE Financial Report For the Year Ended June 30, 2004 Dr. Peter J. Sireno President Darton College Albany, Georgia Mr. Ronnie A. Henry Vice President for Business and Financial Services DARTON COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Darton College Foundation Balance Sheet ........................................................9 Statement of Revenues, Expenses and Changes in Fund Balance.............................10 Darton College Foundation Statement of Activities ............................................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 20 Note 3 Accounts Receivable............................................................................................. 23 Note 4 Inventories............................................................................................................. 23 Note 5 Notes/Loans Receivable........................................................................................ 23 Note 6 Capital Assets........................................................................................................ 24 Note 7 Deferred Revenue.................................................................................................. 25 Note 8 Long-Term Liabilities ........................................................................................... 25 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 30 Note 12 Contingencies...................................................................................................... 31 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 14 Natural Classifications With Functional Classifications..................................... 32 Note 15 Component Units .........................................................................33 DARTON COLLEGE Management's Discussion and Analysis Introduction Darton College is one of the 34 institutions of the University System of Georgia. The College, located in Albany, Georgia, was founded in 1963 and has become known for its state-of-the-art technology and technology-related programs. Additionally, the College is widely recognized as the leader in allied health training in Southwest Georgia. The College offers associates degrees and certificates in a wide variety of subjects. This diverse range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,800 students. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 78 3811 71 3356 64 3179 Overview of the Financial Statements and Financial Analysis Darton College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point-of-time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Darton College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Darton College Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $4,901,622.70 11,916,678.58 16,818,301.28 June 30, 2003 $3,538,723.19 12,671,794.87 16,210,518.06 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,005,357.60 310,262.96 2,315,620.56 1,613,573.76 269,072.70 1,882,646.46 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 11,916,678.58 2,586,002.14 $14,502,680.72 12,671,794.87 1,102,987.61 62,659.28 490,429.84 $14,327,871.60 The total assets of the institution increased by $607,783.22. A review of the Statement of Net Assets will reveal that the increase was due to an increase of current assets in the amount of $1,362,899.51 offset by a decrease of (755,116.29) in investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $432,974.10. The primary cause for the increase was in current liabilities, of which $158,726.12 was in deferred revenue. The combination of the increase in total assets of $607,783.22 and the increase in total liabilities of $432,974.10 yields an increase in total net assets of $174,809.12. The increase in total net assets is primarily in the category of Unrestricted Net Assets in the amount of $2,095,572.30, which offsets decreases in the Restricted Expendable Net Asset category of ($1,102,987.61). The restricted expendable net assets were reclassified as unrestricted for FY2004. Darton College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $13,980,624.57 June 30, 2003 $11,966,921.80 Operating Expenses Operating Loss 25,160,877.04 (11,180,252.47) 23,784,170.78 (11,817,248.98) Nonoperating Revenues and Expenses 11,588,208.04 11,425,296.22 Income (Loss) Before other revenues, expenses, gains or losses 407,955.57 (391,952.76) Other revenues, expenses, gains or losses 0.00 0.00 Increase in Net Assets 407,955.57 (391,952.76) Net Assets at beginning of year, as originally reported Prior Year Adjustm ents Net Assets at beginning of year, restated 14,327,871.60 (233,146.45) 14,094,725.15 13,798,982.81 920,841.55 14,719,824.36 Net Assets at End of Year $14,502,680.72 $14,327,871.60 The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with an increase 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: Darton College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $3,862,893.63 7,291,079.98 407,679.82 2,307,021.02 111,950.12 13,980,624.57 11,567,680.57 23,538.91 (3,011.44) 11,588,208.04 0.00 $25,568,832.61 June 30, 2003 $3,304,858.51 6,286,982.66 215,356.25 2,052,531.74 107,192.64 11,966,921.80 11,377,660.28 16,123.77 26,026.89 5,485.28 11,425,296.22 0.00 $23,392,218.02 Darton College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $10,336,048.84 13,048.49 293,576.93 1,650,771.19 1,907,017.93 1,079,683.69 1,955,759.53 5,284,020.06 2,138,735.21 502,215.17 25,160,877.04 0.00 $25,160,877.04 June 30, 2003 $8,224,382.62 5,223.14 3,784.74 1,943,837.28 1,568,293.40 2,602,456.01 2,250,297.36 4,654,913.20 1,813,116.04 717,866.99 23,784,170.78 0.00 $23,784,170.78 Operating Revenue of the College increased in FY 2004 by $2,013,702.77. The primary cause for this increase is due to a net increase in student tuition and fees of $558,035.12 and an increase of $1,062,333.86 in Federal Grants. Additionally, Auxiliary Enterprises had a net increase in revenue of over $250,000.00. The compensation and employee benefits category increased by approximately $622,659.17. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $64,760.05 during the past year. The increase was primarily associated with the construction and completion of the new Physical Education facility. Under non-operating revenues (expenses) state appropriations increased by approximately $190,020.29. The increase of state appropriations to Darton College has occurred because the enrollment of Darton College continues to rise. We are hopeful that the economy is now on an upward trend and future budget cuts may not have to occur while also allowing for a continued increase in enrollment. Statement of Cash Flows The final statement presented by Darton College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects Darton College Annual Financial Report FY 2004 5 cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 0 ,5 8 1 ,8 9 3 .7 9 ) 1 1 ,6 3 4 ,0 4 0 .5 1 (2 5 8 ,8 7 7 .5 0 ) 2 3 ,5 3 8 .9 1 8 1 6 ,8 0 8 .1 3 1 ,4 4 8 ,1 9 6 .7 9 $ 2 ,2 6 5 ,0 0 4 .9 2 June 30, 2003 ($ 1 0 ,8 5 6 ,2 0 4 .7 6 ) 1 1 ,4 0 8 ,9 4 4 .6 7 (3 1 3 ,5 3 3 .9 0 ) 2 6 ,0 2 6 .8 9 2 6 5 ,2 3 2 .9 0 1 ,1 8 2 ,9 6 3 .8 9 $ 1 ,4 4 8 ,1 9 6 .7 9 Capital Assets Capital investment was down from the prior year at Darton College. Approximately $259,000 was invested in capital assets during 2004 compared with over $330,000 invested during 2003. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Darton College has included the financial statements and notes for all required component units for FY2004. The Darton College Foundation had endowment investments of $859,000 as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Darton College Annual Financial Report FY 2004 6 Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Peter J. Sireno, President Darton College Darton College Annual Financial Report FY 2004 7 Statement of Net Assets DARTON COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $2,265,004.92 513,450.09 397,232.00 1,548,870.30 177,065.39 4,901,622.70 11,916,678.58 11,916,678.58 16,818,301.28 1,086,952.38 464,231.31 (25,705.18) 148,267.48 331,611.61 2,005,357.60 310,262.96 310,262.96 2,315,620.56 11,916,678.58 2,586,002.14 $14,502,680.72 Darton College Annual Financial Report FY 2004 8 Darton College Foundation Balance Sheet Darton C ollege F oundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $217,403.00 50,050.00 1,101,741.00 1,369,194.00 0.00 150,977.00 182,516.00 1,035,701.00 $1,369,194.00 Darton College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets DARTON C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $5,774,930.63 1,912,037.00 6,064,557.73 390,563.90 835,958.35 407,679.82 1,640,334.68 165,385.03 9,399.78 453,703.52 38,198.01 111,950.12 13,980,624.57 6,094,579.75 5,833,740.04 3,095,815.12 1,266.00 106,114.89 3,664,039.63 881,984.69 4,657,889.54 825,447.38 25,160,877.04 (11,180,252.47) Darton College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) S tate A ppropriations G rants and C ontracts Fe d e r a l S tate O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S tate O th e r Total Other Revenues Increase in Net A ssets NET ASSETS Net A ssets-beginning of year, as originally reported Prior Year A djustm ents Net A ssets-beginning of year, restated Net A ssets-End of Year June 30, 2004 11,567,680.57 23,538.91 (3,011.44) 11,588,208.04 407,955.57 0.00 407,955.57 14,327,871.60 (233,146.45) 14,094,725.15 $14,502,680.72 Darton College Annual Financial Report FY 2004 11 Darton College Foundation Statement of Activities Darton C ollege F oundation Statem ent of Activ ities (F unctional Display) (F ASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Revenues $195,315.00 1,197.00 196,512.00 $56,506.00 9,760.00 66,266.00 $125,000.00 21,636.00 16,382.00 (9,760.00) 153,258.00 $376,821.00 22,833.00 16,382.00 416,036.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is ing Total Ex penses C hange in Net A ssets 27,783.00 59,060.00 5,257.00 71,709.00 12,738.00 176,547.00 19,965.00 102,002.00 102,002.00 (35,736.00) 4,035.00 5,000.00 9,035.00 144,223.00 27,783.00 63,095.00 5,257.00 178,711.00 12,738.00 287,584.00 128,452.00 Net Assets B eginning Net A ssets Ending Net A ssets 131,012.00 $150,977.00 218,252.00 $182,516.00 891,478.00 $1,035,701.00 1,240,742.00 $1,369,194.00 Darton College Annual Financial Report FY 2004 12 Statement of Cash Flows DARTON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2004 $5,815,710.78 7,012,647.99 408,402.27 (8,882,759.39) (11,855,497.78) (5,486,592.63) 1,653,614.99 166,513.07 9,399.78 453,703.52 38,198.01 84,765.60 (10,581,893.79) 11,567,678.57 66,361.94 11,634,040.51 (258,877.50) (258,877.50) 23,538.91 23,538.91 816,808.13 1,448,196.79 $2,265,004.92 Darton College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities Darton College had no Non-Cash Investing, Non-Capital Financing, or Capiatal and Related Financing Transactions for FY2004. June 30, 2004 ($11,180,252.47) 825,447.38 (294,708.10) 512.95 0.00 (23,524.71) (18,487.75) 53,362.67 55,756.24 ($10,581,893.79) Darton College Annual Financial Report FY 2004 14 DARTON COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Darton College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Darton College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Darton College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Darton College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Darton College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Darton College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Darton College is reporting the activity for the Darton College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the Darton College Annual Financial Report FY 2004 15 State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College has no investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Darton College Annual Financial Report FY 2004 16 Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Darton College when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Darton College. Deposits The College has no deposits from students for housing on campus. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Darton College had an accrued liability for compensated absences in the amount of $586,118.33 as of 7-1-2003. For FY2004, $1,119,958.63 was earned in compensated absences and employees were paid $1,064,202.39 for a net increase of Darton College Annual Financial Report FY 2004 17 $55,756.24. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $641,874.57. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Darton College had no restricted expendable net assets as of June 30, 2004. Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Darton College Annual Financial Report FY 2004 18 Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances R e serv e for Inve ntory O ther Unrestricte d Total Unre stricte d Ne t A sse ts June 30, 2004 $455,707.72 1,397,332.19 125,902.22 607,060.01 $2,586,002.14 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Darton 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Darton College Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Darton 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Darton College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Darton College Annual Financial Report FY 2004 20 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $2,265,004.92 Bank Balances $1,364,248.57 $2,265,004.92 $1,364,248.57 Risk Categories 1 2 $470,405.73 $893,842.84 $470,405.73 $893,842.84 3 $0.00 $0.00 Darton College Annual Financial Report FY 2004 21 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. At June 30, 2004, Darton College had no investments. Darton College Annual Financial Report FY 2004 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful Accounts $189,786.07 189,384.86 513,450.09 397,232.00 1,269,641.72 2,559,494.74 99,942.35 Net A ccounts Receivable $2,459,552.39 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ook store Food Services Physical Plant O ther T o ta l June 30, 2004 $136,111.58 40,953.81 $177,065.39 Note 5. Notes/Loans Receivable Darton College currently has no loans made through the Federal Perkins Loan Program and therefore, does not provide for an allowance for uncollectible loans. Darton College Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $989,112.73 989,112.73 Additions $0.00 0.00 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 16,109,652.00 1,557,370.63 2,645,140.80 2,849,686.19 23,161,849.62 21,560.80 23,882.00 156,185.62 96,071.68 297,700.10 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 6,540,950.43 890,143.25 1,708,307.80 2,339,766.00 11,479,167.48 583,365.10 108,096.42 526,985.85 102,210.00 1,320,657.37 Total Capital Assets, Being Depreciated, Net 11,682,682.14 (1,022,957.27) Capital Assets, net $12,671,794.87 ($1,022,957.27) Reductions $0.00 0.00 Ending Balance 6/30/2004 $989,112.73 0.00 989,112.73 90,343.35 38,822.60 2,933.00 132,098.95 0.00 16,131,212.80 1,490,909.28 2,762,503.82 0.00 2,942,824.87 0.00 23,327,450.77 189,753.93 122,655.51 84,597.49 2,933.00 399,939.93 0.00 6,934,561.60 875,584.16 2,150,696.16 0.00 2,439,043.00 0.00 12,399,884.92 (267,840.98) 10,927,565.85 ($267,840.98) $11,916,678.58 Darton College Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research O the r D e fe rred R e v enue T o ta ls June 30, 2004 $11,519.00 452,712.31 $464,231.31 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 is shown below: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions Reductions Ending Balance June 30, 2004 $0.00 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 586,118.33 586,118.33 Total Long Term Obligations $586,118.33 1,119,958.63 1,119,958.63 $1,119,958.63 1,064,202.39 1,064,202.39 $1,064,202.39 641,874.57 0.00 641,874.57 $641,874.57 Current Portion $0.00 331,611.61 331,611.61 $331,611.61 Darton College Annual Financial Report FY 2004 25 Note 9. Lease Obligations Darton College is obligated under various operating leases for the use of equipment. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004 were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 5 6-10 11-15 16-20 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases Operating Leases $0.00 $110,818.68 78,812.28 69,207.12 16,781.52 0.00 $0.00 $275,619.60 CAPITAL LEASES Darton has no capital leases at this time. OPERATING LEASES Darton College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2008. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Darton College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Darton College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Darton College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Darton College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 673,712.33 $ 657,862.44 $ 637,593.15 Employees' Retirement System of Georgia Plan Description Darton College participates in the Employees' Retirement System of Georgia (ERS), a singleemployer 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Darton College Annual Financial Report FY 2004 27 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2004, for employees covered by ERS was $51,420.46. The College's total payroll for all employees was $11,928,319.79. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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 College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the College amount to 9.61% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $5,651.47, of which $4,939.61 was made by the College and $711.86 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Darton College Annual Financial Report FY 2004 28 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Darton College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Darton College and the covered employees made the required contributions of $215,945.49 (10.03%) and $107,650.64 (5%), respectively. Georgia Defined Contribution Plan Plan Description Darton College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer 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. Contributions 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 Darton College Annual Financial Report FY 2004 29 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. Total contributions made by employees during fiscal year 2004 amounted to $111,160.22 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Darton College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective selfinsured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Darton College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Darton College Annual Financial Report FY 2004 30 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Darton College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Darton College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 86 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Darton College recognized as incurred $298,117.46 of expenditures, which was net of $99,566.26 of participant contributions. Darton College Annual Financial Report FY 2004 31 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Func tional Classific at ion FY 2004 Natural C lassification Instruction Research Public S e rv ic e A c a d e m ic Support S tud e n t S e r v ic e s I n s titu tio n a l Support Fa c u lty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowship U tilitie s $ 6,080,449.75 1,579,490.19 1,646,818.67 38,091.41 1,800.00 11,652.35 Supplies and Others Service D epreciation 962,495.33 15,251.14 $ 10,980.00 487.60 1,095.92 484.97 $ 0.00 140,107.45 48,418.16 10,914.97 2,585.76 91,550.59 ($ 1,425.00) 1,020,580.37 280,740.21 $ 75.00 1,075,600.99 255,899.57 15,624.18 12,366.31 174,132.07 148,753.05 12,537.33 127,882.07 2,827.69 432,195.28 $ 0.00 1,247,175.34 696,046.92 1,266.00 23,900.35 (1,910,336.00) 184,921.39 700,320.65 136,389.04 Total Expenses $ 10,336,048.84 $ 13,048.49 $ 293,576.93 $ 1,650,771.19 $ 1,907,017.93 $ 1,079,683.69 Na tura l C la ssifica tion F unc t iona l C la s s ific a t io n FY 2004 P la n t O pe ra tio ns S cho la rships A ux ilia ry Una llo ca te d & Ma inte na nce & Fe llow ships Ente rprise s Ex pe nse s Fa culty S ta ff B e ne fits Personal S erv ices Travel S chola rships a nd Fellowships Utilitie s S upplie s a nd O the rs S e rv ice s D e pre cia tion $ 0.00 5 4 2 ,6 5 7 .4 0 10 7 ,5 0 8 .9 1 ( 13 ,0 0 3 .3 4 ) 9 9 .7 6 6 6 7 ,3 18 .2 5 6 2 9 ,0 7 7 .6 7 2 2 ,10 0 .8 8 $ 0.00 5 ,2 8 4 ,0 2 0 .0 6 $ 4,500.00 2 2 8 ,12 8 .3 0 5 9 ,8 9 5 .0 8 13 ,0 0 3 .3 4 3 ,8 5 0 .9 7 16 0 ,6 7 3 .5 0 3 12 .9 4 1,6 6 7 ,6 3 2 .9 8 7 3 8 .10 $ 0.00 5 0 2 ,2 15 .17 To ta l Ex pe nse s $ 1,955,759.53 $ 5,284,020.06 $ 2,138,735.21 $ 502,215.17 To ta l Expenses $ 6,094,579.75 5 ,8 3 3 ,7 4 0 .0 4 3 ,0 9 5 ,8 15 .12 1,2 6 6 .0 0 10 6 ,114 .8 9 3 ,6 6 4 ,0 3 9 .6 3 8 8 1,9 8 4 .6 9 4 ,6 5 7 ,8 8 9 .5 4 8 2 5 ,4 4 7 .3 8 $ 25,160,877.04 Darton College Annual Financial Report FY 2004 32 Note 15. Component Units Darton College Foundation (foundation) is a legally separate, tax-exempt component unit of Darton College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The fifty-member board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon, that the foundation holds and invests, is restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $286,040.50 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Business Office at 2400 Gillionville Road, Albany, GA 31707. Investments for Component Units: Darton College Foundation holds endowment investments in the amount of $859,037.00. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: The Darton College Foundation has no long term liabilities. Darton College Annual Financial Report FY 2004 33 EAST GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2004 J. Foster Watkins Interim President East Georgia College Swainsboro, Georgia Adriance M. Galloway Vice President for Fiscal Affairs EAST GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 East Georgia College Foundation, Inc. Balance Sheet ..........................................9 Statement of Revenues, Expenses and Changes in Net Assets ................................10 East Georgia College Foundation, Inc. Statement of Activities ..............................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 28 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 32 Note 15 Component Units ........................................................................ 33 EAST GEORGIA COLLEGE Management's Discussion and Analysis Introduction East Georgia College is one of the 34 institutions of the University System of Georgia. The College, located in Swainsboro, Georgia, was founded in 1973 and has become known for its state-of-the-art technology, its excellent faculty, and a caring and nurturing environment for its students. The College offers associate degrees in a variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body that now exceeds 1,400 students. The institution's enrollment took a slight decline in Fiscal Year 2004 due to recruiting restrictions specified by the University System of Georgia, and full-time faculty positions decreased due to the anticipated and realized reductions in state appropriation. Faculty Students FY2004 FY2003 FY2002 35 1,420 38 1,499 35 1,393 Overview of the Financial Statements and Financial Analysis East Georgia College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of East Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. East Georgia College Annual Financial Report FY 2004 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $1,404,404.11 11,353,736.60 370,148.84 13,128,289.55 June 30, 2003 $1,533,544.78 11,757,779.04 281,271.99 13,572,595.81 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 828,222.58 138,593.12 966,815.70 917,375.48 92,150.77 1,009,526.25 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 11,345,584.76 37,100.00 (1,232.09) 780,021.18 $12,161,473.85 11,757,779.04 37,100.00 557.14 767,633.38 $12,563,069.56 The total assets of the institution decreased by ($444,306.26). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($404,042.44) of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($42,710.55). The primary cause for the decrease was in current liabilities, primarily due to a decrease of ($239,795.85) in deferred revenue which in turn contributed to a decrease in accounts receivable. The combination of the decrease in total assets of ($444,306.26) and the decrease in total liabilities of ($42,710.55) yields a decrease in total net assets of ($401,595.71). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($412,194.28). East Georgia College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $3,125,776.83 June 30, 2003 $3,237,874.06 Operating Expenses Operating Loss 8,728,043.26 (5,602,266.43) 8,649,996.05 (5,412,121.99) Nonoperating Revenues and Expenses 4,980,605.72 5,593,403.76 Income (Loss) Before other revenues, expenses, gains or losses (621,660.71) 181,281.77 Other revenues, expenses, gains or losses 278,852.60 4,298,373.90 Increase in Net Assets (342,808.11) 4,479,655.67 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 12,563,069.56 (58,787.60) 12,504,281.96 7,951,397.19 132,016.70 8,083,413.89 Net Assets at End of Year $12,161,473.85 $12,563,069.56 The Statement of Revenues, Expenses, and Changes in Net Assets reflects 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: East Georgia College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 $1,076,914.96 1,926,843.17 47,180.55 27,223.22 47,614.93 3,125,776.83 $1,062,966.18 2,046,206.71 43,100.20 32,003.94 53,597.03 3,237,874.06 4,812,568.37 126,791.76 15,972.00 16,202.34 10,251.91 4,981,786.38 5,052,024.00 7,569.85 533,809.91 5,593,403.76 265,922.60 12,930.00 278,852.60 $8,386,415.81 4,298,373.90 4,298,373.90 $13,129,651.72 East Georgia College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $2,737,995.03 588,150.07 833,765.45 602,382.36 1,233,786.33 1,576,997.41 1,139,047.82 15,918.79 8,728,043.26 1,180.66 $8,729,223.92 June 30, 2003 $2,933,653.79 847,643.96 1,018,922.86 553,504.92 1,270,679.34 990,970.15 1,037,452.43 (2,831.40) 8,649,996.05 0.00 $8,649,996.05 Non-operating revenues decreased by approximately ($608,724.58). Capital gifts and grants decreased by approximately ($4,019,521.30) because the College did not receive any transfer of capital assets from the Georgia State Financing and Investment Commission during the fiscal year 2004 as in the previous fiscal year. East Georgia College is a commuter institution without a residential population. Revenues associated with auxiliary services decreased by approximately ($4,780.72) due to a decrease in the commission revenue received from privatized operations that include the snack bar, the bookstore, and vending operations. The compensation and employee benefits category decreased by approximately ($159,325.57). The decrease reflects the reduction in faculty and staff positions at the institution. Utilities increased by approximately $25,014.05 during the past year. The increase was primarily associated with increased electricity and water costs that were experienced over the entire fiscal year. Under non-operating revenues (expenses) state appropriations decreased by approximately ($239,455.63). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for East Georgia College. We are hopeful that the economy is now on an upward trend. East Georgia College Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the East Georgia College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. East Georgia College did not have any non-cash investing, non-capital financing, or capital and related financing transactions during the fiscal year. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 ,6 5 3 ,5 6 1 .1 6 ) 5 ,0 2 4 ,6 9 2 .6 3 4 4 ,9 0 6 .9 4 (1 5 ,4 7 2 .2 2 ) 4 0 0 ,5 6 6 .1 9 6 3 8 ,0 2 1 .8 3 $ 1 ,0 3 8 ,5 8 8 .0 2 June 30, 2003 ($ 5 ,4 2 1 ,5 8 6 .5 6 ) 5 ,0 9 6 ,9 2 3 .6 0 (2 3 2 ,9 5 8 .7 4 ) 6 3 8 ,1 2 5 .5 6 8 0 ,5 0 3 .8 6 5 5 7 ,5 1 7 .9 7 $ 6 3 8 ,0 2 1 .8 3 Capital Assets The College did not have any capital asset additions for facilities completed in fiscal year 2004. The College only had one MRR project in fiscal year 2004 and this project was not completed prior to the end of the fiscal year. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, East Georgia College has included the financial statements and notes for all required component units for FY2004. The East Georgia College Foundation, Inc. had endowment investments of $632,373.00 as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. East Georgia College Annual Financial Report FY 2004 6 Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ J. Foster Watkins, Interim President East Georgia College East Georgia College Annual Financial Report FY 2004 7 Statement of Net Assets EAST GEORGIA COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $996,188.02 9,379.16 284,221.72 1,016.40 113,598.81 1,404,404.11 42,400.00 327,748.84 11,353,736.60 11,723,885.44 13,128,289.55 45,488.37 270.00 282,226.78 142,702.40 228,246.06 129,288.97 828,222.58 130,441.28 8,151.84 138,593.12 966,815.70 11,345,584.76 37,100.00 (1,232.09) 780,021.18 $12,161,473.85 East Georgia College Annual Financial Report FY 2004 8 East Georgia College Foundation Balance Sheet East Georgia C ollege Foundation, Inc. Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $114,997.00 9,137.00 632,373.00 27,228.00 783,735.00 267.00 267.00 80,491.00 702,977.00 0.00 $783,468.00 East Georgia College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets EAST GEORGIA C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $1,863,056.13 784,793.18 1,347.99 1,926,843.17 47,180.55 14,409.43 879.19 10,183.51 1,751.09 47,614.93 3,125,776.83 1,778,620.46 2,006,368.51 1,096,604.70 36,489.48 1,148,450.82 394,648.41 1,692,858.93 574,001.95 8,728,043.26 (5,602,266.43) East Georgia College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 4,812,568.37 18,452.00 75,394.82 32,944.94 15,972.00 16,202.34 (1,180.66) 10,251.91 4,980,605.72 (621,660.71) 265,922.60 12,930.00 278,852.60 (342,808.11) 12,563,069.56 (58,787.60) 12,504,281.96 $12,161,473.85 East Georgia College Annual Financial Report FY 2004 11 East Georgia College Foundation Statement of Activities East Georgia C ollege Foundation, Inc. Statem ent of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To t a l Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program S c ho la rs hip s T im e Total Revenues $83,322.00 913.00 345.00 $133,360.00 16,963.00 6,363.00 1,298.00 79,213.00 8,983.00 174,074.00 6,297.00 (79,213.00) (8,983.00) 74,787.00 $0.00 0.00 $216,682.00 17,876.00 6,708.00 0.00 0.00 7,595.00 0.00 0.00 0.00 248,861.00 Expenses I n s tr u c tio n Public Service Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is ing Total Expenses C hange in Net A ssets 49,958.00 29,255.00 34,490.00 2,349.00 4,800.00 39,418.00 3,515.00 163,785.00 10,289.00 0.00 74,787.00 0.00 0.00 49,958.00 29,255.00 34,490.00 2,349.00 4,800.00 39,418.00 3,515.00 163,785.00 85,076.00 Net Assets B eginning Net A ssets Ending Net A ssets 70,202.00 $80,491.00 628,190.00 $702,977.00 $0.00 698,392.00 $783,468.00 East Georgia College Annual Financial Report FY 2004 12 Statement of Cash Flows EAST GEORGIA COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITA L A ND RELA T ED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $1,834,117.54 2,241,704.28 59,004.15 (3,267,762.46) (3,778,950.40) (1,933,244.00) (3,853.79) 879.19 23,065.96 1,668.10 169,810.27 (4,653,561.16) 4,812,568.37 72,402.19 139,722.07 5,024,692.63 43,885.47 724.01 4,964.74 (3,486.62) (1,180.66) 44,906.94 (37,474.49) 22,002.27 (15,472.22) 400,566.19 638,021.83 $1,038,588.02 East Georgia College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($5,602,266.43) 574,001.95 521,399.13 3,140.20 64,992.92 (88,938.49) (258,490.35) 82,598.83 50,001.08 ($4,653,561.16) East G eorgia C ollege had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions East Georgia College Annual Financial Report FY 2004 14 EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations East Georgia College serves the state, regional and local communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity East Georgia College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of East Georgia College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. East Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, East Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus East Georgia College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, East Georgia College is reporting the activity for the East Georgia College Foundation, Inc. See Note 15. Component Units, for foundation notes. East Georgia College Annual Financial Report FY 2004 15 Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a East Georgia College Annual Financial Report FY 2004 16 component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to East Georgia College when complete. For the year ended June 30, 2004, GSFIC transferred $265,922.60 for capitalizable MRR projects to East Georgia College. Deposits Deposits represent good faith deposits from students for Integrated Science Lab Kits. East Georgia College Annual Financial Report FY 2004 17 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. East Georgia College had accrued liability for compensated absences in the amount of $209,729.17 as of 7-1-2003. For FY2004, $431,145.94 was earned in compensated absences and employees were paid $381,144.86, for a net increase of $50,001.08. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $259,730.25 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. East Georgia College Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable June 30, 2004 ($5,303.59) 4,071.50 ($1,232.09) Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances R e se rv e for Inv e ntory O the r Unre stricte d Total Unrestricted Net A ssets June 30, 2004 $67,002.19 867,692.57 700.00 (155,373.58) $780,021.18 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes East Georgia 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 College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: East Georgia College Annual Financial Report FY 2004 19 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. East Georgia College Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus East Georgia 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus East Georgia College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. East Georgia College Annual Financial Report FY 2004 21 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $763,526.67 Bank Balances $1,233,595.00 $763,526.67 $1,233,595.00 Risk C ategories 1 2 $0.00 $0.00 3 $0.00 $0.00 $0.00 $0.00 East Georgia College Annual Financial Report FY 2004 22 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 275,061.35 310,871.63 16,877.21 $602,810.19 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. East Georgia College Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $158,156.29 3,514.73 9,379.16 134,769.56 305,819.74 12,218.86 $293,600.88 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $0.00 1,016.40 $1,016.40 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Student Government Association Loan Fund. This loan program comprises all of the loans receivable at June 30, 2004. The use of this small loan fund has decreased as students have increased their use of federal and state loan programs such as subsidized and unsubsidized Stafford loans to finance their educations. East Georgia College Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $221,959.45 133,632.00 355,591.45 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 1,444,596.00 12,462,898.36 495,117.45 1,331,202.42 1,043,452.09 16,777,266.32 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 1,053,228.75 2,182,793.97 355,256.58 914,123.81 869,675.62 5,375,078.73 Total Capital Assets, Being Depreciated, Net 11,402,187.59 Capital Assets, net $11,757,779.04 Additions $0.00 72,234.00 72,234.00 Reductions $0.00 133,632.00 133,632.00 Ending Balance 6/30/2004 $221,959.45 72,234.00 294,193.45 227,538.00 74,100.45 132,435.01 11,638.46 41,663.30 487,375.22 4,008.00 148,200.90 141,396.61 17,073.20 310,678.71 1,444,596.00 12,686,428.36 421,017.00 1,322,240.82 11,638.46 1,068,042.19 0.00 16,953,962.83 69,560.03 386,375.10 21,791.23 192,328.99 1,939.74 32,001.62 703,996.71 (216,621.49) ($144,387.49) 12,021.46 66,737.54 3,763.94 101,749.20 383.62 184,655.76 126,022.95 $259,654.95 1,110,767.32 2,502,431.53 373,283.87 1,004,703.60 1,939.74 901,293.62 0.00 5,894,419.68 11,059,543.15 $11,353,736.60 East Georgia College Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $232,354.28 49,872.50 $282,226.78 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $8,151.84 Reductions Ending Balance June 30, 2004 $0.00 $8,151.84 Other Liabilities Compensated Absences Other Long Term Liabilities Total 209,729.17 209,729.17 431,145.94 431,145.94 381,144.86 381,144.86 259,730.25 0.00 259,730.25 Total Long Term Obligations $209,729.17 $439,297.78 $381,144.86 $267,882.09 Current Portion $0.00 129,288.97 129,288.97 $129,288.97 East Georgia College Annual Financial Report FY 2004 26 Note 9. Lease Obligations East Georgia College did not have any operating leases in fiscal year 2004. East Georgia College is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $3,486.62 4,665.22 8,151.84 $8,151.84 $0.00 CAPITAL LEASES East Georgia College has two capital leases for equipment with an outstanding balance at June 30, 2004 in the amount of $8151.84. OPERATING LEASES East Georgia College had no noncancellable operating leases in fiscal year 2004. East Georgia College Annual Financial Report FY 2004 27 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description East Georgia College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of East Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. East Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $231,246.15 $239,158.11 $224,620.08 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy East Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the East Georgia College Annual Financial Report FY 2004 28 employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. East Georgia College and the covered employees made the required contributions of $96,350.42 (10.03%) and $48,031.62 (5%), respectively. Georgia Defined Contribution Plan Plan Description East Georgia 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $8,374.97 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. East Georgia College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The East Georgia College Annual Financial Report FY 2004 29 Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. East Georgia College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although East Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against East Georgia College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the East Georgia College Annual Financial Report FY 2004 30 policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 23 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, East Georgia College recognized as incurred $90,629.74 of expenditures, which was net of $38,846.28 of participant contributions. East Georgia College Annual Financial Report FY 2004 31 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $1,761,645.46 121,055.61 451,596.42 2,950.50 28,763.01 315,777.97 56,206.06 $0.00 $4,585.00 117,421.57 36,103.22 6,182.08 2,171.49 415,084.15 6,602.56 $12,390.00 406,508.35 91,298.56 10,239.51 5,203.00 23,952.40 202,640.56 81,533.07 $0.00 377,237.34 103,216.47 5,438.62 4,200.00 8,979.67 100,758.64 2,551.62 $0.00 702,754.59 317,731.11 10,990.09 21,683.88 198,897.02 (18,270.36) Total Expenses $2,737,995.03 $0.00 $588,150.07 $833,765.45 $602,382.36 $1,233,786.33 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e p r e c ia tio n $ 0.00 281,391.05 96,658.92 688.68 307,885.96 453,180.89 437,191.91 $ 0.00 1,139,047.82 $ 0.00 1,212.00 6,519.70 8,187.09 $ 0.00 Total Expenses $ 1,576,997.41 $ 1,139,047.82 $ 15,918.79 $ 0.00 Total Expenses $ 1,778,620.46 2,006,368.51 1,096,604.70 0.00 36,489.48 1,148,450.82 394,648.41 1,692,858.93 574,001.95 $ 8,728,043.26 East Georgia College Annual Financial Report FY 2004 32 Note 15. Component Units Component Unit Notes East Georgia College Foundation, Inc. (foundation) is a legally separate, tax-exempt component unit of East Georgia College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the college in support of its programs. The seven-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $40,882.82 to the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Treasurer of the Foundation, 131 College Circle, Swainsboro, GA 30401. Investments for Component Units: East Georgia College Foundation holds endowment investments in the amount of $632,373.00. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. East Georgia College Foundation, in conjunction with the donors, has established a spending plan whereby up to 100% of the earnings may be used for academic scholarships. If all the earnings are not used for scholarships, they will be set aside as a reserve. Long Term Liabilities: The East Georgia College Foundation does not have any long-term liabilities. East Georgia College Annual Financial Report FY 2004 33 FLOYD COLLEGE Financial Report For the Year Ended June 30, 2004 Floyd College Rome, Georgia Dr. John Randolph Pierce President Dr. Wilbur B. Shuler Senior Vice President for Fiscal Affairs Floyd College ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Floyd College Foundations Balance Sheet ....................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets ................................9 Floyd College Foundation Statement of Activities .............................................11 Floyd College - Cartersville/Bartow Foundation Statement of Activities ...................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 29 Note 11 Risk Management................................................................................................ 30 Note 12 Contingencies...................................................................................................... 31 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 14 Natural Classifications With Functional Classifications..................................... 33 Note 15 Component Units ........................................................................ 34 FLOYD COLLEGE Management's Discussion and Analysis Introduction Floyd College is one of the 34 institutions of the University System of Georgia. The College, located in Rome, Georgia, was founded in 1970 and has become known for its state-of-the-art technology and allied health programs. The College offers associate of science and associate of art degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,800 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 84 4,709 79 3,984 65 3,217 Overview of the Financial Statements and Financial Analysis Floyd College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Floyd College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Floyd College Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $2,663,368.20 11,846,475.35 26,926.41 14,536,769.96 June 30, 2003 $2,452,663.48 11,844,550.21 14,297,213.69 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,342,481.95 258,553.04 2,601,034.99 1,616,661.12 238,096.76 1,854,757.88 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 11,846,475.35 26,926.41 116,855.10 (54,521.89) $11,935,734.97 11,046,449.86 27,969.20 445,545.83 922,490.92 $12,442,455.81 The total assets of the institution increased by $239,556.27. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $210,704.72 in current assets. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $746,277.11. The primary cause for the increase was in deferred revenue, which increased by $1,073,332.51, due in a large part to the earlier registration and assessing of fees for Fall 2004. The combination of the increase in total assets of $239,556.27 and the increase in total liabilities of $746,277.11 yields a decrease in total net assets of ($506,720.84). The decrease in total net assets is primarily in the category of restricted expendable net assets in the amount of ($328,690.73). Floyd College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $8,826,480.81 June 30, 2003 $8,422,774.79 Operating Expenses Operating Loss 19,814,418.77 (10,987,937.96) 18,859,877.60 (10,437,102.81) Nonoperating Revenues and Expenses 10,448,617.19 9,931,719.33 Income (Loss) Before other revenues, expenses, gains or losses (539,320.77) (505,383.48) Other revenues, expenses, gains or losses 405,614.12 6,266.00 Increase in Net Assets (133,706.65) (499,117.48) Net Assets at beginning of year, as originally rep Prior Year Adjustments Net Assets at beginning of year, restated 12,442,455.81 (373,014.19) 12,069,441.62 11,875,179.20 1,066,394.09 12,941,573.29 Net Assets at End of Year $11,935,734.97 $12,442,455.81 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: Floyd College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2004 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm A ux ilia r y O the r $4,140,658.07 2,737,535.91 193,008.46 1,671,793.65 83,484.72 Total Operating Revenue 8,826,480.81 Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue 9,699,014.00 744,597.77 24,857.48 (19,852.06) 10,448,617.19 C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants 368,563.12 37,051.00 405,614.12 Total Revenues $19,680,712.12 June 30, 2003 $2,756,925.74 3,679,981.56 243,110.75 284,645.69 6,964,663.74 9,928,390.38 5,240.17 (1,911.22) 9,931,719.33 6,266.00 6,266.00 $16,902,649.07 Floyd College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $7,751,373.95 1,417,890.22 1,312,436.67 2,988,961.79 1,916,486.39 2,091,444.59 1,578,520.95 757,304.21 19,814,418.77 0.00 $19,814,418.77 June 30, 2003 $7,789,974.68 1,499,094.60 1,273,047.31 3,287,465.82 780,256.75 1,079,085.52 1,289,437.32 1,861,515.60 18,859,877.60 0.00 $18,859,877.60 The faculty salaries and benefits category increased by $266,340.91. The increase reflects an increased cost due to the tremendous growth of the institution. Utilities increased by $98,060.83 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004, as well as the additional costs associated with the renovation of Heritage Hall, particularly involving the Dental Hygiene department moving into the facility. Under non-operating revenues (expenses) state appropriations decreased by ($229,376.38). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Floyd College. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by Floyd College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received Floyd College Annual Financial Report FY 2004 5 from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 0 ,6 1 2 ,7 2 5 .3 3 ) 1 0 ,1 6 5 ,4 9 5 .6 8 (2 6 6 ,9 9 8 .3 8 ) 2 4 ,7 3 6 .0 0 (6 8 9 ,4 9 2 .0 3 ) 8 8 6 ,0 0 2 .4 2 $ 1 9 6 ,5 1 0 .3 9 June 30, 2003 ($ 9 ,1 5 7 ,7 3 8 .8 0 ) 9 ,1 8 1 ,3 3 7 .6 2 (1 0 1 ,9 2 0 .4 2 ) 7 ,1 6 4 .2 7 (7 1 ,1 5 7 .3 3 ) 9 5 7 ,1 5 9 .7 5 $ 8 8 6 ,0 0 2 .4 2 Capital Assets The College had a significant capital asset addition for facilities in fiscal year 2004. The Heritage Hall renovation was completed for the 2003- 2004 academic year. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Floyd College has included the financial statements and notes for all required component units for FY2004. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a significantly reduced funded year, the College was able to generate a modest increase in Net Assets, once deferred revenue is removed from the calculation. The College anticipates the current fiscal year will be much like last, as the effect of the new Bartow campus will not be realized until FY 2005-06 (with the exception of incurring additional costs for training/staffing for registration for Summer 2005), and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. ______________________________ Dr. John Randolph Pierce, President Floyd College Floyd College Annual Financial Report FY 2004 6 Statement of Net Assets FLOYD COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x pe nd a b le Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $196,510.39 112,855.70 2,112,264.76 262,492.89 (20,755.54) 2,663,368.20 26,926.41 11,846,475.35 11,873,401.76 14,536,769.96 (115,076.15) 1,783,643.59 133,742.33 179,471.80 360,700.38 2,342,481.95 258,553.04 258,553.04 2,601,034.99 11,846,475.35 26,926.41 116,855.10 (54,521.89) $11,935,734.97 Floyd College Annual Financial Report FY 2004 7 Floyd College Foundations Balance Sheet Floyd C ollege Foundations Balance Sheet (F ASB) June 30, 2004 Floyd C ollege C artersv ille/Bartow F o und a tio n F o und a tio n A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets $22,281.07 17,555.27 555,145.84 301,300.00 896,282.18 $444,748.00 23,322.89 468,070.89 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 80,536.67 80,536.67 42,915.44 42,915.44 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 377,791.40 437,954.11 $815,745.51 295,155.45 130,000.00 $425,155.45 Floyd College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets FLOYD COLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $4,672,436.48 531,778.41 2,725,335.91 12,200.00 193,008.46 1,429,615.29 57,164.01 185,014.35 83,484.72 8,826,480.81 4,813,107.76 5,270,194.91 2,601,736.66 1,362.00 150,610.61 2,113,598.24 902,575.96 3,232,865.06 728,367.57 19,814,418.77 (10,987,937.96) Floyd College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 9,699,014.00 585,097.73 159,500.04 24,857.48 (19,852.06) 10,448,617.19 (539,320.77) 368,563.12 37,051.00 405,614.12 (133,706.65) 12,442,455.81 (373,014.19) 12,069,441.62 $11,935,734.97 Floyd College Annual Financial Report FY 2004 10 Floyd College Foundation Statement of Activities Floyd College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $6,413.02 41,750.92 38,150.00 17,555.27 103,869.21 $0.00 $283,954.11 0.00 283,954.11 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 28,766.62 5,727.91 1,868.06 75,259.00 35,111.61 146,733.20 (42,863.99) 0.00 0.00 0.00 283,954.11 Net Assets Beginning Net Assets Ending Net Assets 420,655.39 $377,791.40 0.00 $0.00 154,000.00 $437,954.11 Total $290,367.13 41,750.92 0.00 0.00 38,150.00 17,555.27 0.00 0.00 0.00 387,823.32 0.00 0.00 28,766.62 5,727.91 1,868.06 75,259.00 35,111.61 146,733.20 241,090.12 574,655.39 $815,745.51 Floyd College Annual Financial Report FY 2004 11 Floyd College Cartersville/Bartow Foundation Statement of Activities Cartersville/Bartow Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $23,000.00 2,980.59 1,856.55 27,837.14 $0.00 $0.00 2,000.00 0.00 2,000.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 1,717.50 1,073.95 25,360.17 25,675.11 53,826.73 (25,989.59) 0.00 0.00 0.00 2,000.00 Net Assets Beginning Net Assets Ending Net Assets 321,145.04 $295,155.45 $0.00 128,000.00 $130,000.00 Total $23,000.00 4,980.59 1,856.55 0.00 0.00 0.00 0.00 0.00 0.00 29,837.14 0.00 0.00 1,717.50 1,073.95 0.00 25,360.17 25,675.11 53,826.73 (23,989.59) 449,145.04 $425,155.45 Floyd College Annual Financial Report FY 2004 12 Statement of Cash Flows FLOYD COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL A ND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $4,625,068.46 2,621,173.57 214,628.73 (7,028,394.08) (10,082,617.90) (2,645,376.65) 1,402,529.74 57,824.80 169,297.22 53,140.78 (10,612,725.33) 9,699,014.00 (294,886.44) 761,368.12 10,165,495.68 (266,998.38) (266,998.38) 24,736.00 24,736.00 (689,492.03) 886,002.42 $196,510.39 Floyd College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($10,987,937.96) 728,367.57 (1,201,471.52) (19,621.22) 10,027.95 (83,410.33) 1,073,332.31 (157,537.90) 25,525.77 ($10,612,725.33) Floyd C ollege had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions Floyd College Annual Financial Report FY 2004 14 FLOYD COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Floyd College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Floyd College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Floyd College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Floyd College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Floyd College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Floyd College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Floyd College is reporting the activity for the Floyd College Foundation, and the Cartersville/Bartow College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Floyd College Annual Financial Report FY 2004 15 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Floyd College Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Floyd College when complete. For the year ended June 30, 2004, GSFIC did not transfer any capital additions to Floyd College. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Floyd College Annual Financial Report FY 2004 17 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Floyd College had accrued liability for compensated absences in the amount of $593,727.65 as of 7-1-2003. For FY2004, $1,128,221.55 was earned in compensated absences and employees were paid $1,102,695.78, for a net increase of $25,525.77. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $619,253.42. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Expendable $116,855.10 $116,855.10 Floyd College Annual Financial Report FY 2004 18 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 ($134,656.05) (80,608.86) 249,856.22 (89,113.20) ($54,521.89) When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Floyd 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Floyd College Annual Financial Report FY 2004 19 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Floyd College Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Floyd 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Floyd College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Floyd College Annual Financial Report FY 2004 21 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Ca r r y ing Amount Cash Deposits $196,510.39 Investment Portfolio Accounts Total Cash Deposits $196,510.39 Bank Balances $215,825.32 $215,825.32 Risk Categories 1 2 3 $200,000.00 $0.00 $15,825.32 $200,000.00 $0.00 $15,825.32 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. Floyd College Annual Financial Report FY 2004 22 At June 30, 2004, the College's investments consisted of the following: Type of Investments C ommon Stock C orporate Bonds Securities and C orporate Obligations Risk Categories 1 2 $0.00 $0.00 3 $0.00 Totals $0.00 Investments Not Subject to C ategorizations: Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments Total Investments $0.00 $0.00 Ca r r y ing Amount $0.00 0.00 0.00 $0.00 0.00 0.00 26,926.41 0.00 0.00 0.00 $26,926.41 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Floyd College Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $1,554,003.22 100,019.76 112,855.70 458,241.78 2,225,120.46 $2,225,120.46 Note 4. Inventories Inventories consisted of the following at June 30, 2004. June 30, 2004 B ook store Food Services Physical Plant O th e r T o ta l $256,727.76 3,117.76 2,647.37 $262,492.89 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the College had no allowance for uncollectible loans. Floyd College Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2003 $569,490.00 569,490.00 1,356,385.00 18,057,284.00 1,350,008.00 2,319,892.09 1,971,112.48 25,054,681.57 913,283.35 8,206,117.24 1,022,791.60 1,898,548.04 1,735,988.13 13,776,728.36 11,277,953.21 $11,847,443.21 Additions $169,000.00 169,000.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $738,490.00 0.00 738,490.00 737,126.24 119,888.00 52,212.38 909,226.62 368,563.12 462,108.10 11,050.03 841,721.25 1,356,385.00 18,425,847.12 1,350,008.00 1,977,671.99 0.00 2,012,274.83 0.00 25,122,186.94 61,487.13 478,060.53 53,535.88 122,664.79 222,792.52 938,540.85 (29,314.23) $139,685.77 6,148.71 47,806.05 5,353.59 388,845.10 252,914.17 701,067.62 140,653.63 $140,653.63 968,621.77 8,636,371.72 1,070,973.89 1,632,367.73 0.00 1,705,866.48 0.00 14,014,201.59 11,107,985.35 $11,846,475.35 Floyd College Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $1,783,643.59 $1,783,643.59 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 593,727.65 1,128,221.55 1,102,695.78 593,727.65 1,128,221.55 1,102,695.78 619,253.42 0.00 619,253.42 $593,727.65 $1,128,221.55 $1,102,695.78 $619,253.42 Current Portion $0.00 360,700.38 360,700.38 $360,700.38 Floyd College Annual Financial Report FY 2004 26 Note 9. Lease Obligations Floyd College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $0.00 $111,716.00 6,000.00 6,000.00 6,000.00 0.00 $0.00 $129,716.00 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2011. Floyd College currently has no capital leases. OPERATING LEASES Floyd College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2006. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Floyd College Annual Financial Report FY 2004 27 In 1992, Floyd College entered into a real property operating lease with the Etowah Foundation, for classroom space from 1992 through 1994 for annual rentals of $8,400.00. Over the years, additional space was added and the rent increased to the current amount of $50, 000 per year. The College anticipates termination of this agreement at the end of FY05 with the completion of the new campus at Cartersville. In 2002, Floyd College entered into a real property operating lease with Ray Dempsey, Lynn Dempsey and Rebecca Woodard for a parking lot at the Heritage Hall site in Rome for annual rentals of $6,000. The lease is one year in duration, with an option to renew annually for four years. Noncancellable operating lease expenditures in 2004 were $56,000.00 for real property. Floyd College Annual Financial Report FY 2004 28 Note 10. Retirement Plans Teachers Retirement System Of Georgia Plan Description Floyd College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Floyd College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Floyd College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $577,291.91 $590,820.48 $582,376.99 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Floyd College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer Floyd College Annual Financial Report FY 2004 29 contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Floyd College and the covered employees made the required contributions of $218,346.00 (10.03%) and $108,846.87 (5%), respectively. Georgia Defined Contribution Plan Plan Description Floyd College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $63,870.55 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Floyd College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective selfinsured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Floyd College Annual Financial Report FY 2004 30 Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Floyd College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Floyd College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Floyd College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the Floyd College Annual Financial Report FY 2004 31 policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 72 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Floyd College recognized as incurred $289,394.57 of expenditures, which was net of $90,088.20 of participant contributions. Floyd College Annual Financial Report FY 2004 32 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $4,805,403.76 999,898.37 1,274,434.82 84,287.83 144,889.24 438,372.11 4,087.82 $0.00 $0.00 $6,604.00 944,218.75 215,535.03 30,195.18 250.00 23,981.38 194,725.40 2,380.48 $0.00 867,074.70 211,203.36 19,003.24 21,903.65 18,362.92 174,888.80 $1,100.00 1,757,513.00 693,386.34 1,362.00 16,359.42 64,515.23 440,585.24 14,140.56 Total Expenses $7,751,373.95 $0.00 $0.00 $1,417,890.22 $1,312,436.67 $2,988,961.79 Natural Classification Functional Classification FY2004 Plant Operations Scholarships Auxiliary Unallocated & Maintenance & Fellowships Enterprises Expenses MCG only Patient Care Total Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $0.00 512,810.18 157,941.13 (10,262.50) 632.78 644,396.32 662,992.83 (52,024.35) $0.00 2,091,444.59 $0.00 188,679.91 44,593.98 10,262.50 132.16 6,430.87 1,321,300.68 7,120.85 $0.00 4,642.00 752,662.21 $0.00 $4,813,107.76 5,270,194.91 2,601,736.66 1,362.00 150,610.61 2,113,598.24 902,575.96 3,232,865.06 728,367.57 Total Expenses $1,916,486.39 $2,091,444.59 $1,578,520.95 $757,304.21 $0.00 $19,814,418.77 Floyd College Annual Financial Report FY 2004 33 Note 15. Component Units Component Unit Notes The Floyd College Foundation (foundation) is a legally separate, tax-exempt component unit of Floyd College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from the Administrative Office at 3175 Highway 27 South, Rome, GA 30162-1864. The Cartersville/Bartow College Foundation (foundation) is a legally separate, tax-exempt component unit of Floyd College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Complete financial statements for the foundation can be obtained from the Administrative Office at 3175 Highway 27 South, Rome, GA 30162-1864. Floyd College Annual Financial Report FY 2004 34 Investments for Component Units: The Floyd College Foundation holds endowment investments in the amount of $555,145.84. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Cartersville/Bartow College Foundation holds endowment investments in the amount of $23,322.89. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Resa Building Note July 1, 2003 $23,597.28 Additions $0.00 Reductions $23,597.28 June 30, 2004 $0.00 One Year $0.00 Total Long Term Debt $23,597.28 $0.00 $23,597.28 $0.00 $0.00 Floyd College Annual Financial Report FY 2004 35 FORT VALLEY STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Kofi Lomotey President Fort Valley State University Fort Valley, Georgia E. Thomas Oliver Senior Vice President for Fiscal Affairs FORT VALLEY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets ................................9 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 19 Note 3 Accounts Receivable............................................................................................. 21 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 24 Note 10 Retirement Plans ................................................................................................. 25 Note 11 Risk Management................................................................................................ 26 Note 12 Contingencies...................................................................................................... 27 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 14 Natural Classifications With Functional Classifications..................................... 29 FORT VALLEY STATE UNIVERSITY Management's Discussion and Analysis Introduction Fort Valley State University is one of the 34 institutions of the University System of Georgia. The University, located in Fort Valley, Georgia, was founded in 1895 and has become known for its agricultural research, technology and technology-related programs. The University offers associate, baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,000 EFT students each year, as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 118 2,289 127 2,226 117 2,049 Overview of the Financial Statements and Financial Analysis Fort Valley State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Fort Valley State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Fort Valley State University Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $2,835,773.56 24,142,817.08 2,083,700.58 29,062,291.22 June 30, 2003 $5,048,348.57 28,444,885.07 2,026,557.80 35,519,791.44 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,346,887.79 2,799,995.80 5,146,883.59 3,571,465.35 2,954,985.89 6,526,451.24 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 24,142,817.08 3,815,041.02 (4,042,450.47) $23,915,407.63 28,444,885.07 402,000.00 146,455.13 $28,993,340.20 The total assets of the institution decreased by ($6,457,500.22). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($4,302,067.99) of investment in plant, net of accumulated depreciation. The decrease is a net result of recording more than $5 million of accumulated depreciation associated with the library collections, and various capital equipment purchases and building improvements made during the year. The total liabilities for the year decreased by ($1,379,567.65). The primary cause for the decrease was in current liabilities, primarily ($917,902.03) in accrued payables, which contributed to the decrease in current assets. The overall decrease in total assets of ($6,457,500.22) and the decrease in total liabilities of ($1,379,567.65) yields a decrease in total net assets of ($5,077,932.57). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($4,302,067.99). Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and non- Fort Valley State University Annual Financial Report FY 2004 2 operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 June 30, 2003 Operating Revenues $39,884,585.08 $36,623,979.23 Operating Expenses Operating Loss 61,061,939.27 (21,177,354.19) 59,477,177.35 (22,853,198.12) Nonoperating Revenues and Expenses 18,807,959.71 21,436,598.76 Income (Loss) Before other revenues, expenses, gains or losses (2,369,394.48) (1,416,599.36) Other revenues, expenses, gains or losses 45,807.00 Increase in Net Assets (2,323,587.48) (1,416,599.36) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 28,993,340.20 (2,754,345.09) 26,238,995.11 35,131,318.97 (4,721,379.41) 30,409,939.56 Net Assets at End of Year $23,915,407.63 $28,993,340.20 The Statement of Revenues, Expenses, and Changes in Net Assets reflect 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: Fort Valley State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $3,882,206.44 3,642,854.70 26,404,456.57 128,524.75 5,570,817.86 255,724.76 39,884,585.08 18,960,053.00 7,288.46 (159,381.75) 18,807,959.71 45,807.00 45,807.00 $58,738,351.79 June 30, 2003 $3,135,268.69 4,195,105.22 24,243,652.11 77,301.65 4,153,179.11 819,472.45 36,623,979.23 21,556,017.00 (12,165.33) 21,543,851.67 0.00 $58,167,830.90 Fort Valley State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $13,247,533.96 5,653,777.70 2,720,012.40 10,252,285.32 3,992,631.50 5,901,475.40 3,504,412.82 11,485,514.69 5,053,318.16 (749,022.68) 0.00 61,061,939.27 0.00 $61,061,939.27 June 30, 2003 $15,838,800.36 4,385,658.50 3,133,804.31 5,809,802.19 3,925,005.41 6,408,412.20 4,863,235.18 10,377,351.80 4,735,107.40 59,477,177.35 107,252.91 $59,584,430.26 Governmental grants and contracts increased in the amount of approximately $2.5 million. This is primarily a result of a new USDA grant of more than $1.2 million for our Cooperative Extension program and an increase in student scholarships and financial assistance. Revenues associated with the residential life and food services, net of sponsored and unsponsored scholarships, category increased approximately $600,000 during the year. This increase reflects an improvement in our freshmen enrollment that resulted in more students living on campus. In addition, the increase is, in part due to our change in upgrading our food services provider. The compensation and employee benefits category decreased by approximately ($488,403.42). The decrease is a direct result of the institution's reduction in its workforce. Utilities increased by approximately $65,797.00 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004. Under non-operating revenues (expenses) state appropriations decreased by approximately ($2,595,964.00). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Fort Valley State University. We are hopeful that the economy is now on an upward trend. Fort Valley State University Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Fort Valley State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($17,547,882.55) 18,960,053.00 (2,192,464.98) 7,288.46 (773,006.07) 798,525.89 $25,519.82 June 30, 2003 ($22,868,142.49) 21,448,764.09 (995,138.54) (12,165.33) (2,426,682.27) 3,225,208.16 $798,525.89 Capital Assets The University had two significant capital asset reductions in fiscal year 2004. The retirement of all capital assets below the $5,000 threshold resulted in a $600,000 reduction and a retirement of several automobiles resulted in an additional reduction of $150,000. Fort Valley State University also completed major renovations to the College of Agriculture in FY2004. The project was funded, in part from MRR funds of $45,000 which were administered by the Georgia State Finance and Investment Commission (GSFIC). For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Fort Valley State University Annual Financial Report FY 2004 6 Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is sound. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Kofi Lomotey, President Fort Valley State University Fort Valley State University Annual Financial Report FY 2004 7 Statement of Net Assets FORT VALLEY STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $25,519.82 1,627,855.38 898,617.71 283,780.65 2,835,773.56 1,325.00 2,082,375.58 24,142,817.08 26,226,517.66 29,062,291.22 596,007.58 112,526.89 207,946.06 101,416.35 171,480.36 308,081.56 849,428.99 2,346,887.79 1,129,777.49 1,670,218.31 2,799,995.80 5,146,883.59 24,142,817.08 3,815,041.02 (4,042,450.47) $23,915,407.63 Fort Valley State University Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets FORT VALLEY STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $6,688,506.68 2,806,300.24 3,642,854.70 25,688,007.20 392,511.87 323,937.50 128,524.75 1,915,293.29 458,175.79 1,932,339.73 27,640.94 344,332.66 839,331.54 53,703.91 255,724.76 39,884,585.08 7,625,108.47 17,457,337.96 7,313,883.13 221.50 401,464.52 12,630,287.59 2,382,212.66 9,615,846.95 3,635,576.49 61,061,939.27 (21,177,354.19) Fort Valley State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 18,960,053.00 7,288.46 (159,381.75) 18,807,959.71 (2,369,394.48) 45,807.00 45,807.00 (2,323,587.48) 28,993,340.20 (2,754,345.09) 26,238,995.11 $23,915,407.63 Fort Valley State University Annual Financial Report FY 2004 10 Statement of Cash Flows FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIE S Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVIT IES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $6,730,403.92 3,642,854.70 25,813,512.71 128,524.75 (13,393,353.25) (32,374,312.09) (13,922,055.94) 1,915,293.29 458,175.79 1,932,339.73 27,640.94 344,332.66 839,331.54 53,703.94 255,724.76 (17,547,882.55) 18,960,053.00 18,960,053.00 45,807.00 (159,381.75) (2,103,980.64) 25,090.41 (2,192,464.98) 7,288.46 7,288.46 (773,006.07) 798,525.89 $25,519.82 Fort Valley State University Annual Financial Report FY 2004 11 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDED (USED) BY OPERA T ING A CTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating A ctivities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($21,177,354.19) 3,635,576.49 1,515,274.53 124,037.06 (199,742.65) (917,902.03) (553,361.56) (124,427.73) 150,017.53 ($17,547,882.55) Fort Valley State University had no Non-C ash Investing, Non-C apital Financing or C apital and Related Financing Transactions Fort Valley State University Annual Financial Report FY 2004 12 FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Fort Valley State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Fort Valley State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Fort Valley State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Fort Valley State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Fort Valley State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Fort Valley State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2004, Fort Valley State University does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 Fort Valley State University Annual Financial Report FY 2004 13 required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and Fort Valley State University Annual Financial Report FY 2004 14 local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Fort Valley State University when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Fort Valley State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Fort Valley State University Annual Financial Report FY 2004 15 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Fort Valley State University had accrued liability for compensated absences in the amount of $1,829,188.95 as of 7-1-2003. For FY2004, $732,838.85 was earned in compensated absences and employees were paid $582,821.32, for a net increase of $150,017.53. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,979,206.48. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Fort Valley State University Annual Financial Report FY 2004 16 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $103,078.56 2,187,245.74 1,524,716.72 $3,815,041.02 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $606,334.95 (566,498.87) (4,082,286.55) ($4,042,450.47) When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Fort Valley State University, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Fort Valley State University Annual Financial Report FY 2004 17 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Fort Valley State University Annual Financial Report FY 2004 18 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Fort Valley State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Fort Valley State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Fort Valley State University Annual Financial Report FY 2004 19 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $25,519.82 1,325.00 $26,844.82 Bank Balances $25,519.82 1,325.00 $26,844.82 Risk C ategories 1 2 $25,519.82 1,325.00 $0.00 $26,844.82 $0.00 3 $0.00 $0.00 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University had no investments Fort Valley State University Annual Financial Report FY 2004 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctivities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $233,051.33 267,686.63 1,627,855.38 284,315.87 336,335.56 2,749,244.77 222,771.68 $2,526,473.09 Note 4. Inventories Fort Valley State University had no inventories as of June 30, 2004. Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the University had no allowance for uncollectible loans. Fort Valley State University Annual Financial Report FY 2004 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,262,548.17 1,262,548.17 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $1,262,548.17 0.00 1,262,548.17 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 37,452,308.06 1,506,124.00 8,936,268.38 5,651,935.48 53,546,635.92 306,900.00 902,333.47 307,905.48 1,517,138.95 1,530,099.20 1,530,099.20 0.00 37,759,208.06 1,506,124.00 8,308,502.65 0.00 5,959,840.96 0.00 53,533,675.67 19,230,623.35 1,303,762.21 5,829,913.46 26,364,299.02 27,182,336.90 $28,444,885.07 935,914.65 108,541.29 5,001,744.00 6,046,199.94 (4,529,060.99) ($4,529,060.99) 93,591.47 132,349.67 1,030,976.66 500,174.40 1,757,092.20 0.00 20,072,946.53 1,279,953.83 4,798,936.80 0.00 4,501,569.60 0.00 30,653,406.76 (226,993.00) 22,880,268.91 ($226,993.00) $24,142,817.08 Fort Valley State University Annual Financial Report FY 2004 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $0.00 207,946.06 $207,946.06 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Current Portion $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 1,829,188.95 2,113,393.67 3,942,582.62 732,838.85 732,838.85 582,821.32 135,093.80 717,915.12 1,979,206.48 1,978,299.87 3,957,506.35 849,428.99 308,081.56 1,157,510.55 Total Long Term Obligations $3,942,582.62 $732,838.85 $717,915.12 $3,957,506.35 $1,157,510.55 Fort Valley State University Annual Financial Report FY 2004 23 Note 9. Lease Obligations Fort Valley State University is obligated under various operating leases for the use of office equipment (i.e., copiers) and certain farm equipment (i.e., backhoe). Future commitments for operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $0.00 $71,584.09 56,940.34 32,532.31 5,871.29 0.00 $0.00 $166,928.03 CAPITAL LEASES Fort Valley State University had no capital leases in the current fiscal year. OPERATING LEASES Fort Valley State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2008. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Fort Valley State University Annual Financial Report FY 2004 24 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Fort Valley State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Fort Valley State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Fort Valley State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 1,719,223.98 $ 1,726,854.49 $ 1,647,366.55 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Fort Valley State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, Fort Valley State University Annual Financial Report FY 2004 25 the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Fort Valley State University and the covered employees made the required contributions of $415,017.26 (10.03%) and $206,888.72 (5%), respectively. Georgia Defined Contribution Plan Plan Description Fort Valley State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $53,475.31 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Fort Valley State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Fort Valley State University Annual Financial Report FY 2004 26 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Fort Valley State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Fort Valley State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Fort Valley State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Fort Valley State University Annual Financial Report FY 2004 27 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 196 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Fort Valley State University recognized as incurred $ 1,132,856.08 of expenditures, which was net of $419,156.74 of participant contributions. Fort Valley State University Annual Financial Report FY 2004 28 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $7,625,108.47 1,998,711.70 2,475,133.73 112,066.71 149,576.50 95,487.89 759,452.80 31,996.16 $0.00 2,364,479.07 637,285.96 69,379.30 196,833.76 20,689.38 2,265,842.63 99,267.60 $0.00 1,595,326.71 463,592.11 85,241.55 24,065.84 525,208.62 26,577.57 $0.00 3,631,850.94 947,484.34 46,941.78 3,871.54 136,509.95 1,454,764.02 4,030,862.75 $0.00 2,141,191.64 531,581.26 44,568.92 360,140.99 37,658.17 874,411.52 3,079.00 $0.00 3,292,831.24 1,476,267.85 221.50 36,247.77 568.98 74,865.80 1,015,949.53 4,522.73 Total Expenses $13,247,533.96 $5,653,777.70 $2,720,012.40 $10,252,285.32 $3,992,631.50 $5,901,475.40 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e pr e c ia tio n $ 0.00 1,382,076.52 532,521.23 (459,503.47) 749.61 1,860,504.03 184,130.26 3,934.64 $ 0.00 11,485,514.69 $ 0.00 1,050,870.14 250,016.65 459,503.47 6,268.88 433,781.13 132,431.60 2,536,087.57 184,358.72 $ 0.00 (749,022.68) Total Expenses $ 3,504,412.82 $ 11,485,514.69 $ 5,053,318.16 ($ 749,022.68) Total Expenses $ 7,625,108.47 17,457,337.96 7,313,883.13 221.50 401,464.52 12,630,287.59 2,382,212.66 9,615,846.95 3,635,576.49 $ 61,061,939.27 Fort Valley State University Annual Financial Report FY 2004 29 GEORGIA COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Georgia College & State University Milledgeville, Georgia President Dr. Dorothy Leland Vice President for Fiscal Affairs Harry E. Keim GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Georgia College and State University Foundations Balance Sheet...........................10 Statement of Revenues, Expenses, and Changes in Net Assets ...............................11 Georgia College & State University Alumni Association, Inc. Statement of Activities...13 Georgia College & State University Foundation, Inc. Statement of Activities ..............14 Statement of Cash Flows ................................................................................................... 15 Note 1 Summary of Significant Accounting Policies ...................................................... 17 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 23 Note 3 Accounts Receivable............................................................................................. 26 Note 4 Inventories............................................................................................................. 26 Note 5 Notes/Loans Receivable........................................................................................ 26 Note 6 Capital Assets........................................................................................................ 27 Note 7 Deferred Revenue.................................................................................................. 28 Note 8 Long-Term Liabilities ........................................................................................... 28 Note 9 Lease Obligations.................................................................................................. 29 Note 10 Retirement Plans ................................................................................................. 31 Note 11 Risk Management................................................................................................ 33 Note 12 Contingencies...................................................................................................... 33 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 34 Note 14 Natural Classifications With Functional Classifications..................................... 35 Note 15 Component Units ........................................................................ 36 GEORGIA COLLEGE & STATE UNIVERSITY Management's Discussion and Analysis Introduction Georgia College & State University is one of the 34 institutions of the University System of Georgia. The University, located in Milledgeville, Georgia, was founded in 1889 as Georgia Normal and Industrial College. It later became Georgia State College for Women (GSCW). In 1967 it became Georgia College and was re-established as a co-educational institution. In 1995 the Board of Regents gave Georgia College university status, a new mission, and new name, "Georgia College & State University". As the state's designated public liberal arts university, GC&SU is committed to combining the educational experiences typical of esteemed private liberal arts colleges with the affordability of public higher education. GC&SU is a residential learning community that emphasizes undergraduate education and offers selected graduate programs. The faculty is dedicated to challenging students and fostering excellence in the classroom and beyond. GC&SU seeks to endow its graduates with a passion for achievement, a lifelong curiosity, and exuberance for living. GC&SU offers degree programs in the Arts & Sciences, Business, Education and Health Sciences as well as Pre-Professional and Graduate Studies. There are over 5,000 students enrolled on the Milledgeville campus. Faculty Students FY2004 FY2003 FY2002 292 7,096 296 6,696 282 6,352 Overview of the Financial Statements and Financial Analysis Georgia College & State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a Georgia College and State University Annual Financial Report FY 2004 1 fiscal snapshot of Georgia College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $11,708,168.39 40,616,521.03 8,163,068.96 60,487,758.38 June 30, 2003 $24,330,572.22 33,487,633.21 5,432,135.58 63,250,341.01 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 4,909,114.42 798,922.45 5,708,036.87 16,107,204.80 810,541.34 16,917,746.14 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 40,580,785.49 2,743,388.41 6,191,362.74 5,264,184.87 $54,779,721.51 33,455,392.46 2,640,662.32 4,970,975.50 5,265,564.59 $46,332,594.87 The total assets of the institution decreased by ($2,762,582.63). A review of the Statement of Net Assets will reveal that the investment in plant, net of accumulated depreciation increased by $7,128,887.82 but was offset by a decrease in current assets in the amount of $12,622,403.83. Georgia College and State University Annual Financial Report FY 2004 2 The decrease in current assets is the result of lower receivables for student accounts because fall semester tuition and fees were not recognized prior to June 30, 2004. Additionally consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($11,209,709.27). The primary cause for the decrease was a reduction in deferred revenue. Because student tuition and fees for fall semester were not recognized prior to June 30, 2004, both accounts receivable and deferred revenue were lower. This is consistent with the state auditor's observation that fall semester should not be reflected in the current fiscal year receivables and revenue. The combination of the decrease in total assets of ($2,762,582.63) and the decrease in total liabilities of ($11,209,709.27) yields an increase in total net assets of $8,447,126.64. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $7,125,393.03. Net assets restricted for expendable represents the additional increase in total net assets. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Georgia College and State University Annual Financial Report FY 2004 3 Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $29,528,266.53 Operating Expenses Operating Loss 74,504,381.90 (44,976,115.37) Nonoperating Revenues and Expenses 46,359,864.01 Income (Loss) Before other revenues, expenses, gains or losses 1,383,748.64 Other revenues, expenses, gains or losses 80,000.00 Increase in Net Assets 1,463,748.64 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 46,332,594.87 6,983,378.00 53,315,972.87 Net Assets at End of Year $54,779,721.51 June 30, 2003 $27,303,863.26 72,405,743.75 (45,101,880.49) 46,017,890.65 916,010.16 4,335,749.30 5,251,759.46 38,579,262.43 2,501,572.98 41,080,835.41 $46,332,594.87 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Georgia College and State University Annual Financial Report FY 2004 4 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $15,344,299.75 316,666.51 1,022,919.24 12,091,271.22 753,109.81 29,528,266.53 26,316,747.76 17,064,271.78 2,212,906.61 722,199.33 45,409.54 46,361,535.02 80,000.00 80,000.00 $75,969,801.55 June 30, 2003 $13,116,462.62 177,895.14 785,978.87 11,784,756.78 1,438,769.85 27,303,863.26 30,700,901.26 15,870,115.64 43,635.63 86,947.65 (681,289.83) 46,020,310.35 4,266,742.80 69,006.50 4,335,749.30 $77,659,922.91 Georgia College and State University Annual Financial Report FY 2004 5 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $26,569,168.80 187,545.36 107,635.49 3,522,227.14 3,551,045.57 6,941,614.65 7,597,836.76 12,923,678.62 11,445,244.49 1,658,385.02 74,504,381.90 1,671.01 $74,506,052.91 June 30, 2003 $26,919,428.92 41,019.63 248,595.89 4,126,930.29 3,048,519.34 7,355,966.57 7,279,227.43 12,226,533.25 11,405,302.88 (245,780.45) 72,405,743.75 2,419.70 $72,408,163.45 The compensation and employee benefits category increased by approximately $185,601.24. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $542,505.07 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004. Under non-operating revenues (expenses) state appropriations decreased by approximately ($4,384,153.50). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Georgia College & State University. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by the Georgia College & State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles Georgia College and State University Annual Financial Report FY 2004 6 the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 3 ,6 7 4 ,7 4 1 .3 6 ) 4 5 ,9 5 0 ,9 0 5 .4 3 (2 ,7 6 3 ,8 4 2 .7 5 ) (1 5 9 ,8 6 9 .7 0 ) (6 4 7 ,5 4 8 .3 8 ) 1 1 ,0 4 3 ,5 5 8 .3 8 $ 1 0 ,3 9 6 ,0 1 0 .0 0 June 30, 2003 ($ 4 5 ,2 3 5 ,8 1 4 .1 2 ) 4 4 ,9 3 2 ,7 3 2 .4 7 (1 ,0 4 6 ,3 9 7 .2 1 ) 3 1 1 ,0 1 2 .0 2 (1 ,0 3 8 ,4 6 6 .8 4 ) 1 2 ,0 8 2 ,0 2 5 .2 2 $ 1 1 ,0 4 3 ,5 5 8 .3 8 Capital Assets The University completed the first phase of the library project expanding this facility to include an additional 95,000 square feet. The additional library space is scheduled to open fall 2004 and phase two, renovation of the existing library, will continue in fiscal 2005. Additional GSFIC projects include a Central Chiller Plant and Restoration of the Old Governor's Mansion. Both of these are scheduled for completion early in fiscal year 2005. Total GSFIC funding for the Library is $10,326,302 for Phase I Library Addition and $2,691,698 for Phase II Library Renovation. Other projects currently funded by GSFIC include $4,350,000 for a Central Chiller Plant and $9,000,000 for Restoration of the Old Governor's Mansion. Both of these are scheduled for completion early in fiscal year 2005 and will be included in Capital Assets in the year GC&SU the assets are turned over to GC&SU by GSFIC. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Georgia College & State University has included the financial statements and notes for all required component units for FY2004. As of June 30, 2004, the Georgia College & State University Foundation had endowed investments of $8.1 million, buildings valued at $51 million and long-term debt of $65 million in the form of two bond issues. Also, at June 30, 2004, the Georgia College & State University Alumni Association had endowed investments of $4.6 million. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Georgia College and State University Annual Financial Report FY 2004 7 Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Dorothy Leland, President Georgia College & State University Georgia College and State University Annual Financial Report FY 2004 8 Statement of Net Assets GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects U n r e s tr ic te d TOTAL NET ASSETS June 30, 2004 $7,652,621.59 130,000.00 199,127.18 1,012,266.64 1,268,564.66 1,274,200.24 171,388.08 11,708,168.39 2,743,388.41 2,274,363.92 3,145,316.63 40,616,521.03 48,779,589.99 60,487,758.38 389,942.67 453,311.75 2,607,538.72 126,227.11 267,114.56 2,587.80 1,062,391.81 4,909,114.42 795,261.29 3,661.16 798,922.45 5,708,036.87 40,580,785.49 2,743,388.41 6,191,362.74 5,264,184.87 $54,779,721.51 Georgia College and State University Annual Financial Report FY 2004 9 Georgia College & State University Foundation Balance Sheet Georgia C ollege & State Univ ersity Foundations Balance Sheet (FASB) June 30, 2004 Alum ni A s s o c ia t io n F o und a tio n A s s e ts C ash and C ash Equivalents Endowm ent Investm ents Pledges Receivable, net C apital A ssets, net O ther A ssets Total A ssets $91,350.00 4,633,598.00 104,029.00 33,484.00 4,862,461.00 $734,497.00 8,113,971.00 433,446.00 50,995,083.00 18,254,742.00 78,531,739.00 Lia b ilitie s A ccounts Payable Long-Term Debt O ther Liabilities Total Liabilities 0.00 1,888,931.00 65,339,383.00 68,195.00 67,296,509.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 122,073.00 89,700.00 4,650,688.00 4,862,461.00 2,289,987.00 948,697.00 7,996,546.00 11,235,230.00 Total liabilities and Net Assets $4,862,461.00 $78,531,739.00 Georgia College and State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA C OLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $18,185,753.48 2,801,353.89 40,099.84 311,628.32 5,038.19 1,022,919.24 3,456,490.34 2,813,753.23 3,067,770.78 424,099.84 591,901.80 1,615,269.38 121,985.85 753,109.81 29,528,266.53 17,329,839.02 14,692,480.34 8,761,472.76 400,339.46 13,361,679.12 2,680,167.19 14,500,004.83 2,778,399.18 74,504,381.90 (44,976,115.37) Georgia College and State University Annual Financial Report FY 2004 11 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 26,316,747.76 15,393,814.39 105,023.58 1,565,433.81 2,212,906.61 722,199.33 (1,671.01) 45,409.54 46,359,864.01 1,383,748.64 80,000.00 80,000.00 1,463,748.64 46,332,594.87 6,983,378.00 53,315,972.87 $54,779,721.51 Georgia College and State University Annual Financial Report FY 2004 12 Georgia College & State University Alumni Association, Inc. Statement of Activities Georgia College & State University Alumni Association, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Other Income Reclassifications Program Total Revenues and Other Support $0.00 617.00 7,956.00 120,220.00 $22,357.00 125,840.00 69,063.00 1,001.00 213,941.00 342,734.00 (213,941.00) 4,320.00 $256,755.00 244,676.00 13,088.00 514,519.00 $279,112.00 126,457.00 321,695.00 134,309.00 0.00 0.00 861,573.00 Expenses Institutional Support Academic Support Student Financial Aid Fundraising Total Expenses Change in Net Assets 138,090.00 29,209.00 159,024.00 12,368.00 338,691.00 4,043.00 0.00 4,320.00 0.00 514,519.00 138,090.00 29,209.00 159,024.00 12,368.00 338,691.00 522,882.00 Net Assets Beginning Net Assets Ending Net Assets 118,030.00 $122,073.00 85,380.00 $89,700.00 4,136,169.00 $4,650,688.00 4,339,579.00 $4,862,461.00 Georgia College and State University Annual Financial Report FY 2004 13 Georgia College & State University Foundation, Inc. Statement of Activities Georgia College & State University Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenue Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain(Loss) on Sale of jAssets Other Income Reclassifications Program Total Revenues and Othe Support $1,949,771.00 $37,512.00 40,428.00 (536,895.00) 5,777,064.00 1,036,584.00 8,304,464.00 $696,756.00 $143,364.00 46,422.00 171,039.00 224,146.00 (1,036,584.00) 245,143.00 $121,766.00 554,866.00 193.00 676,825.00 $2,768,293.00 $180,876.00 641,716.00 (365,856.00) 6,001,403.00 0.00 0.00 9,226,432.00 Expenses Institutional Support Academic Support Student Financial Aid Fundraising Total Expenses Change in Net Assets 7,068,703.00 478,326.00 296,981.00 71,673.00 7,915,683.00 388,781.00 0.00 245,143.00 0.00 676,825.00 7,068,703.00 478,326.00 296,981.00 71,673.00 0.00 7,915,683.00 1,310,749.00 Net Assets Beginning Net Assets Ending Net Assets 1,901,206.00 $2,289,987.00 703,554.00 $948,697.00 7,319,721.00 $7,996,546.00 9,924,481.00 $11,235,230.00 Georgia College and State University Annual Financial Report FY 2004 14 Statement of Cash Flows GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVIT IES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $18,208,710.09 113,987.19 1,122,447.55 (27,457,133.42) (31,973,037.63) (16,163,033.01) (754,097.53) 634,374.34 5,709,972.20 2,885,699.86 1,491,473.28 346,037.61 382,523.99 1,154,076.96 121,985.85 501,271.31 (43,674,741.36) 26,316,747.76 (157,981.06) 19,792,138.73 45,950,905.43 (2,751,952.78) (10,218.96) (1,671.01) (2,763,842.75) 440,098.63 94,434.88 (694,403.21) (159,869.70) (647,548.38) 11,043,558.38 $10,396,010.00 Georgia College and State University Annual Financial Report FY 2004 15 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating A ctivities June 30, 2004 ($44,976,115.37) 2,778,399.18 9,954,705.19 (9,105.69) (133,943.23) 83,856.73 (8,854,272.08) (2,522,690.17) 4,424.08 ($43,674,741.36) ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations C hange in fair value of investments recognized as a com ponent of interest i $63,984.71 $535,359.75 Georgia College and State University Annual Financial Report FY 2004 16 GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Georgia College & State University serves the state by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Georgia College & State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia College & State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia College & State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia College & State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Georgia College & State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Georgia College & State University is reporting the activity for the Georgia College & State University Foundation and the Georgia College Alumni Association. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Georgia College and State University Annual Financial Report FY 2004 17 Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Georgia College and State University Annual Financial Report FY 2004 18 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia College & State University when complete. For the year ended June 30, 2004, GSFIC did not transfer capital additions to Georgia College & State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. The University implemented an application confirmation deposit in Fiscal Year 2004. These deposits are credited to student accounts for tuition and fees at registration. Georgia College and State University Annual Financial Report FY 2004 19 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Georgia College & State University had accrued liability for compensated absences in the amount of $1,853,229.02 as of 7-1-2003. For FY2004, $3,417,636.15 was earned in compensated absences and employees were paid $3,413,212.07, for a net increase of $4,424.08. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,857,653.10 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Georgia College and State University Annual Financial Report FY 2004 20 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Expendable June 30, 2004 $1,999,231.70 3,385,085.41 807,045.63 $6,191,362.74 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $415,604.68 (808,344.44) 1,274,200.24 4,382,724.39 $5,264,184.87 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Georgia College & State University, 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. Georgia College and State University Annual Financial Report FY 2004 21 Classification of Revenues The University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Georgia College and State University Annual Financial Report FY 2004 22 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Georgia College & State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia College & State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Georgia College and State University Annual Financial Report FY 2004 23 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $10,396,010.00 93,774.65 $10,489,784.65 Bank Balances $10,670,150.10 $93,774.65 $10,763,924.75 Risk Categories 1 2 3 $495,636.79 $0.00 $10,174,513.31 93,774.65 $495,636.79 $0.00 $10,268,287.96 Georgia College and State University Annual Financial Report FY 2004 24 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Un-insured and un-registered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Un-insured and un-registered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 403,712.00 $0.00 0.00 3 $0.00 C arrying Amount $0.00 403,712.00 T o ta ls $403,712.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $403,712.00 1,776,877.27 130,000.00 $2,310,589.27 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Georgia College and State University Annual Financial Report FY 2004 25 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $259,142.96 221,644.53 199,127.18 1,012,266.64 853,455.50 2,545,636.81 65,678.33 $2,479,958.48 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $1,274,200.24 $1,274,200.24 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Georgia College and State University Annual Financial Report FY 2004 26 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $634,079.21 4,027,789.13 4,661,868.34 Additions $0.00 2,301,695.06 2,301,695.06 Reductions $0.00 1,098,841.94 1,098,841.94 Ending Balance 6/30/2004 $634,079.21 5,230,642.25 5,864,721.46 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 44,273,848.60 760,319.00 6,767,145.38 120,472.65 5,943,995.91 174,800.00 58,040,581.54 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 19,217,036.64 521,482.73 4,602,440.09 68,436.64 4,773,621.80 31,798.77 29,214,816.67 Total Capital Assets, Being Depreciated, Net 28,825,764.87 Capital Assets, net $33,487,633.21 7,647,046.61 106,700.00 1,127,465.43 6,885.45 355,893.29 24,300.00 9,268,290.78 607,720.74 47,500.00 52,740.00 24,300.00 732,260.74 0.00 51,920,895.21 867,019.00 7,286,890.07 79,858.10 6,247,149.20 174,800.00 66,576,611.58 2,194,515.86 43,350.95 651,869.37 17,566.57 304,295.00 4,369.98 3,215,967.73 6,052,323.05 $8,354,018.11 219,451.59 4,335.10 128,729.68 22,036.02 231,420.00 605,972.39 0.00 21,192,100.91 560,498.58 5,125,579.78 63,967.19 4,846,496.80 36,168.75 31,824,812.01 126,288.35 34,751,799.57 $1,225,130.29 $40,616,521.03 Georgia College and State University Annual Financial Report FY 2004 27 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $2,548,134.38 59,404.34 $2,607,538.72 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $32,240.75 Additions $0.00 Reductions Ending Balance June 30, 2004 $25,991.79 $6,248.96 Current Portion $2,587.80 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 1,853,229.02 3,417,636.15 1,853,229.02 3,417,636.15 3,413,212.07 3,413,212.07 1,857,653.10 0.00 1,857,653.10 1,062,391.81 1,062,391.81 $1,885,469.77 $3,417,636.15 $3,439,203.86 $1,863,902.06 $1,064,979.61 Georgia College and State University Annual Financial Report FY 2004 28 Note 9. Lease Obligations Georgia College & State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $3,153.24 1,776.00 1,776.00 592.00 $423,903.37 31,666.00 26,446.00 27,238.00 28,054.00 58,682.00 50.00 50.00 50.00 30.00 7,297.24 1,048.28 $6,248.96 $596,169.37 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2008. Expenditures for fiscal year 2004 were $11,889.97 of which $1,671.01 represented interest. Total principal paid on capital leases was $10,218.96 for the fiscal year ended June 30, 2004. Interest rates range from 6.20 percent to 8.30 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Equipment Totals $ 6,248.96 $ 6,248.96 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Georgia College & State University has various capital leases for equipment with an outstanding balance at June 30, 2004 in the amount of $6,248.96. Georgia College and State University Annual Financial Report FY 2004 29 OPERATING LEASES Georgia College & State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2032. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. In July 2003, Georgia College & State University entered into a real property operating lease with the Georgia College Alumni Association, a related party, for office space from 2003 through June 2004 for monthly rentals of $950.00. The agreement does not contain a renewal option. Under this agreement, the University paid $11,400.00 in the current year. On January 30, 2001, Georgia College & State University entered into a real property operating lease with McComb Family Trust for additional Bookstore space. The monthly rent of $1,900.00 increased in 2003 to $1,957.00 and in 2004 to $2,016.00. This operating lease will be considered for renewal in 2011. Under this agreement, the lessee paid the lessor $24,192.00 in the current year. On July 1, 2003, Georgia College & State University entered into a real property operating lease with J. Chambers for storage space at a monthly rental of $500.00. This operating lease was renewed July 1, 2004 to extend the lease to June 20, 2005. Under this agreement, the lessor paid the lessee $6,000.00 in the current year. Non-cancelable operating lease expenditures in 2004 were $41,592.00 for real property. Georgia College and State University Annual Financial Report FY 2004 30 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia College & State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia College & State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia College & State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,682,743.30 $1,768,795.95 $1,700,531.89 Employees' Retirement System of Georgia Plan Description Georgia College & State University does not participate in the Employees' Retirement System of Georgia. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits Georgia College and State University Annual Financial Report FY 2004 31 are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia College & State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Georgia College & State University and the covered employees made the required contributions of $1,105,084.42 (10.03%) and $550,801.39 (5%), respectively. Georgia Defined Contribution Plan Plan Description Georgia College & State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $48,824.05 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Georgia College and State University Annual Financial Report FY 2004 32 Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia College & State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Georgia College & State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia College & State University expects such amounts, if any, to be immaterial to its overall financial position. Georgia College and State University Annual Financial Report FY 2004 33 Litigation, claims and assessments filed against Georgia College & State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 236 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Georgia College & State University recognized as incurred $751,145.20 of expenditures, which was net of $287,014.31 of participant contributions. Georgia College and State University Annual Financial Report FY 2004 34 Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below. Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $16,422,516.38 2,751,626.65 4,520,377.48 238,400.18 4,500.00 167,454.14 2,387,831.99 76,461.98 $20,267.00 66,639.10 14,229.03 14,710.57 403.02 70,840.84 455.80 $0.00 78,469.33 20,293.01 51.37 1,620.00 5,259.45 1,942.33 $813,694.12 1,559,750.67 598,896.66 33,967.98 36,768.09 334,600.30 144,549.32 $0.00 1,998,216.47 494,902.80 39,358.09 68,499.45 948,713.73 1,355.03 $0.00 3,661,795.41 1,721,047.67 35,163.07 79,756.95 1,397,940.54 45,911.01 Total Expenses $26,569,168.80 $187,545.36 $107,635.49 $3,522,227.14 $3,551,045.57 $6,941,614.65 Natural C lassification Func tional Classific ation F Y 2004 Plant Operations Scholarships Auxiliary Unallocated & Maintenance & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 3,163,988.61 1,025,822.05 (1,215,045.09) 9,151.80 1,815,102.10 2,762,735.53 36,081.76 $ 0.00 12,923,678.62 $ 73,361.52 1,411,994.10 365,904.06 1,215,045.09 29,536.40 433,500.50 510,563.44 7,280,227.66 125,111.72 $ 0.00 (688,145.21) 2,346,530.23 Total Expenses $ 7,597,836.76 $ 12,923,678.62 $ 11,445,244.49 $ 1,658,385.02 Total Expenses $ 17,329,839.02 14,692,480.34 8,761,472.76 0.00 400,339.46 13,361,679.12 2,680,167.19 14,500,004.83 2,778,399.18 $ 74,504,381.90 Georgia College and State University Annual Financial Report FY 2004 35 Note 15. Component Units Component Unit Notes Georgia College & State University Foundation (foundation) and Georgia College & State University Alumni Association, Inc. (association) are legally separate, tax-exempt component units of Georgia College & State University (university). The foundation and alumni association act primarily as fund-raising organizations to supplement the resources that are available to the university in support of its programs. The boards of the foundation and association are selfperpetuating and consist of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation or association, the majority of resources or income thereon, which the foundation and association hold and invest, are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation and the association can only be used by, or for the benefit of, the university, the foundation and the association are considered component units of the university and are discretely presented in the university's financial statements. The foundation information includes three single member limited liability companies (LLC's) whose sole member is the foundation. The limited liability companies (LLC I, II and III) were formed primarily to construct and finance various buildings and improvements located on the property of Georgia College & State University. LLC III was not officially operational until July 14, 2004. The foundation and association are private nonprofit organizations that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $339,350 and the association distributed $159,024 to the University for both restricted and unrestricted purposes. Complete financial statements for both the Foundation and Alumni Association can be obtained from the Georgia College & State University Advancement Office at Campus Box 96, Milledgeville, GA 31061. Georgia College and State University Annual Financial Report FY 2004 36 Investments for Component Units: Georgia College & State University Foundation holds endowment investments of $8.1 million and the Alumni Association holds endowment investments of $4.6 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia College & State University Foundation and Alumni Association, in conjunction with the donors, has established a spending plan whereby 4.75% of the fair market value at year end may be used for academic scholarships and .25% may be used for administrative expenses. Long Term Liabilities for Component Units: Student Activities Facilities Bonds are issued by the Georgia College & State University Real Estate Foundation, a component unit of the GC&SU Foundation, to finance a student activities facility at Georgia College & State University. The bonds mature serially and are serviced by a pledge of a portion of student activity fees paid by students each semester at Georgia College & State University. Lease Revenue Bonds were issued by the Georgia College & State University Foundation Property II, LLC to finance a student center and parking lot at the University. The bonds, serial and term, are secured by a pledge of a portion of rental income to be paid by the Board of Regents of the University System of Georgia. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year Student Housing Revenue Bonds Lease Revenue Bonds Total Long TermDebt $55,875,000.00 0.00 $55,875,000.00 $0.00 7,840,000.00 $7,840,000.00 $0.00 0.00 $0.00 $55,875,000.00 7,840,000.00 $63,715,000.00 $0.00 0.00 $0.00 Georgia College and State University Annual Financial Report FY 2004 37 Debt Service Obligations for Component Units A nnual debt s ervice requirements to maturity for Student Hous ing Revenue Bonds , LLC I) payable are as follows : Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Prin c ip a l $0.00 480,000.00 560,000.00 685,000.00 815,000.00 6,195,000.00 8,495,000.00 10,875,000.00 13,905,000.00 13,865,000.00 Interes t Total $2,318,437.00 1,947,225.00 1,929,025.00 1,907,238.00 1,880,987.00 8,836,362.00 7,535,413.00 5,848,938.00 3,690,837.00 1,000,388.00 $2,318,437.00 2,427,225.00 2,489,025.00 2,592,238.00 2,695,987.00 15,031,362.00 16,030,413.00 16,723,938.00 17,595,837.00 14,865,388.00 $55,875,000.00 $36,894,850.00 $92,769,850.00 A nnual debt s ervice requirements to maturity for Leas e Revenue Bonds (LLC I I) payable are as follows : Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Bonds Payable Prin c ip a l Interes t Total $0.00 265,000.00 275,000.00 275,000.00 280,000.00 1,555,000.00 1,860,000.00 1,785,000.00 1,545,000.00 $300,421.00 297,439.00 291,019.00 284,144.00 276,506.00 1,220,613.00 905,275.00 491,634.00 47,700.00 $300,421.00 562,439.00 566,019.00 559,144.00 556,506.00 2,775,613.00 2,765,275.00 2,276,634.00 1,592,700.00 $7,840,000.00 $4,114,751.00 $11,954,751.00 Georgia College and State University Annual Financial Report FY 2004 38 GAINESVILLE COLLEGE Financial Report For the Year Ended June 30, 2004 Martha T. Nesbitt President Gainesville College Gainesville, Georgia Debbra Pilgrim Interim Vice President for Fiscal Affairs GAINESVILLE COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Gainesville College Foundation Balance Sheet ..................................................8 Statement of Revenues, Expenses, and Changes in Net Assets ................................9 Gainesville College Foundation Statement of Activities .......................................11 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 20 Note 3 Accounts Receivable............................................................................................. 22 Note 4 Inventories............................................................................................................. 22 Note 5 Notes/Loans Receivable........................................................................................ 22 Note 6 Capital Assets........................................................................................................ 23 Note 7 Deferred Revenue.................................................................................................. 24 Note 8 Long-Term Liabilities ........................................................................................... 24 Note 9 Lease Obligations.................................................................................................. 24 Note 10 Retirement Plans ................................................................................................. 25 Note 11 Risk Management................................................................................................ 26 Note 12 Contingencies...................................................................................................... 27 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 14 Natural Classifications With Functional Classifications..................................... 29 Note 15 Component Units ........................................................................ 30 GAINESVILLE COLLEGE Management's Discussion and Analysis Introduction Gainesville College is one of the 34 institutions of the University System of Georgia. The institution, located south of Gainesville, Georgia was founded in 1964 and has become one of the premier two-year colleges in the state, specializing in a strong core curriculum and quality support services and offering Associate of Arts, Associate of Science and Associate of Applied Science degrees. With a second campus south of Athens, Georgia, opening in 2003, the College enjoys both high student satisfaction ratings and high retention rates and has integrated technology into both the curriculum and administrative services. The institution attracts a highly qualified faculty and student body of more than 5,000 students each year. In the fall semester of 2003, the College experienced an unprecedented enrollment growth due primarily to the acquisition of its second campus. Faculty* Students FY2004 FY2003 FY2002 700 12,691 392 9,010 351 8,001 *Represents a total of full-time and part-time faculty. Overview of the Financial Statements and Financial Analysis Gainesville College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Gainesville College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Gainesville College Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $4,449,145.96 17,840,596.73 355,872.10 22,645,614.79 June 30, 2003 $3,412,601.70 19,197,099.28 306,891.10 22,916,592.08 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 1,906,787.74 162,899.50 2,069,687.24 1,699,956.55 172,859.93 1,872,816.48 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 17,840,596.73 10,722.50 505,651.79 2,218,956.53 $20,575,927.55 17,472,474.01 10,722.50 491,240.16 3,069,338.93 $21,043,775.60 The total assets of the institution decreased by ($270,977.29). A review of the Statement of Net Assets will reveal that this decrease was primarily due to a decrease of ($1,356,502.55) of investment in plant, net of accumulated depreciation. This decrease coupled with an increase in current assets of $1,036,544.26 resulted in the overall decrease. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $196,870.76. The primary increase was in current liabilities, particularly deferred revenue, which reflects the College's increased enrollment for Gainesville College Annual Financial Report FY 2004 2 summer semester. The combination of the decrease in total assets of ($270,977.29) and the increase in total liabilities of $196,870.76 yields a decrease in total net assets of ($467,848.05). The decrease in total net assets is primarily in the category of unrestricted net assets in the amount of ($850,382.40). Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $12,066,934.72 June 30, 2003 $9,573,180.06 Operating Expenses Operating Loss 24,418,737.91 (12,351,803.19) 21,556,844.60 (11,983,664.54) Nonoperating Revenues and Expenses 12,611,317.44 11,855,703.42 Income (Loss) Before other revenues, expenses, gains or losses 259,514.25 (127,961.12) Other revenues, expenses, gains or losses Increase in Net Assets 259,514.25 (127,961.12) Net Assets at beginning of year, as originally rep Prior Year Adjustments Net Assets at beginning of year, restated 21,043,775.60 (727,362.30) 20,316,413.30 20,176,949.41 994,787.31 21,171,736.72 Net Assets at End of Year $20,575,927.55 $21,043,775.60 Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Gainesville College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $6,727,795.87 2,571,802.67 296,049.07 2,406,781.62 64,505.49 12,066,934.72 11,911,211.74 764,321.00 17,251.76 (81,467.06) 12,611,317.44 0.00 $24,678,252.16 June 30, 2003 $5,126,158.50 2,290,479.13 295,691.74 1,779,471.10 81,379.59 9,573,180.06 11,223,384.00 741,301.60 21,795.67 (130,777.85) 11,855,703.42 0.00 $21,428,883.48 Gainesville College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $10,198,996.90 93,256.02 3,657,603.13 2,018,894.16 3,150,450.44 1,795,464.56 1,217,933.38 1,966,302.22 319,837.10 24,418,737.91 0.00 $24,418,737.91 June 30, 2003 $9,068,974.55 145,957.80 2,725,562.29 1,948,571.43 2,600,653.38 2,343,650.53 1,260,814.63 1,462,659.99 21,556,844.60 0.00 $21,556,844.60 The compensation and employee benefits category increased by approximately $1,402,749.16. The increase reflects an increased cost of health insurance for the employees of the institution and the addition of a small number of new employees. Utilities increased by approximately $55,651.26 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004 and the additional utilities for the Oconee campus. Under non-operating revenues (expenses) state appropriations increased by approximately $687,827.74. Due to a sluggish economy, a challenge has been created for all institutions of the University System of Georgia and, thus, for Gainesville College. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by the Gainesville College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash Gainesville College Annual Financial Report FY 2004 5 used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 1 ,7 4 7 ,2 1 6 .8 9 ) 1 2 ,7 4 4 ,1 8 5 .5 0 (3 1 1 ,1 3 1 .7 9 ) 1 7 ,2 5 1 .7 6 7 0 3 ,0 8 8 .5 8 2 ,5 8 8 ,0 4 9 .7 9 $ 3 ,2 9 1 ,1 3 8 .3 7 June 30, 2003 ($ 1 1 ,2 5 2 ,5 1 5 .0 5 ) 1 2 ,1 1 2 ,6 8 8 .9 3 (2 8 6 ,4 1 6 .7 9 ) 2 1 ,7 9 5 .6 7 5 9 5 ,5 5 2 .7 6 1 ,9 9 2 ,4 9 7 .0 3 $ 2 ,5 8 8 ,0 4 9 .7 9 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2004. Construction of the G.W. Bailey Amphitheatre was completed and it was placed into service early in fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Gainesville College has included the financial statements and notes for all required component units for FY2004. The Gainesville College Foundation had endowment investments of $8.1 M as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will monitor resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Martha T. Nesbitt, President Gainesville College Gainesville College Annual Financial Report FY 2004 6 Statement of Net Assets GAINESVILLE COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x pe nd a b le Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $2,935,266.27 16,555.71 615,069.13 298,017.07 584,237.78 4,449,145.96 355,872.10 17,840,596.73 18,196,468.83 22,645,614.79 (82,758.82) 1,384,751.06 18,388.99 186,941.73 399,464.78 1,906,787.74 162,899.50 162,899.50 2,069,687.24 17,840,596.73 10,722.50 505,651.79 2,218,956.53 $20,575,927.55 Gainesville College Annual Financial Report FY 2004 7 Gainesville College Foundation Balance Sheet Gainesv ille C ollege Foundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $109,558.00 8,118,921.00 5,550.00 8,400.00 8,242,429.00 15,630.00 15,630.00 556,288.00 5,155,257.00 2,515,254.00 $8,226,799.00 Gainesville College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets GAINESVILLE C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $7,794,940.85 1,061,968.15 5,176.83 2,342,928.09 117,001.00 111,873.58 296,049.07 2,369,098.28 8,923.37 7,716.20 21,043.77 64,505.49 12,066,934.72 6,720,629.89 6,299,649.75 3,225,202.98 141,813.98 1,222,707.38 759,004.76 5,201,259.60 848,469.57 24,418,737.91 (12,351,803.19) Gainesville College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 11,911,211.74 31,567.97 612,004.55 120,748.48 17,251.76 (81,467.06) 12,611,317.44 259,514.25 0.00 259,514.25 21,043,775.60 (727,362.30) 20,316,413.30 $20,575,927.55 Gainesville College Annual Financial Report FY 2004 10 Gainesville College Foundation Statement of Activities Gainesville College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Reclassification Program Equipment Time Total Revenues $341,724.00 114,113.00 522,763.00 32,805.00 488,800.00 1,500,205.00 $173,036.00 87,161.00 416,450.00 $46,748.00 73.00 41,517.00 (488,800.00) $561,508.00 201,274.00 939,286.00 0.00 74,322.00 229,364.00 46,821.00 1,776,390.00 Expenses Instruction Research Institutional Support Academic support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 6,199.00 12,376.00 296,640.00 287,291.00 109,577.00 712,083.00 788,122.00 0.00 229,364.00 0.00 46,821.00 6,199.00 0.00 12,376.00 296,640.00 0.00 287,291.00 109,577.00 712,083.00 1,064,307.00 Net Assets Beginning Net Assets Ending Net Assets (86,196.00) $701,926.00 4,045,817.00 $4,275,181.00 3,202,871.00 $3,249,692.00 7,162,492.00 $8,226,799.00 Gainesville College Annual Financial Report FY 2004 11 Statement of Cash Flows GAINESVILLE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITA L A ND RELA TE D F INA NCING A CTIVIT IES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $7,931,014.16 2,541,306.90 296,049.07 (9,519,765.30) (13,026,570.26) (2,284,675.53) 2,195,965.91 8,923.37 7,716.20 21,043.77 81,774.82 (11,747,216.89) 11,911,211.74 68,652.76 764,321.00 12,744,185.50 (5,000.00) (306,131.79) (311,131.79) 17,251.76 17,251.76 703,088.58 2,588,049.79 $3,291,138.37 Gainesville College Annual Financial Report FY 2004 12 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other A ssets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($12,351,803.19) 848,469.57 (130,725.71) (149,550.02) (67,931.50) (119,261.41) 261,018.97 3,020.73 (40,454.33) ($11,747,216.89) G ainesville C ollege had no Non-C ash Investing, Non-C apital Financing or C apital and Related Financing Transactions Gainesville College Annual Financial Report FY 2004 13 GAINESVILLE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Gainesville College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Gainesville College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Gainesville College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Gainesville College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Gainesville College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Gainesville College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Gainesville College is reporting the activity for the Gainesville College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Gainesville College Annual Financial Report FY 2004 14 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the pre-dominate activity takes place. Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments Gainesville College has no long-term investments Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable Gainesville College Annual Financial Report FY 2004 15 expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Gainesville College when complete. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Gainesville College had accrued liability for compensated absences in the amount of $602,818.61 as of 7-1-2003. For FY2004, $1,281,976.29 was earned in compensated absences and employees were paid $1,322,430.62, for Gainesville College Annual Financial Report FY 2004 16 a net decrease of $40,454.33. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $562,364.28 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Expendable $505,651.79 $505,651.79 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Gainesville College Annual Financial Report FY 2004 17 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserv e for Inv entory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $4,683.57 271,785.47 298,017.07 1,644,470.42 $2,218,956.53 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Gainesville 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Gainesville College Annual Financial Report FY 2004 18 Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 program, are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Gainesville College Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Gainesville 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Gainesville College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Gainesville College Annual Financial Report FY 2004 20 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $3,291,138.37 Bank Balances $3,291,138.37 $3,291,138.37 $3,291,138.37 Risk Categories 1 2 $3,291,138.37 $0.00 $3,291,138.37 $0.00 3 $0.00 $0.00 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College had no investments. Gainesville College Annual Financial Report FY 2004 21 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctivities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $404,611.82 1,085.98 16,555.71 209,371.33 631,624.84 $631,624.84 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $298,017.07 $298,017.07 Note 5. Notes/Loans Receivable Gainesville College had no note/loans receivable as of June 30, 2004. Gainesville College Annual Financial Report FY 2004 22 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $105,849.29 9,755.80 115,605.09 Additions $0.00 0.00 Reductions $0.00 9,755.80 9,755.80 Ending Balance 6/30/2004 $105,849.29 105,849.29 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 371,830.00 25,117,160.00 1,069,478.00 1,987,077.70 1,935,952.42 30,481,498.12 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 165,581.78 7,034,306.43 1,004,517.97 1,450,061.30 1,745,536.45 11,400,003.93 Total Capital Assets, Being Depreciated, Net 19,081,494.19 Capital Assets, net $19,197,099.28 40,120.20 106,650.74 186,236.09 161,274.94 494,281.97 40,120.20 136,902.63 220,698.18 397,721.01 371,830.00 25,223,810.74 1,069,478.00 2,036,411.16 0.00 1,876,529.18 0.00 30,578,059.08 172,405.19 1,544,972.92 59,887.77 175,954.64 432,385.45 83.16 2,385,689.13 (1,891,407.16) ($1,891,407.16) 17,450.65 217,124.86 118,216.00 92,983.85 496,522.90 83.16 942,381.42 320,536.32 8,362,154.49 946,189.74 1,533,032.09 0.00 1,681,399.00 0.00 12,843,311.64 (544,660.41) 17,734,747.44 ($534,904.61) $17,840,596.73 Gainesville College Annual Financial Report FY 2004 23 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $1,172,571.00 212,180.06 $1,384,751.06 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 602,818.61 1,281,976.29 1,322,430.62 602,818.61 1,281,976.29 1,322,430.62 562,364.28 0.00 562,364.28 $602,818.61 $1,281,976.29 $1,322,430.62 $562,364.28 Current Portion $0.00 399,464.78 399,464.78 $399,464.78 Note 9. Lease Obligations Gainesville College has no lease obligations as of June 30, 2004. Gainesville College Annual Financial Report FY 2004 24 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Gainesville College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Gainesville College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Gainesville College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $759,949.74 $740,823.51 $722,567.71 Employees' Retirement System of Georgia Gainesville College does not participate in the Employee's Retirement System of Georgia Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Gainesville College Annual Financial Report FY 2004 25 Funding Policy Gainesville College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Gainesville College and the covered employees made the required contributions of $257,551.57 (10.03%) and $128,391.10 (5%), respectively. Georgia Defined Contribution Plan Plan Description Gainesville 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $79,641.56 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Gainesville College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Gainesville College Annual Financial Report FY 2004 26 Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Gainesville College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Gainesville College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Gainesville College (an organizational unit of the Board of Regents of the University 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, 2004. Gainesville College Annual Financial Report FY 2004 27 Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 87 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Gainesville College recognized as incurred $338,993.81 of expenditures, which was net of $104,797.44 of participant contributions. Gainesville College Annual Financial Report FY 2004 28 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2004 below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $6,717,174.89 999,490.86 1,618,310.45 0.00 78,504.36 4,774.00 84,001.21 693,764.35 2,976.78 $0.00 $0.00 72,874.00 16,336.14 2,237.89 127.94 1,680.05 $1,055.00 1,727,941.68 424,089.38 15,560.21 54,869.08 1,439,117.54 (5,029.76) $2,400.00 1,329,579.95 298,742.97 22,475.95 24,357.74 340,072.55 1,265.00 $0.00 1,341,599.55 1,127,527.25 21,485.39 19,015.96 637,257.34 3,564.95 Total Expenses $10,198,996.90 $0.00 $93,256.02 $3,657,603.13 $2,018,894.16 $3,150,450.44 Natural C lassification Plant Operations & Maintenance Functional Classification FY 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Total Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 730,948.88 200,178.48 (31,165.21) 964.52 574,351.63 308,424.76 11,761.50 $ 0.00 1,217,933.38 $ 0.00 97,214.83 32,911.11 31,165.21 585.66 2,281.20 1,797,500.01 4,644.20 $ 0.00 (492,892.80) (16,557.00) 829,286.90 $ 6,720,629.89 6,299,649.75 3,225,202.98 0.00 141,813.98 1,222,707.38 759,004.76 5,201,259.60 848,469.57 Total Expenses $ 1,795,464.56 $ 1,217,933.38 $ 1,966,302.22 $ 319,837.10 $ 24,418,737.91 Gainesville College Annual Financial Report FY 2004 29 Note 15. Component Units Component Unit Notes Organization Gainesville College Foundation (Foundation) is a legally separate, tax-exempt component unit of Gainesville College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirtysix member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Non-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is January 1 through December 31. During the year ended December 31, 2003, the Foundation distributed $295,604.23 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation office at 3820 Mundy Mill Road; Oakwood, GA 30566. Gainesville College Annual Financial Report FY 2004 30 Investments for Component Units: Investments in marketable equity securities and debt securities consisted of the following as of December 31, 2003: Regions Morgan Keegan Stocks, Mutual Funds, Bonds Total Cost at 12/31/03 7,443,987 $7,443,987 Market at 12/31/03 8,118,921 $8,118,921 Unrealized Gain/(Loss) 674,934 $ 674,934 These accounts include funds held in separate accounts for the following: Endowment Challenge Grant--Title III General Endowment Fund Eminent Scholarship Fund Goizueta Foundation Grant Fund Total Market Value 12/31/03 4,642,621 2,067,208 1,070,277 338,815 $8,118,921 The following schedule summarizes investment income: Interest & Dividends Net Realized Gains and Losses Total Gross Gains Less: Management Fees Net Realized Gains and Losses Unrestricted $ 114,113 533,360 647,473 10,597 $ 636,876 Temporarily Restricted $ 87,161 432,316 519,477 15,866 $ 503,611 Permanently Restricted $ -0- 73 73 -0$ 73 Total $ 201,274 965,749 1,167,023 26,463 $1,140,560 Investment income has been reported as an increase in unrestricted net assets unless the donor placed restrictions on the income's use. If the income is restricted, it is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restrictions. Investment in land consists of 76.70 acres of land in Hall County, Georgia valued at $8,400 by the Foundation at the time of receipt in December 1980. Long Term Liabilities for Component Units: The Gainesville College Foundation had no long term liabilities as of December 31, 2003. Debt Service Obligations for Component Units, Cont. The Gainesville College Foundation had no debt service obligations as of December 31, 2003. Gainesville College Annual Financial Report FY 2004 31 GEORGIA PERIMETER COLLEGE Financial Report For the Year Ended June 30, 2004 Georgia Perimeter College Decatur, Georgia Jacquelyn M. Belcher President Ronald L. Carruth Executive Vice President for Financial and Administrative Affairs GEORGIA PERIMETER COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets ................................9 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 19 Note 3 Accounts Receivable............................................................................................. 22 Note 4 Inventories............................................................................................................. 22 Note 5 Notes/Loans Receivable........................................................................................ 22 Note 6 Capital Assets........................................................................................................ 23 Note 7 Deferred Revenue.................................................................................................. 24 Note 8 Long-Term Liabilities ........................................................................................... 24 Note 9 Lease Obligations.................................................................................................. 25 Note 10 Retirement Plans ................................................................................................. 26 Note 11 Risk Management................................................................................................ 27 Note 12 Contingencies...................................................................................................... 28 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 14 Natural Classifications With Functional Classifications..................................... 30 GEORGIA PERIMETER COLLEGE Management's Discussion and Analysis Introduction Georgia Perimeter College is one of the 34 institutions of the University System of Georgia. The College has six convenient locations along the major access corridors of metropolitan Atlanta. Georgia Perimeter College was founded by the DeKalb Board of Education in 1958. It became a college in 1964. Georgia Perimeter College is the largest two-year college and the third largest institution in the University System. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 347 18,986 330 17,573 328 15,372 Overview of the Financial Statements and Financial Analysis Georgia Perimeter College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Perimeter College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. The readers are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Georgia Perimeter College Annual Financial Report FY2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $14,294,308.42 109,477,131.13 1,054,676.52 124,826,116.07 June 30, 2003 $16,648,717.56 113,018,543.29 57,811.78 129,725,072.63 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 7,609,329.58 16,743,302.08 24,352,631.66 12,038,781.60 16,745,011.91 28,783,793.51 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 93,182,840.81 31,338.39 156,531.54 1,000,215.54 6,102,558.13 $100,473,484.41 96,016,750.81 50,150.81 129,509.27 1,000,215.54 3,744,652.69 $100,941,279.12 The total assets of the institution decreased by ($4,898,956.56) while the total liabilities for the year decreased by ($4,431,161.85) resulting in a total decrease in net assets of ($467,794.71). These changes are due to the disposal of $1.5 million dollars in equipment and the change in categorization of funds invested in LGIP along with $1.5 million dollars being moved from construction work in progress from the prior year, an asset to an expense during the fiscal year. The overall decrease can be attributed to these factors along with depreciation expense and the fact that fewer funds were used during fiscal year 2004 for the purchase of equipment than in previous years. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and Georgia Perimeter College Annual Financial Report FY2004 2 constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $53,090,525.07 June 30, 2003 $45,936,776.26 Operating Expenses Operating Loss 102,893,973.50 (49,803,448.43) 97,449,722.07 (51,512,945.81) Nonoperating Revenues and Expenses 49,403,355.67 46,828,208.96 Income (Loss) Before other revenues, expenses, gains or losses (400,092.76) (4,684,736.85) Other revenues, expenses, gains or losses 19,727,623.33 Increase in Net Assets (400,092.76) 15,042,886.48 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 100,941,279.12 (67,701.95) 100,873,577.17 83,625,287.40 2,273,105.24 85,898,392.64 Net Assets at End of Year $100,473,484.41 $100,941,279.12 Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Georgia Perimeter College Annual Financial Report FY2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 $31,415,156.43 16,893,039.38 1,555,269.31 2,450,643.93 776,416.02 53,090,525.07 $25,724,699.74 14,927,507.13 1,629,551.41 2,285,967.15 1,369,050.83 45,936,776.26 49,712,835.37 419,019.87 68,917.09 53,515.80 50,254,288.13 47,783,503.00 76,778.13 (180,818.92) 47,679,462.21 0.00 $103,344,813.20 19,727,623.33 19,727,623.33 $113,343,861.80 Georgia Perimeter College Annual Financial Report FY2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $39,498,842.00 848.02 8,809,455.16 9,924,328.61 15,039,879.82 10,021,795.24 14,699,622.78 1,811,198.00 3,088,003.87 102,893,973.50 850,932.46 $103,744,905.96 June 30, 2003 $36,243,729.98 23,493.17 8,001,869.98 8,481,271.67 14,891,407.67 11,577,424.40 13,138,975.33 1,625,937.10 3,465,612.77 97,449,722.07 851,253.25 $98,300,975.32 Federal grants and contracts increased in the amount of approximately $2,000,000.00. The increase is due to an increase in Pell grant awards and a one time Transportation Enhancement Grant. Tuition and fees increased by $5,700,000.00. Approximately $3,000,000.00 of this increase is due to a change in accounting policy by Georgia Perimeter College. In the past, all summer semester revenues had been deferred and reported in the subsequent fiscal year. Beginning this year, the College will record revenues earned through June 30 in the current fiscal year and revenue earned after June 30 in the following fiscal year. Therefore, the FY2004 statements reflect tuition and fees for one and one half summer terms. The remaining increase in tuition and fee revenue is due to enrollment and a 3% increase in student fee rates. The compensation and employee benefits category increased by $5,003,932.11. This increase is due, in part, to the change in accounting policy for summer semester. The faculty salaries for the first half of summer semester 2004 were expensed in fiscal year 2004. Therefore, as with revenues, the college is compliant with GASB 34/35. The rest of the increase is due to additional faculty and staff required to meet the demands of increased enrollment. Utilities decreased by ($226,448.76) during the past year. This decrease is considered minimal requiring no further explanation. Georgia Perimeter College Annual Financial Report FY2004 5 Under non-operating revenues (expenses) state appropriations increased by $1,929,332.37. State appropriation revenue was increased by the formula funding for enrollment growth. Statement of Cash Flows The final statement presented by Georgia Perimeter College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section reports the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 7 ,8 6 2 ,6 6 5 .4 5 ) 5 1 ,8 7 3 ,2 3 5 .4 3 (2 ,5 2 5 ,9 3 0 .1 5 ) 6 8 ,9 1 7 .0 9 1 ,5 5 3 ,5 5 6 .9 2 1 0 ,4 1 8 ,8 3 2 .6 2 $ 1 1 ,9 7 2 ,3 8 9 .5 4 June 30, 2003 ($ 4 8 ,5 1 8 ,4 4 8 .7 8 ) 4 7 ,2 6 3 ,4 3 7 .2 5 (4 ,4 5 9 ,2 7 2 .1 7 ) 3 ,5 1 6 ,2 7 8 .2 9 (2 ,1 9 8 ,0 0 5 .4 1 ) 1 2 ,6 1 6 ,8 3 8 .0 3 $ 1 0 ,4 1 8 ,8 3 2 .6 2 Capital Assets There were no additions to Capital Assets for fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Georgia Perimeter College is not including financial statements and notes for any component units for FY2004. The Georgia Perimeter College Foundation does not meet the threshold to consider it significant for component unit reporting at this point in time. Georgia Perimeter College Annual Financial Report FY2004 6 Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________, President Georgia Perimeter College Georgia Perimeter College Annual Financial Report FY2004 7 Statement of Net Assets GEORGIA PERIMETER COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D eposits Deferred Revenue Other Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $10,929,425.02 278,654.76 75,000.00 2,782,761.22 174,067.08 54,400.34 14,294,308.42 1,042,964.52 11,712.00 109,477,131.13 110,531,807.65 124,826,116.07 1,311,896.00 3,794,406.93 88,656.54 603,876.06 428,215.78 1,382,278.27 7,609,329.58 877,227.54 15,866,074.54 16,743,302.08 24,352,631.66 93,182,840.81 31,338.39 156,531.54 1,000,215.54 6,102,558.13 $100,473,484.41 Georgia Perimeter College Annual Financial Report FY2004 8 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA PERIMETER C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $36,467,396.67 5,052,350.65 (110.41) 16,247,698.69 332,977.29 312,363.40 1,555,269.31 853,583.00 44,392.01 1,220,320.25 332,348.67 776,416.02 53,090,525.07 27,050,943.72 28,764,548.47 12,265,262.52 465,338.65 10,114,477.20 2,955,148.81 16,526,562.78 4,751,691.35 102,893,973.50 (49,803,448.43) Georgia Perimeter College Annual Financial Report FY2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 49,712,835.37 419,019.87 68,917.09 (850,932.46) 53,515.80 49,403,355.67 (400,092.76) 0.00 (400,092.76) 100,941,279.12 (67,701.95) 100,873,577.17 $100,473,484.41 Georgia Perimeter College Annual Financial Report FY2004 10 Statement of Cash Flows GEORGIA PERIMETER COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $33,526,085.45 17,131,808.70 1,846,593.69 (31,946,258.05) (55,782,968.47) (15,166,827.85) (92,276.18) 95,208.79 460,436.21 71,147.69 1,192,925.83 320,366.21 481,092.53 (47,862,665.45) 49,637,835.37 1,761,584.38 473,815.68 51,873,235.43 (1,256,126.15) (418,871.54) (850,932.46) (2,525,930.15) 68,917.09 68,917.09 1,553,556.92 10,418,832.62 $11,972,389.54 Georgia Perimeter College Annual Financial Report FY2004 11 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($49,803,448.43) 4,751,691.35 457,643.15 (20,613.56) 444,743.22 (207,249.35) (2,847,247.27) (665,457.89) 27,273.33 ($47,862,665.45) G eorgia Perim eter C ollege had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions Georgia Perimeter College Annual Financial Report FY2004 12 GEORGIA PERIMETER COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Georgia Perimeter College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Georgia Perimeter College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Perimeter College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Perimeter College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Perimeter College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Georgia Perimeter College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2004, Georgia Perimeter College does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 Georgia Perimeter College Annual Financial Report FY2004 13 by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days to 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Georgia Perimeter College Annual Financial Report FY2004 14 Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Perimeter College when complete. There were no transfers for the year ended June 30, 2004. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Georgia Perimeter College had accrued liability for compensated absences in the amount of $2,232,232.48 as of 7-1-2003. For FY2004, $1,866,148.13 was earned in compensated absences and employees were paid $1,838,874.80 for Georgia Perimeter College Annual Financial Report FY2004 15 a net increase of $27,273.33. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $2,259,505.81 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable $21,024.99 17,542.67 106,553.29 11,410.59 $156,531.54 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Georgia Perimeter College Annual Financial Report FY2004 16 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O the r Unre stricted Total Unre stricte d Ne t A sse ts June 30, 2004 $17,268.88 4,685,031.77 175,000.00 1,225,257.48 $6,102,558.13 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Georgia Perimeter 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Georgia Perimeter College Annual Financial Report FY2004 17 Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Georgia Perimeter College Annual Financial Report FY2004 18 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Georgia Perimeter 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia Perimeter College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Georgia Perimeter College Annual Financial Report FY2004 19 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Carrying Amount $9,324,459.08 Bank Balances $10,670,936.31 Total Cash Deposits $9,324,459.08 $10,670,936.31 Risk Categories 1 2 $100,000.00 $10,570,936.31 $100,000.00 $10,570,936.31 3 $0.00 $0.00 Georgia Perimeter College Annual Financial Report FY2004 20 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 0.00 0.00 0.00 0.00 2,647,930.46 0.00 $2,647,930.46 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Georgia Perimeter College Annual Financial Report FY2004 21 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $556,513.51 514,032.17 278,654.76 75,000.00 1,911,362.88 3,335,563.32 199,147.34 Net A ccounts Receiv able $3,136,415.98 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $0.00 174,067.08 $174,067.08 Note 5. Notes/Loans Receivable Georgia Perimeter College had no notes or loans receivable as of June 30, 2004. Georgia Perimeter College Annual Financial Report FY2004 22 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $4,220,775.73 1,485,867.97 5,706,643.70 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 107,971,438.67 3,814,170.00 10,570,930.98 17,279,804.07 11,410,055.56 151,046,399.28 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 24,567,181.51 2,174,158.77 7,078,658.36 414,131.05 9,500,370.00 43,734,499.69 Total Capital Assets, Being Depreciated, Net 107,311,899.59 Capital Assets, net $113,018,543.29 Additions $0.00 0.00 Reductions $0.00 1,485,867.97 1,485,867.97 Ending Balance 6/30/2004 $4,220,775.73 0.00 4,220,775.73 962,175.03 1,241,781.54 699,901.78 2,903,858.35 1,578,926.81 86,713.00 1,665,639.81 0.00 107,971,438.67 4,776,345.03 10,233,785.71 17,279,804.07 12,023,244.34 0.00 152,284,617.82 3,252,163.06 117,725.83 1,109,302.46 288,713.37 433,186.00 5,201,090.72 (2,297,232.37) ($2,297,232.37) 325,216.31 11,772.58 1,483,626.10 86,713.00 1,907,327.99 0.00 27,494,128.26 2,280,112.02 6,704,334.72 702,844.42 9,846,843.00 0.00 47,028,262.42 (241,688.18) 105,256,355.40 $1,244,179.79 $109,477,131.13 Georgia Perimeter College Annual Financial Report FY2004 23 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $3,484,169.85 310,237.08 $3,794,406.93 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 $16,713,161.86 $1,474,770.74 $1,893,642.28 $16,294,290.32 Current Portion $428,215.78 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 2,232,232.48 1,866,148.13 1,838,874.80 2,232,232.48 1,866,148.13 1,838,874.80 2,259,505.81 0.00 2,259,505.81 1,382,278.27 1,382,278.27 $18,945,394.34 $3,340,918.87 $3,732,517.08 $18,553,796.13 $1,810,494.05 Georgia Perimeter College Annual Financial Report FY2004 24 Note 9. Lease Obligations Georgia Perimeter College is obligated under capital leases for the acquisition of real property. Future commitments for the capital lease in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 6-10 11-15 16-20 21-25 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases Operating Leases $1,257,304.00 1,254,804.00 1,354,804.00 1,374,804.00 1,374,804.00 7,080,684.00 6,814,000.00 4,983,909.06 $0.00 25,495,113.06 9,200,822.74 0.00 $16,294,290.32 $0.00 CAPITAL LEASES Georgia Perimeter College has one capital lease payable in monthly installments with the term expiring in 2023. Expenditures for fiscal year 2004 were $1,269,803.91 of which $850,932.46 represented interest expense. Principal paid on the capital lease was $418,871.45 for the fiscal year ended June 30, 2004. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Buildings $16,294,290.32 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Georgia Perimeter College Annual Financial Report FY2004 25 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia Perimeter College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia Perimeter College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Perimeter College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $2,714,400.40 $2,601,856.37 $2,420,304.85 Funding Policy As established by State statue, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. Georgia Perimeter College had no employees covered by ERS for the year ended June 30, 2004. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits Georgia Perimeter College Annual Financial Report FY2004 26 are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia Perimeter College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Georgia Perimeter College and the covered employees made the required contributions of $1,384,915.29 (10.03%) and $690,392.61 (5%), respectively. Georgia Defined Contribution Plan Plan Description Georgia Perimeter 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $692,657.56 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity Georgia Perimeter College Annual Financial Report FY2004 27 healthcare plan. Georgia Perimeter College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Georgia Perimeter College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Perimeter College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Perimeter College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims Georgia Perimeter College Annual Financial Report FY2004 28 and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 217 employees who had retired or were disabled that were receiving these post-employment health, dental, and life insurance benefits. For the year ended June 30, 2004, Georgia Perimeter College recognized as incurred $776,425 of expenditures, which was net of $275,563 of participant contributions. Georgia Perimeter College Annual Financial Report FY2004 29 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $27,008,895.15 4,886,242.47 5,918,720.85 177,271.54 (5,025,070.63) 372,317.46 5,245,548.93 914,916.23 $0.00 $0.00 848.02 $16,988.63 5,699,415.43 1,121,938.01 $25,059.94 5,821,412.96 1,282,618.63 85,770.99 182,774.07 1,121,451.29 581,116.74 69,551.39 161,501.90 121,143.38 2,435,984.33 7,056.08 $0.00 7,939,972.83 2,756,786.17 83,012.09 413,835.49 3,732,356.38 113,916.86 Total Expenses $39,498,842.00 $0.00 $848.02 $8,809,455.16 $9,924,328.61 $15,039,879.82 Natural C lassification Plant Operations & Maintenance Functional Classification F Y 2004 Scholarships Auxiliary & Fellowships Enterprises Unallocated Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 3,938,510.19 1,099,533.86 (84,565.72) 12,098.12 1,846,666.60 3,171,723.02 37,829.17 $ 0.00 14,699,622.78 $ 0.00 478,994.59 85,665.00 84,565.72 37,634.52 278,423.15 17,563.79 819,498.83 8,852.40 $ 0.00 3,088,003.87 Total Expenses $ 10,021,795.24 $ 14,699,622.78 $ 1,811,198.00 $ 3,088,003.87 Total Expenses $ 27,050,943.72 28,764,548.47 12,265,262.52 0.00 465,338.65 10,114,477.20 2,955,148.81 16,526,562.78 4,751,691.35 $ 102,893,973.50 Georgia Perimeter College Annual Financial Report FY2004 30 GEORGIA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Carl V. Patton President Georgia State University Atlanta, Georgia Jerry J. Rackliffe Vice President for Finance & Administration GEORGIA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ..................................................................................... 1 Statement of Net Assets ............................................................................................................... 8 Georgia State University Foundations Balance Sheet ................................................ 9 Statement of Revenues, Expenses and Changes in Net Assets.................................................. 10 Georgia State University Research Foundation Statement of Activities ...........................12 Georgia State University Foundation Statement of Activities ...................................... 13 Statement of Cash Flows ........................................................................................................... 14 Note 1. Summary of Significant Accounting Policies ............................................................. 16 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments.................................... 22 Note 3. Accounts Receivable................................................................................................... 25 Note 4. Inventories................................................................................................................... 25 Note 5. Notes/Loans Receivable.............................................................................................. 25 Note 6. Capital Assets.............................................................................................................. 26 Note 7. Deferred Revenue........................................................................................................ 27 Note 8. Long-Term Liabilities ................................................................................................. 27 Note 9. Lease Obligations........................................................................................................ 28 Note 10. Retirement Plans ....................................................................................................... 30 Note 11. Risk Management...................................................................................................... 33 Note 12. Contingencies............................................................................................................. 33 Note 13. Post-Employment Benefits Other Than Pension Benefits ........................................ 34 Note 14. Natural Classifications With Functional Classifications........................................... 35 Note 15. Component Units........................................................................... 36 GEORGIA STATE UNIVERSITY Management's Discussion and Analysis Introduction Georgia State University is one of the 34 institutions of the University System of Georgia. The University, located in Atlanta, Georgia, was founded in 1913. The University offers baccalaureate, masters and doctoral degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 28,000 students each year. Georgia State University employs approximately 1,700 faculty and 2,000 staff. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 1,741 1,740 1,583 28,079 27,502 25,745 Overview of the Financial Statements and Financial Analysis Georgia State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Georgia State University Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $107,227,572.75 288,023,787.90 6,141,412.60 401,392,773.25 June 30, 2003 $102,356,042.45 293,822,045.81 5,826,290.92 402,004,379.18 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 39,730,520.97 46,193,717.35 85,924,238.32 39,012,058.16 47,684,486.04 86,696,544.20 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 242,841,982.19 46,275.93 15,110,744.89 64,850.00 57,404,681.92 $315,468,534.93 247,186,520.64 43,665.29 15,330,560.89 64,850.00 52,682,238.16 $315,307,834.98 The total assets of the institution decreased by ($611,605.93). The total liabilities for the year decreased by ($772,305.88). The unrestricted net asset balance of $57,404,681.92 is allocated to Reserve for Encumbrances in the amount of $15,146,385.02, Reserve for Renewals and Replacements in the amount of $10,877,775.62, and the remaining balance is primarily allocated to Auxiliary Enterprises and Student Activities. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and Georgia State University Annual Financial Report FY 2004 2 constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $215,498,305.03 June 30, 2003 $210,697,194.51 Operating Expenses Operating Loss 398,007,920.97 (182,509,615.94) 386,244,860.42 (175,547,665.91) Nonoperating Revenues and Expenses 177,562,791.39 174,707,889.17 Income (Loss) Before other revenues, expenses, gains or losses (4,946,824.55) (839,776.74) Other revenues, expenses, gains or losses 5,107,524.50 26,476,942.05 Increase in Net Assets 160,699.95 25,637,165.31 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 315,307,834.98 315,307,834.98 279,547,329.48 10,123,340.19 289,670,669.67 Net Assets at End of Year $315,468,534.93 $315,307,834.98 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Georgia State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal A ppropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 $107,006,851.86 75,494,951.48 1,964,245.64 24,687,102.21 6,345,153.84 215,498,305.03 $98,743,029.49 78,184,247.15 2,667,383.15 23,436,266.34 7,666,268.38 210,697,194.51 170,612,715.71 5,663,320.37 4,213,150.01 968,127.28 (1,143,615.08) 180,313,698.29 171,615,802.34 5,853,065.40 17,784.94 1,411,042.79 (1,465,809.66) 177,431,885.81 5,005,777.46 101,747.04 5,107,524.50 $400,919,527.82 26,380,740.39 96,201.66 26,476,942.05 $414,606,022.37 Georgia State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $129,572,599.90 60,479,031.60 13,780,007.07 42,172,190.11 21,797,466.66 50,335,074.59 34,610,544.05 25,027,846.99 20,233,160.00 398,007,920.97 2,750,906.90 $400,758,827.87 June 30, 2003 $133,268,186.81 54,382,528.07 22,200,080.34 37,550,901.29 22,383,169.83 47,889,909.32 27,490,988.69 22,696,010.99 18,383,085.08 386,244,860.42 2,723,996.64 $388,968,857.06 Revenues associated with student tuition and fees, net of sponsored and unsponsored scholarships, increased $10,307,619.63 during the year. This reflects an increase in both tuition and fees for the University. Grants and Contracts decreased in the amount of ($2,689,295.67) with an increase in federal grants of $6,528,197.63, a decrease in state grants of ($2,137,861.66) and a decrease in local and private grants of ($7,079,631.64). The compensation and employee benefits category increased by $3,945,349.02. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by $321,416.40 during the past year. Under non-operating revenues (expenses) state appropriations decreased by ($1,003,086.63). Gifts increased by $4,195,365.07 primarily due to Georgia State Financing and Investment Commission (GSFIC) funded capital improvements that do not meet the capitalization threshold. State Capital Gifts decreased by $21,374,962.93 from Fiscal Year 2003 primarily due to the prior year addition of the Helen M. Aderhold Learning Center. Statement of Cash Flows The final statement presented by Georgia State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The Georgia State University Annual Financial Report FY 2004 5 third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 5 4 ,8 3 6 ,9 0 4 .1 3 ) 1 8 0 ,0 9 9 ,2 4 5 .1 6 (2 2 ,1 1 7 ,2 8 0 .7 4 ) 9 6 5 ,2 0 8 .0 3 4 ,1 1 0 ,2 6 8 .3 2 7 8 ,5 4 7 ,2 2 6 .4 6 $ 8 2 ,6 5 7 ,4 9 4 .7 8 June 30, 2003 ($ 1 6 6 ,0 2 9 ,1 4 5 .2 1 ) 1 7 8 ,1 0 5 ,3 2 3 .9 8 (2 3 ,1 4 5 ,6 7 7 .7 4 ) 1 ,4 0 9 ,7 8 0 .4 6 (9 ,6 5 9 ,7 1 8 .5 1 ) 8 8 ,2 0 6 ,9 4 4 .9 7 $ 7 8 ,5 4 7 ,2 2 6 .4 6 Capital Assets In term of future projects, the University's top capital priority is the Science Teaching Laboratory Building. The Board of Regents, in spring 2000, added our proposal for the 202,000 gross square foot building to its Major Capital Funding List. Of the total $71.35 million estimated to construct the building, the University has requested state funding of $46.35 million and the remainder is to be funded through non-state sources. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long-Term Debt Georgia State University had a Long-Term Debt of $54,840,332.36 of which $8,646,615.01 was reflected as current liability at June 30, 2004. For additional information concerning Long-Term Debt see Notes 1 and 8 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Georgia State University has included the financial statements and notes for all required component units for FY2004. The Georgia State University Foundation had endowment investments of $62 million as of June 30, 2004 and long-term debt of $50.1 million in the form two capital leases, one bond and one promissory note. The Georgia State University Research Foundation had endowment investments of $2 M and no long-term Georgia State University Annual Financial Report FY 2004 6 debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University has been impacted by state mandated reductions in appropriations due to the current economic situation. However, strong fiscal management combined with an increase in tuition and fees has enabled the University to continue to grow within this challenging environment. The overall financial position of the University is strong. The University anticipates the current fiscal year will be much like the last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. ____________________ Carl V. Patton, President Georgia State University Georgia State University Annual Financial Report FY 2004 7 Statement of Net Assets Georgia State University STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $82,657,494.78 3,205,749.08 18,139,671.26 105,185.45 3,119,472.18 107,227,572.75 48,200.47 6,093,212.13 288,023,787.90 294,165,200.50 401,392,773.25 5,264,277.62 329,961.07 24,159,433.15 51,011.82 1,279,222.30 1,707,426.86 6,939,188.15 39,730,520.97 3,021,730.61 43,171,986.74 46,193,717.35 85,924,238.32 242,841,982.19 46,275.93 15,110,744.89 64,850.00 57,404,681.92 $315,468,534.93 Georgia State University Annual Financial Report FY 2004 8 Georgia State University Foundations Balance Sheet Georgia State University Balance Sheet (F ASB) June 30, 2004 Georgia State Univ e rs ity Research F oundation A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net O ther A ssets Total A ssets $5,496,061.46 2,000,000.00 3,875,991.22 12,298,135.83 23,670,188.51 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents O ther Liabilities Total Liabilities 6,052,202.91 3,294,473.15 9,346,676.06 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 11,178,902.16 1,144,610.29 2,000,000.00 $14,323,512.45 Georgia State Univ e rs ity F o und a tio n $13,886,774.00 501,273.00 62,019,410.00 8,637,304.00 63,369,252.00 20,355,732.00 168,769,745.00 2,589,990.00 117,990.00 50,051,557.00 61,885.00 6,975,732.00 59,797,154.00 21,886,008.00 32,091,158.00 54,995,425.00 $108,972,591.00 Georgia State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets Georgia State University STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $133,129,662.45 23,651,778.30 2,471,032.29 57,854,636.98 6,495,731.11 11,144,583.39 1,964,245.64 10,621,456.44 662,829.05 185,662.33 5,328,624.10 4,996,316.97 2,892,213.32 6,345,153.84 215,498,305.03 78,773,881.82 126,957,077.19 44,945,341.52 3,384,022.23 25,833,151.63 9,159,289.99 88,514,597.70 20,440,558.89 398,007,920.97 (182,509,615.94) Georgia State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 170,612,715.71 158,204.94 5,505,115.43 4,213,150.01 968,127.28 (2,750,906.90) (1,143,615.08) 177,562,791.39 (4,946,824.55) 5,005,777.46 101,747.04 5,107,524.50 160,699.95 315,307,834.98 315,307,834.98 $315,468,534.93 Georgia State University Annual Financial Report FY 2004 11 Georgia State University Research Foundation Statement of Activities Georgia State University Research Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 103,636.18 579,504.25 $0.00 47,458.64 2,747,556.97 46,201,639.11 45,453,940.52 (45,453,940.52) 48,884,637.92 795,157.23 $0.00 0.00 $0.00 151,094.82 579,504.25 0.00 0.00 48,949,196.08 0.00 0.00 0.00 49,679,795.15 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 47,975,719.48 47,975,719.48 908,918.44 0.00 795,157.23 0.00 0.00 0.00 47,975,719.48 0.00 0.00 0.00 0.00 0.00 47,975,719.48 1,704,075.67 Net Assets Beginning Net Assets Ending Net Assets 10,269,983.99 $11,178,902.43 349,452.79 $1,144,610.02 2,000,000.00 $2,000,000.00 12,619,436.78 $14,323,512.45 Georgia State University Annual Financial Report FY 2004 12 Georgia State University Foundation Statement of Activities Georgia State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted Permanently Restricted Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $563,711.00 295,106.00 1,567,327.00 10,111,432.00 205,198.75 $6,414,189.00 1,449,147.00 1,640,766.00 $3,490,829.00 5,483,489.00 6,730,145.00 19,472,919.75 (6,892,154.00) 2,611,948.00 162,009.00 9,136,327.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 10,845,571.49 5,040,879.95 1,166,918.35 203,725.96 17,257,095.75 2,215,824.00 0.00 2,611,948.00 0.00 9,136,327.00 Net Assets Beginning Net Assets Ending Net Assets 19,670,188.00 $21,886,012.00 29,478,878.00 $32,090,826.00 45,859,426.00 $54,995,753.00 Total $10,468,729.00 1,744,253.00 8,691,582.00 0.00 10,111,432.00 205,198.75 0.00 0.00 0.00 31,221,194.75 0.00 0.00 10,845,571.49 5,040,879.95 0.00 1,166,918.35 203,725.96 17,257,095.75 13,964,099.00 95,008,492.00 $108,972,591.00 Georgia State University Annual Financial Report FY 2004 13 Statement of Cash Flows Georgia State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and C ontracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES C apital Grants and Gifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital Debt and Leases Interest Paid on C apital Debt and Leases Net C ash used by C apital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $104,861,909.64 75,799,133.63 5,958,869.74 (149,816,008.46) (198,233,152.60) (20,577,550.74) (2,776,512.89) 2,464,025.85 11,192,607.60 665,801.42 210,263.03 5,380,603.97 4,945,076.13 2,817,155.28 2,270,874.27 (154,836,904.13) 170,612,715.71 (349,295.75) 9,835,825.20 180,099,245.16 3,126,549.48 13,201.56 (20,896,585.31) (1,612,161.69) (2,748,284.78) (22,117,280.74) (2,634.64) 967,842.67 965,208.03 4,110,268.32 78,547,226.46 $82,657,494.78 Georgia State University Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities Depreciation C hange in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities ($182,509,615.94) 20,440,558.89 2,788,763.16 3,745.82 9,200,618.71 (2,215,439.38) (2,339,210.40) (457,632.61) 251,307.62 ($154,836,904.13) ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations C hange in fair value of investments recognized as a component of interest incom Gift of capital assets reducing proceeds of capital grants and gifts $272,547.92 ($2,610.64) ($1,980,975.02) Georgia State University Annual Financial Report FY 2004 15 GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Georgia State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Georgia State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Georgia State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Georgia State University is reporting the activity for the Georgia State University Foundation, and the Georgia State University Research Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Georgia State University Annual Financial Report FY 2004 16 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) require that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place. Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments. Georgia State University Annual Financial Report FY 2004 17 Accounts Receivable Accounts receivable consist of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies and resale inventories are carried at average cost. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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 the year ended June 30, 2004, GSFIC reimbursed capital expenditures valued at $3,126,549.48 to Georgia State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Georgia State University Annual Financial Report FY 2004 18 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Georgia State University had accrued liability for compensated absences in the amount of $9,709,611.14 as of 7-1-2003. For FY2004, $7,351,119.36 was earned in compensated absences and employees were paid $7,099,811.74, for a net increase of $251,307.62. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $9,960,918.76. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Georgia State University Annual Financial Report FY 2004 19 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $8,838,730.33 6,161,998.26 110,016.30 $15,110,744.89 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. Renewal & Replacement Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $10,877,775.62 15,146,385.02 102,569.86 31,277,951.42 $57,404,681.92 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Georgia State University, 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. Georgia State University Annual Financial Report FY 2004 20 Classification of Revenues The University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Georgia State University Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Georgia State University) 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 50-1759: 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Georgia State University Annual Financial Report FY 2004 22 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $22,313,376.22 $22,313,376.22 Bank Balances $22,112,411.60 0.00 $22,112,411.60 Risk Categories 1 2 3 $208,538.39 $0.00 $21,903,873.21 $208,538.39 $0.00 $21,903,873.21 Georgia State University Annual Financial Report FY 2004 23 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorization: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 48,200.47 60,156,364.56 $60,204,565.03 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Georgia State University Annual Financial Report FY 2004 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Fe d e r a l S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $8,679,024.54 1,183,329.02 3,205,749.08 11,121,888.32 24,189,990.96 2,844,570.62 $21,345,420.34 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $0.00 84,309.20 20,876.25 $105,185.45 Note 5. Notes/Loans Receivable Student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the notes/loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Georgia State University Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $21,361,853.59 4,741,773.69 26,103,627.28 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 2,515,865.03 317,304,880.21 1,472,472.12 54,597,272.59 740,467.35 78,011,066.56 10,892.60 454,652,916.46 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 575,770.27 98,408,424.40 621,053.03 32,181,495.10 170,110.40 54,977,644.73 186,934,497.93 Total Capital Assets, Being Depreciated, Net 267,718,418.53 Capital Assets, net $293,822,045.81 Additions $0.00 4,017,940.38 4,017,940.38 Reductions Ending Balance 6/30/2004 $0.00 3,980,773.23 3,980,773.23 $21,361,853.59 4,778,940.84 26,140,794.43 4,783,928.80 4,644,661.02 284,806.03 4,998,400.67 44,076.00 14,755,872.52 2,069,133.89 12,258.11 366,938.40 2,448,330.40 2,515,865.03 322,088,809.01 1,472,472.12 57,172,799.72 1,013,015.27 82,642,528.83 54,968.60 466,960,458.58 115,002.55 9,945,087.44 77,347.92 5,986,567.93 163,903.67 4,151,791.08 858.30 20,440,558.89 1,930,653.31 366,938.40 2,297,591.71 690,772.82 108,353,511.84 698,400.95 36,237,409.72 334,014.07 58,762,497.41 858.30 205,077,465.11 (5,684,686.37) 150,738.69 261,882,993.47 ($1,666,745.99) $4,131,511.92 $288,023,787.90 Georgia State University Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $19,100,173.82 3,177,437.51 1,881,821.82 $24,159,433.15 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Current Portion $46,237,123.80 $272,547.92 $1,630,258.11 $44,879,413.60 $1,707,426.86 9,709,611.14 7,351,119.36 7,099,811.74 9,709,611.14 7,351,119.36 7,099,811.74 9,960,918.76 0.00 9,960,918.76 6,939,188.15 6,939,188.15 $55,946,734.94 $7,623,667.28 $8,730,069.85 $54,840,332.36 $8,646,615.01 Georgia State University Annual Financial Report FY 2004 27 Note 9. Lease Obligations Georgia State University is obligated under various operating leases and capital leases for the use of real property (land, buildings, and office facilities) and equipment. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 21-25 26-30 31-35 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal O utstanding C apital Leases $4,392,627.51 4,394,428.41 4,358,281.57 4,391,609.53 4,469,919.69 26,690,779.04 29,468,776.76 11,290,241.56 O perating Leases $4,986,806.96 4,657,035.49 4,576,909.88 4,017,145.08 3,082,148.91 10,261,426.47 89,456,664.08 44,577,250.48 $44,879,413.60 $31,581,472.79 CAPITAL LEASES Capital leases are generally payable in monthly installments and have terms expiring in various years between 2005 and 2021. Expenditures for fiscal year 2004 were $4,375,350.31 of which $2,750,906.90 represented interest. Total principal paid on capital leases was $1,624,443.41 for the fiscal year ended June 30, 2004. Interest rates averaged 6.5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Buildings Equipment Totals $45,072,006.17 679,001.20 $45,751,007.37 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Georgia State University has two capital leases associated with buildings. In July 2001, Georgia State University entered in to a capital lease valued at $34,650,000.00 with an effective interest rate of 6.985 percent with the Georgia State University Foundation (Foundation), whereby the Georgia State University Annual Financial Report FY 2004 28 University leases the Student Recreation Center for a twenty-year period that began July 2001 and expires June 2021. In March 2000, the University entered into a capital lease valued at $14,038,328.00 with an effective interest rate of 6.985 percent with the Foundation whereby the University leases the Alpharetta Center for a twenty-year period that began March 2000 and expires February 2020. The outstanding principal liability at June 30, 2004 on these capital leases is $31,989,764.69 and $12,404,315.09 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI. Georgia State University also has various capital leases for equipment with an outstanding principal balance at June 30, 2004 in the amount of $445,333.82 OPERATING LEASES Georgia State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2014. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Noncancellable operating lease expenditures for equipment in 2004 were $391,262.32 and for buildings were $4,101,174.18. Georgia State University Annual Financial Report FY 2004 29 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 9,706,222.04 $ 9,755,816.34 $ 9,473,076.86 Employees' Retirement System of Georgia Plan Description Georgia State University 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Georgia State University Annual Financial Report FY 2004 30 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $709,113.99. The University's total payroll for all employees was $205,730,959.01. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University 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 University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University amount to 10.46 % of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $84,843.36, of which $74,207.17 was made by the University and $10,636.19 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Georgia State University Annual Financial Report FY 2004 31 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan established and administered by the Board of Regents of the University System of Georgia, under which it may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Member contribution requirements are established by the Board of Trustees of the Teachers Retirement System. Employer contributions are established by statute and may be amended only by the General Assembly of the State of Georgia. The employer contributes 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Georgia State University and the covered employees made the required contributions of $6,948,612.35 (10.03%) and $3,463,914.43 (5%), respectively. Georgia Defined Contribution Plan Plan Description Georgia State University 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. 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 Georgia State University Annual Financial Report FY 2004 32 termination of employment, the amount of the member's account is refundable upon request by the member. Total contributions made by employees during fiscal year 2004 amounted to $482,759.77 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management Georgia State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia State University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia - Administrative Central Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents. 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. Georgia State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are Georgia State University Annual Financial Report FY 2004 33 disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. Employees who are eligible for retirement or disability under the criteria established by the Teachers Retirement System of Georgia and who have at least ten years of service with the University System of Georgia are eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. As of June 30, 2004, there were 819 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Georgia State University recognized as incurred $3,299,451.11 of expenditures, which was net of $1,360,921.62 of participant contributions. Georgia State University Annual Financial Report FY 2004 34 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $58,737,676.21 31,334,754.91 22,565,510.09 $17,956,364.68 21,666,462.31 4,354,217.43 1,392,666.67 475,434.85 961,534.30 11,071,161.37 3,033,861.50 955,337.15 151,763.50 290,259.08 14,675,240.29 429,387.16 $606,691.93 5,720,074.22 1,475,197.04 $1,218,161.36 22,832,231.72 5,768,770.38 $254,987.64 12,269,987.78 2,747,172.87 279,178.71 174,511.27 134,518.96 5,366,050.94 23,784.00 399,299.88 81,276.93 11,491,467.62 380,982.22 169,584.55 3,595.02 363,071.42 4,848,466.59 1,140,600.79 $0.00 20,438,187.79 5,568,139.37 143,205.04 669,587.83 13,876,399.21 9,639,555.35 Total Expenses $129,572,599.90 $60,479,031.60 $13,780,007.07 $42,172,190.11 $21,797,466.66 $50,335,074.59 Natural C lassification Plant O p e r a tio ns & Maintenance Func tional Classific ation FY 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Total Expenses Faculty S ta ff B e ne fits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e p r e c ia tio n $ 0.00 10,156,864.58 2,023,627.60 23,111.01 4,603,888.22 15,892,317.98 1,910,734.66 $ 0.00 25,027,846.99 $ 0.00 2,538,513.88 442,706.74 21,639.22 2,055,153.25 11,293,493.70 3,881,653.21 $ 0.00 $ 78,773,881.82 126,957,077.19 44,945,341.52 0.00 3,384,022.23 25,833,151.63 9,159,289.99 88,514,597.70 20,440,558.89 Total Expenses $ 34,610,544.05 $ 25,027,846.99 $ 20,233,160.00 $ 0.00 $ 398,007,920.97 Georgia State University Annual Financial Report FY 2004 35 Note 15. Component Units The Georgia State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Georgia State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The 34-member board of the Foundation, of which 7 members are exofficio, is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $16,737,330 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Assistant Vice President Development Finance and Operations, Georgia State University Foundation, P. O. Box 3963, Atlanta, GA 30302-3963. The Georgia State University Research Foundation, Inc. (Research Foundation) is a legally separate, tax-exempt component unit of Georgia State University and was established to contribute to the scientific, literary, educational, and charitable functions of the University in securing gifts, contributions, and grants from individuals, private organizations, and public agencies, and in obtaining contracts with such individuals or entities for the performance of sponsored research, development, or other programs by the various colleges, schools, departments or other units of the University. Most of the research grants awarded to the Research Foundation are subcontracted to the University, which is responsible for the fiscal administration of the grants. The ten member board of the Research Foundation is selfperpetuating and consists of faculty and administrators of the University. Because the resources held by the Research Foundation can only be used by or for the benefit of the University, the Research Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Research Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Research Foundation paid to the University $46,288,108 in grant revenue and $540,021 for support of research activities. They also paid to the Foundation $750,000 for an Eminent Scholar Chair in Drug Discovery. Complete financial statements for the Research Foundation can be obtained from the office of the Georgia State University Research Foundation, Inc., Alumni Hall, Suite G76, Atlanta, GA 30303. Georgia State University Annual Financial Report FY 2004 36 Investments for Component Units: The Foundation holds endowment investments in the amount of $62 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donor and the Foundation's current endowment spending policy. The Trustees of the Foundation adopted an endowment spending policy that provides for the allocation of endowment funds at the rate of 70% of the previous year's allocation plus 30% of the current year's market values at a spending rate of 4.5% of the market value of the endowment funds. A 1% management fee is used to fund the Foundation's administrative activities. The balance of the return is applied to the value of the endowment funds. Long Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Balance July 1, 2003 Additions Ending Amounts due Balance within Reductions June 30, 2004 One Year Rialto Center Capital Lease Alpharetta Campus Facilities Capital Lease Student Recreation Center Bonds Piedmont Ellis Promissory Note $3,472,491.90 7,727,865.36 30,825,000.00 9,000,000.00 $789,224.81 $257,835.11 125,190.36 1,380,000.00 $4,003,881.60 7,602,675.00 29,445,000.00 9,000,000.00 $330,416.20 375,750.00 1,430,000.00 166,668.00 Total Long Term Debt $51,025,357.26 $789,224.81 $1,763,025.47 $50,051,556.60 $2,302,834.20 Rialto Center - Capital lease During 1994, the Foundation purchased and has since renovated facilities currently occupied by the University's School of Music. The project included the purchase and renovation of two existing office buildings and the Foundation entered into a long-term land lease for the renovation and use of an existing performing arts theater (Rialto Theater). The project is being financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (Authority) and loaned to The University Financing Foundation (TUFF). The Foundation has entered into long-term lease commitments with TUFF to provide for the debt service payments on the bonds and other bond financing related expenses. The Foundation leases the facilities to the University through a series of oneyear renewable lease agreements. Title to the two office buildings will pass to the Foundation at the end of the lease period or the retirement of the bonds, whichever occurs first. During 2004, the 1994 bonds issued by the Authority were refunded to obtain savings in debt service and to obtain funds for improvements to the Rialto Theater. Accordingly, the Authority entered into a new loan agreement with TUFF and a new agreement with the Foundation as the guarantor of the bonds. The guarantee is expressly limited to the unrestricted income and Georgia State University Annual Financial Report FY 2004 37 unrestricted assets of the Foundation. The terms of the long-term lease commitment between TUFF and the Foundation were modified to reflect the new interest rate of the bonds, the additional proceeds available for capital improvements, the additional bond financing-related expenses and extending the term of the lease through November 1, 2015. Pursuant to this transaction, the Foundation also formed Rialto Center, Limited Liability Company (LLC), a single member LLC with the Foundation as the sole member, for the purpose of holding the related capital lease. Financial statements of the Foundation incorporate the financial activities of Rialto Center, LLC. Interest expense relating to the TUFF lease obligation for the years ended June 30, 2004 and 2003 amounted to $293,702 and $296,213, respectively. Annual debt service requirements to maturity for the Rialto Center Capital Lease are as follows: Rialto Capital Lease Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 Year 1 2 3 4 5 6-10 11-15 Principal $330,416.20 263,001.74 281,245.56 300,754.89 321,617.54 1,815,760.72 691,084.95 Interest Total $266,842.62 249,782.26 231,538.44 212,029.11 191,166.46 588,577.60 35,377.86 $597,258.82 512,784.00 512,784.00 512,784.00 512,784.00 2,404,338.32 726,462.81 $4,003,881.60 $1,775,314.35 $5,779,195.95 Alpharetta Campus Facilities Capital lease On September 23, 1998, $10,600,000 of revenue bonds were issued by the Development Authority of Alpharetta, Georgia (Development Authority) for the purpose of financing the costs of acquiring, constructing and installing educational facilities located in the City of Alpharetta to be leased by the Foundation. The bonds are special limited obligation bonds payable by the Development Authority from lease payments made to it by the Foundation. The lease obligates the Foundation, on a limited recourse basis, to make lease payments sufficient to pay 83.5% of principal and interest on the bonds with the balance to be paid by the Development Authority. The Foundation in turn subleases the facilities to the Board of Regents of the University System of Georgia (Board of Regents) for the use of the University. The liability of the Foundation is limited to the interest of the Foundation in the project and the rents, profits, issues, products and proceeds thereof. The City of Alpharetta is obligated to make 100% of the principal and interest payments on the bonds to the extent rental payments derived from the project are insufficient for such purposes. Interest expense related to lease obligations with the Development Authority amounted to $492,378 and $364,793 for the years ended June 30, 2004 and 2003, respectively. Georgia State University Annual Financial Report FY 2004 38 Annual debt service requirements to maturity for the Alpharetta Campus Facilities Capital Lease are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 Year 1 2 3 4 5 6-10 11-15 Alpharetta Capital Lease Principal Interest Total $375,750.00 388,275.00 404,975.00 421,675.00 438,375.00 2,475,775.00 3,097,850.00 $329,475.34 314,614.43 298,973.66 282,469.37 264,956.98 1,018,228.40 372,726.78 $705,225.34 702,889.43 703,948.66 704,144.37 703,331.98 3,494,003.40 3,470,576.78 $7,602,675.00 $2,881,444.96 $10,484,119.96 Student Recreation Center - Bonds On October 15, 1998, $33,430,000 of revenue bonds were issued by the Atlanta Development Authority (ADA) with the proceeds to be loaned to the Foundation for the purpose of financing the acquisition, construction, improvement and equipping of a student recreation center for the benefit of the University. The bonds are special limited obligation bonds of the ADA payable from funds received from the Foundation pursuant to a promissory note between the ADA and the Foundation. The Foundation leases the facilities to the Board of Regents for the use of the University. The Foundation's liability on the note is limited to its interest in the project and the rents and revenues from the project, including amounts received pursuant to the rental agreement with the Board of Regents. Payment of principal and interest on the bonds are insured by American Municipal Bond Assurance Corporation (AMBAC). Principal payments are to be made annually to October 1, 2018. Interest is paid semi-annually also through 2018 at a rate specified in the revenue bonds ranging from 3.60% to 4.60%. Annual debt service requirements to maturity for the Recreation Center Bonds are as follows: Recreation Center Bonds Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 Year 1 2 3 4 5 6-10 11-15 Principal Interest Total $1,430,000.00 1,490,000.00 1,550,000.00 1,615,000.00 1,680,000.00 9,595,000.00 12,085,000.00 $1,274,165.00 1,216,338.33 1,155,386.67 1,090,576.67 1,021,465.00 3,914,180.00 1,393,570.83 $2,704,165.00 2,706,338.33 2,705,386.67 2,705,576.67 2,701,465.00 13,509,180.00 13,478,570.83 $29,445,000.00 $11,065,682.50 $40,510,682.50 Georgia State University Annual Financial Report FY 2004 39 Piedmont/Ellis - Promissory Note The Foundation, as sole member of Piedmont/Ellis, LLC, has entered into a $9 million promissory note with a financial entity to finance the purchase of land and buildings. The note has an interest rate of 4.0% per annum above the commercial paper rate, secured by the associated real and personal property and is payable over 24 consecutive months of interest only, ten equal monthly installments of $27,778 with principal payments beginning January 2005 with a balloon payment of $8,833,332 due November 2005. Annual debt service requirements to maturity for the Piedmont Ellis Promissory Note are as follows: Piedmont Ellis Promissory Note Year Ending June 30: 2005 2006 Year 1 2 Principal Interest (Estimated) Total $166,668.00 8,833,332.00 $492,000.00 160,000.00 $658,668.00 8,993,332.00 $9,000,000.00 $652,000.00 $9,652,000.00 Georgia State University Annual Financial Report FY 2004 40 Gordon College Financial Report For the Year Ended June 30, 2004 Gordon College Barnesville, Georgia Dr. Lawrence V. Weill President George J. Turner Vice President for Business Affairs GORDON COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Gordon College Foundation Balance Sheet .......................................................8 Statement of Revenues, Expenses, and Changes in Net Assets ................................9 Gordon College Foundation Statement of Activities ...........................................11 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 20 Note 3 Accounts Receivable............................................................................................. 23 Note 4 Inventories............................................................................................................. 23 Note 5 Notes/Loans Receivable........................................................................................ 23 Note 6 Capital Assets........................................................................................................ 24 Note 7 Deferred Revenue.................................................................................................. 25 Note 8 Long-Term Liabilities ........................................................................................... 25 Note 9 Lease Obligations.................................................................................................. 25 Note 10 Retirement Plans ................................................................................................. 26 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 GORDON COLLEGE Management's Discussion and Analysis Introduction Gordon College is one of the 34 institutions of the University System of Georgia. The College, located in Barnesville, Georgia, was founded in 1852 and has become known for its quality instructional programs. The College offers Associate degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,400 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 89 3,470 87 3,416 76 2,758 Overview of the Financial Statements and Financial Analysis Gordon College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Gordon College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Gordon College Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $6,345,234.35 27,080,721.92 10,632.54 33,436,588.81 June 30, 2003 $5,289,265.20 27,928,157.57 10,632.54 33,228,055.31 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,624,860.61 40,318.90 2,665,179.51 1,905,504.51 101,254.72 2,006,759.23 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 25,940,208.81 13,052.91 4,818,147.58 $30,771,409.30 27,928,157.57 13,052.91 3,280,085.60 $31,221,296.08 The total assets of the institution increased by $208,533.50. This increase was due to an increase in current assets. The total liabilities for the year increased by $658,420.28. The primary cause for the increase was in current liabilities. The change from prior year of $896,754.82 in funds held for other organizations contributed to the increase in total liabilities. The combination of the increase in total assets of $208,533.50 and the increase in total liabilities of $658,420.28 yields a decrease in total net assets of ($449,886.78). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($1,987,948.76). Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other Gordon College Annual Financial Report FY 2004 2 revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $9,964,571.59 June 30, 2003 $9,137,061.12 Operating Expenses Operating Loss 20,736,590.26 (10,772,018.67) 19,891,743.58 (10,754,682.46) Nonoperating Revenues and Expenses 10,333,630.97 10,375,442.68 Income (Loss) Before other revenues, expenses, gains or losses (438,387.70) (379,239.78) Other revenues, expenses, gains or losses 12,036,988.57 Increase in Net Assets (438,387.70) 11,657,748.79 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 31,221,296.08 (11,499.08) 31,209,797.00 18,599,810.13 963,737.16 19,563,547.29 Net Assets at End of Year $30,771,409.30 $31,221,296.08 The Statement of Revenues, Expenses, and Changes in Net Assets reflects 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: The increase in operating revenue is due in large part to the increases in tuition and fees, combined with the increase in student enrollment amounted to over $511,000. Operating expense for salaries and benefits increased over $238,000. This increase was due to filling several vacant positions, along with the increase in health insurance and other benefits. Another cause for the increase in operating expense is the change of expensing items costing less that $5,000. The policy in the prior year was to capitalize items $1,000 or over. Gordon College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $3,106,552.25 3,243,010.59 91,999.40 3,475,898.83 47,110.52 9,964,571.59 10,367,465.85 50,970.38 (84,805.26) 10,333,630.97 0.00 $20,298,202.56 June 30, 2003 $2,706,837.53 3,089,785.79 14,692.10 3,274,282.68 51,463.02 9,137,061.12 10,486,287.18 112,185.30 (223,029.80) 10,375,442.68 12,036,988.57 12,036,988.57 $31,549,492.37 Gordon College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $8,035,362.06 1,641,209.21 1,399,305.45 519,461.73 2,778,530.05 3,159,859.42 3,202,108.84 753.50 20,736,590.26 0.00 $20,736,590.26 June 30, 2003 $8,293,296.03 1,417,802.11 1,388,335.92 2,245,413.29 2,272,659.73 1,480,222.93 2,794,013.57 19,891,743.58 0.00 $19,891,743.58 With the tuition and fee increases for Fiscal Year 2004 Gordon College's revenue reflects an increase of $511,062.61, helping to offset the increased expenditures due to improvements in technology and generally higher costs. The compensation and employee benefits category increased by approximately $238,459.54. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities decreased by approximately ($48,022.16) during the past year. The decrease was primarily associated with the negotiation of a new contract with the gas utility company. Under non-operating revenues (expenses) state appropriations decreased by approximately ($118,821.33). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Gordon College. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by Gordon College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash Gordon College Annual Financial Report FY 2004 5 used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 9 ,0 1 3 ,4 0 5 .1 9 ) 1 1 ,5 6 1 ,4 2 9 .0 2 (6 3 6 ,2 0 1 .3 8 ) 5 0 ,9 7 0 .3 8 1 ,9 6 2 ,7 9 2 .8 3 3 ,7 2 8 ,2 0 5 .7 3 $ 5 ,6 9 0 ,9 9 8 .5 6 June 30, 2003 ($ 9 ,7 1 0 ,9 0 9 .8 2 ) 1 0 ,3 7 3 ,2 2 2 .5 8 (1 ,8 6 0 ,0 5 0 .2 6 ) 1 1 2 ,1 8 5 .3 0 (1 ,0 8 5 ,5 5 2 .2 0 ) 4 ,8 1 3 ,7 5 7 .9 3 $ 3 ,7 2 8 ,2 0 5 .7 3 Capital Assets For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Gordon College has included the financial statements and notes for all required component units for FY2004. The Gordon College Foundation had unrestricted assets of $4,845,322 as of December 31, 2003. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Dr. Lawrence V. Weill, President Gordon College Gordon College Annual Financial Report FY 2004 6 Statement of Net Assets GORDON COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $5,690,998.56 39,015.98 318,172.39 287,999.36 9,048.06 6,345,234.35 10,632.54 27,080,721.92 27,091,354.46 33,436,588.81 726,706.61 66,000.00 641,350.85 67,199.43 920,658.78 202,944.94 2,624,860.61 40,318.90 40,318.90 2,665,179.51 25,940,208.81 13,052.91 4,818,147.58 $30,771,409.30 Gordon College Annual Financial Report FY 2004 7 Gordon College Foundation Balance Sheet Gordon C ollege F oundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term C haritable G ift A nnuity Obligation Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $253,613.00 4,520,844.00 148,562.00 4,923,019.00 10,486.00 67,211.00 77,697.00 4,845,322.00 $4,845,322.00 Gordon College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets GORDON C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $4,763,591.24 1,637,772.54 19,266.45 3,243,010.59 91,999.40 711,666.14 1,488,432.34 944,329.41 61,998.00 246,681.70 22,791.24 47,110.52 9,964,571.59 5,009,111.87 3,754,486.64 2,152,726.78 2,225.00 92,515.33 1,589,353.68 1,051,055.24 5,794,202.86 1,290,912.86 20,736,590.26 (10,772,018.67) Gordon College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 10,367,465.85 50,970.38 (84,805.26) 10,333,630.97 (438,387.70) 0.00 (438,387.70) 31,221,296.08 (11,499.08) 31,209,797.00 $30,771,409.30 Gordon College Annual Financial Report FY 2004 10 Gordon College Foundation Statement of Activities Gordon College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio n s Program Equipment Acquisition T im e Total Revenues $78,423.00 126,714.00 583,399.00 289.00 788,825.00 $0.00 0.00 $0.00 0.00 $78,423.00 126,714.00 583,399.00 0.00 0.00 289.00 0.00 0.00 0.00 0.00 788,825.00 Expenses Instruction Research Institutional Support Management and General Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 16,766.00 121,980.00 676.00 139,422.00 649,403.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 16,766.00 0.00 121,980.00 676.00 139,422.00 649,403.00 Net Assets Beginning Net Assets Ending Net Assets 4,195,919.00 $4,845,322.00 $0.00 $0.00 4,195,919.00 $4,845,322.00 Gordon College Annual Financial Report FY 2004 11 Statement of Cash Flows GORDON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA T ING A CTIVITIE S Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $4,776,730.95 4,122,978.24 91,999.40 (9,540,852.16) (8,754,489.75) (3,227,126.22) 706,011.14 1,488,432.34 944,329.41 61,998.00 246,681.70 22,791.24 47,110.52 (9,013,405.19) 10,556,532.85 1,004,896.17 11,561,429.02 (636,201.38) (636,201.38) 50,970.38 50,970.38 1,962,792.83 3,728,205.73 $5,690,998.56 Gordon College Annual Financial Report FY 2004 12 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($10,772,018.67) 1,290,912.86 879,967.65 33,572.09 (6,716.06) (107,928.76) 19,615.52 (341,495.11) (9,314.71) ($9,013,405.19) G ordon C ollege had no Non-C ash Investing, Non-C aptial Financing, or C apital and Related Financing Transactions Gordon College Annual Financial Report FY 2004 13 GORDON COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Gordon College serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Gordon College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Gordon College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Gordon College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Gordon College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Gordon College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Gordon College is reporting the activity for the Gordon College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Gordon College Annual Financial Report FY 2004 14 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Gordon College Annual Financial Report FY 2004 15 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Gordon College when complete. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Gordon College Annual Financial Report FY 2004 16 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Gordon College had accrued liability for compensated absences in the amount of $313,514.37 as of 7-1-2003. For FY2004, $267,168.99 was earned in compensated absences and employees were paid $337,419.52, for a net decrease of $70,250.53. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $243,263.84 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctivi Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable $0.00 13,052.91 $13,052.91 Gordon College Annual Financial Report FY 2004 17 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $2,523,320.87 1,833,295.03 42,355.46 419,176.22 $4,818,147.58 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Gordon 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Gordon College Annual Financial Report FY 2004 18 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Gordon College Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Gordon 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Gordon College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Gordon College Annual Financial Report FY 2004 20 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $1,123,230.73 Bank Balances $1,094,248.89 Risk Categories 1 2 $100,000.00 $994,248.89 $1,123,230.73 $1,094,248.89 $100,000.00 $994,248.89 3 $0.00 $0.00 Gordon College Annual Financial Report FY 2004 21 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 4,567,767.83 $4,567,767.83 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Gordon College Annual Financial Report FY 2004 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $30,883.37 1,585.30 39,015.98 290,044.72 361,529.37 4,341.00 $357,188.37 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $241,599.24 46,400.12 $287,999.36 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was approximately $4,341.00. Gordon College Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $287,541.04 834,859.44 1,122,400.48 Additions $60,666.00 6,592.50 67,258.50 Reductions $0.00 836,539.44 836,539.44 Ending Balance 6/30/2004 $348,207.04 4,912.50 353,119.54 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 2,699,055.85 30,107,530.92 1,125,187.35 3,803,747.97 2,328,616.55 40,064,138.64 998,706.44 218,926.03 79,930.94 1,297,563.41 415,169.12 5,672.00 420,841.12 2,699,055.85 31,106,237.36 1,125,187.35 3,607,504.88 0.00 2,402,875.49 0.00 40,940,860.93 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 1,183,177.21 7,546,897.06 753,958.46 1,872,948.36 1,901,400.46 13,258,381.55 Total Capital Assets, Being Depreciated, Net 26,805,757.09 Capital Assets, net $27,928,157.57 108,439.71 753,209.33 67,025.58 375,874.98 104,954.00 1,409,503.60 (111,940.19) ($44,681.69) 10,843.97 90,341.44 6,826.13 330,363.86 16,251.20 454,626.60 1,280,772.95 8,209,764.95 814,157.91 1,918,459.48 0.00 1,990,103.26 0.00 14,213,258.55 (33,785.48) 26,727,602.38 $802,753.96 $27,080,721.92 Gordon College Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $641,350.85 $641,350.85 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 313,514.37 267,168.99 313,514.37 267,168.99 $313,514.37 $267,168.99 337,419.52 337,419.52 243,263.84 0.00 243,263.84 $337,419.52 $243,263.84 Current Portion $0.00 202,944.94 202,944.94 $202,944.94 Note 9. Lease Obligations CAPITAL LEASES Gordon College has no Capital leases. OPERATING LEASES Gordon College has no operating leases. Gordon College Annual Financial Report FY 2004 25 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Gordon College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Gordon College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Gordon College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $466,188.64 $456,222.56 $414,185.31 Employees' Retirement System of Georgia Plan Description Gordon College participates in the Employees' Retirement System of Georgia (ERS), a singleemployer 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Gordon College Annual Financial Report FY 2004 26 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2004, for employees covered by ERS was $56,327. The College's total payroll for all employees was $56,327. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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 College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the College amount to 5.66% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $6,765.50, of which $5,920.54 was made by the College and $844.96 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Gordon College Annual Financial Report FY 2004 27 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Gordon College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Gordon College and the covered employees made the required contributions of $279,471.23 (10.03%) and $139,318.47 (5%), respectively. Georgia Defined Contribution Plan Plan Description Gordon College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer 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. Contributions 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 Gordon College Annual Financial Report FY 2004 28 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. Total contributions made by employees during fiscal year 2004 amounted to $20,623.56 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Gordon College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Gordon College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Gordon College Annual Financial Report FY 2004 29 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Gordon College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Gordon College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 22 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Gordon College recognized as incurred $104,039.82 of expenditures, which was net of $28,087.68 of participant contributions. Gordon College Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below. Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $5,008,189.37 247,079.78 1,247,679.59 28,686.15 49,831.75 395,202.30 1,058,693.12 $0.00 $0.00 ($6,396.00) 751,208.81 192,018.22 7,637.15 25,042.47 554,576.10 117,122.46 $0.00 749,788.18 199,711.55 25,242.30 26,209.73 398,353.69 $0.00 981,772.65 236,738.70 1,280.00 23,285.75 (1,637,772.54) 31,693.87 880,356.64 2,106.66 Total Expenses $8,035,362.06 $0.00 $0.00 $1,641,209.21 $1,399,305.45 $519,461.73 Natural Classification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary & Fellowships Enterprises Unallocated Expenses Fa cu lty Sta ff Be n e fits Personal Services Tra ve l Scholarships and Fellow ships Utilitie s Supplies and Others Services De p re cia tio n $ 0.00 759,610.27 244,923.14 (140,671.21) 1,986.61 861,960.05 1,036,955.65 13,765.54 $ 0.00 3,159,859.42 $ 7,318.50 265,026.95 31,655.58 141,616.21 5,677.37 67,266.80 56,317.37 2,528,004.98 99,225.08 $ 0.00 753.50 Total Expenses $ 2,778,530.05 $ 3,159,859.42 $ 3,202,108.84 $ 753.50 Total Expenses $ 5,009,111.87 3,754,486.64 2,152,726.78 2,225.00 92,515.33 1,589,353.68 1,051,055.24 5,794,202.86 1,290,912.86 $ 20,736,590.26 Gordon College Annual Financial Report FY 2004 31 Note 15. Component Units Gordon College Foundation (foundation) is a legally separate, tax-exempt component unit of Gordon College (College). The foundation is set up to provide support to students attending Gordon College. The organization solicits Gordon College Foundation donations for the use of scholarships to eligible students. The 49 members of the Gordon College Foundation are elected to three-year terms of service. The Board of Trustees is composed of business and civic leaders from the Gordon College service area. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or incomes thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31. During the year ended June 30, 2004, the foundation distributed $121,980 to the college for restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 419 College Drive, Barnesville, GA 30204. Gordon College Annual Financial Report FY 2004 32 Investments for Component Units: Gordon College Foundation investments Certificates of deposit in banks are carried at face value. Corporate bonds are recorded at fair market value as shown by the holder of the securities. The Common Fund is an equity-income fund and is carried at Market Value as shown by the funds. Charles Schwab consists of cash, money market funds, stock and mutual funds. It is carried at Market Value as shown on the Charles Schwab statement for December 31, 2003. The various stocks held by the Foundation are carried at market value. Gordon College Foundation received a charitable gift annuity. With a charitable gift annuity, the donor contributes assets in exchange for distributions of a fixed amount for specified period of time. The assets were contributed directly to the organization and are held as general assets of the organization. The related liability for annuity payments is recorded as a general obligation of the organization. Gordon College Foundation, Inc. received various stocks with a fair market value of $137,660. In exchange for the stock, the Foundation agreed to pay the donor quarterly payments of $2,621.44 until the donor's death or until the donor's wife's death if she survives him. The estimated present value of these payments over an actuarially determine life of the donor is recorded as a liability. At December 31, 2003, the estimated present value of annuity payments was $77,697. Interest paid during 2003 was $4,363. Long Term Liabilities for Component Units: Gordon College Foundation had no long term liabilities as of June 3, 2004. Gordon College Annual Financial Report FY 2004 33 GEORGIA SOUTHERN UNIVERSITY Financial Report For the Year Ended June 30, 2004 Georgia Southern University Statesboro, Georgia President Dr. Bruce Grube Interim, Vice President for Business and Finance, Mr. Joe Franklin GEORGIA SOUTHERN UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Georgia Southern University Foundations Balance Sheet .......................................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Georgia Southern University Housing Foundation Statement of Activities .................12 Georgia Southern University Foundation Statement of Activities ...........................13 Georgia Southern University - Southern Boosters, Inc. .......................................14 Georgia Southern University Research & Service Foundation ...............................15 Statement of Cash Flows ................................................................................................... 16 Note 1 Summary of Significant Accounting Policies ...................................................... 18 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 24 Note 3 Accounts Receivable............................................................................................. 27 Note 4 Inventories............................................................................................................. 27 Note 5 Notes/Loans Receivable........................................................................................ 27 Note 6 Capital Assets........................................................................................................ 28 Note 7 Deferred Revenue.................................................................................................. 29 Note 8 Long-Term Liabilities ........................................................................................... 29 Note 9 Lease Obligations.................................................................................................. 30 Note 10 Retirement Plans ................................................................................................. 32 Note 11 Risk Management................................................................................................ 33 Note 12 Contingencies...................................................................................................... 34 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 34 Note 14 Natural Classifications With Functional Classifications..................................... 36 Note 15 Component Units ........................................................................ 37 GEORGIA SOUTHERN UNIVERSITY Management's Discussion and Analysis Introduction Georgia Southern University is the largest and most comprehensive center of higher education in the southern half of Georgia. A residential campus of more than 15,000 students, Georgia Southern is one of the top universities of choice in Georgia for incoming Hope Scholars. The University's hallmark is a superior undergraduate experience emphasizing academic programs from baccalaureates to doctorates in its seven Colleges: Liberal Arts and Social Sciences, Business Administration; Education; Health and Human Sciences; The Jack N. Averitt College of Graduate Studies; and the Allen E. Paulson College of Science and Technology, the College of Information Technology. The University has earned national accreditation in 79 program areas. Founded in 1906, the University is located in Statesboro. The University's enrollment continues to increase to record levels even as admissions standards are raised. Full Time Faculty Students FY2004 FY2003 FY2002 642 15,704 612 15,075 626 14,371 Overview of the Financial Statements and Financial Analysis Georgia Southern University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Overview of the Financial Statements and Financial Analysis Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Southern University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Georgia Southern University Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net Other A ssets Total A ssets June 30, 2004 $30,469,019.92 213,699,394.65 5,168,040.34 249,336,454.91 June 30, 2003 $31,278,975.53 164,045,245.81 5,109,527.40 200,433,748.74 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 15,153,394.75 45,146,536.31 60,299,931.06 13,236,877.47 3,862,408.37 17,099,285.84 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 168,704,364.49 2,347,834.09 3,259,429.73 14,724,895.54 $189,036,523.85 161,066,286.66 2,222,610.69 3,254,890.87 16,790,674.68 $183,334,462.90 The total assets of the institution increased by $48,902,706.17 A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $49,654,148.84 of investment in plant, net of accumulated depreciation. Investment in Plant increase is due primarily to the inception of a capital lease between the institution and the GSU Housing Foundation, Inc., for acquisition of two new residence halls. The new residence halls provide on-campus housing to our students. Both residence halls are operated by the institution's Auxiliary Services division under a management agreement with the GSU Housing Foundation, Inc. University assets are utilized for acquisition and improvements to various areas of the institution for fulfillment of the university's mission. . Georgia Southern University Annual Financial Report FY 2004 2 The total liabilities for the year increased by $43,200,645.22. The primary cause of the increase was due to the inception of the capital lease discussed above concerning related increase in assets, investment in plant. The combination of the increase in total assets of $48,902,706.17 and the increase in total liabilities of $43,200,645.22 yields an increase in total net assets of $5,702,060.95. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $7,638,077.83. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and non-operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $133,641,418.31 June 30, 2003 $118,674,851.69 Operating Expenses Operating Loss 203,144,083.40 (69,502,665.09) 196,995,510.96 (78,320,659.27) Nonoperating Revenues and Expenses 71,521,912.40 76,066,272.74 Income (Loss) Before other revenues, expenses, gains or losses 2,019,247.31 (2,254,386.53) Other revenues, expenses, gains or losses 3,706,663.56 23,783,272.33 Increase in Net Assets 5,725,910.87 21,528,885.80 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 183,334,462.90 (23,849.92) 183,310,612.98 154,514,242.74 7,291,334.36 161,805,577.10 Net Assets at End of Year $189,036,523.85 $183,334,462.90 Georgia Southern University Annual Financial Report FY 2004 3 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: -Georgia Southern University enrollment continues to grow even in-light of continuing increases in admission requirements. The effects of increased enrollment can be seen primarily in revenue sources of tuition and student services areas of Auxiliary Services and Athletics. Revenue increases related to higher enrollment coupled with decreases in operating costs due to additional state budget reductions and the absence of salary merit increases in fiscal year 2004 resulted in a net increase in net assets for the year. -Sponsored program revenues increased during fiscal year 2004 due to increases in enrollment, which drive increases in Federal financial aid funds available to the larger student body. Additionally, the institution has increased successful solicitation of grant funds which resulted in over $1,000,000 in additional grant funds this year. -During fiscal year 2004 we did not have any major capital projects completed and remitted to the institution by GSFIC, resulting in a decrease of other revenues over fiscal year 2003. Georgia Southern University Annual Financial Report FY 2004 4 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 $32,946,536.31 61,754,245.05 1,961,030.71 35,987,861.76 991,744.48 133,641,418.31 $29,786,879.35 53,667,582.50 1,895,779.34 32,002,011.48 1,322,599.02 118,674,851.69 73,061,699.00 10,923.17 541,521.30 (398,825.46) 73,215,318.01 75,763,268.44 641,277.40 (193,011.78) 76,211,534.06 3,679,185.77 27,477.79 3,706,663.56 $210,563,399.88 23,750,841.26 32,431.07 23,783,272.33 $218,669,658.08 Georgia Southern University Annual Financial Report FY 2004 5 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $59,556,590.29 2,169,249.19 2,415,062.23 11,783,337.89 13,019,872.46 16,628,577.34 17,824,598.67 49,007,647.71 30,739,147.62 203,144,083.40 1,693,405.61 $204,837,489.01 June 30, 2003 $59,469,326.03 1,922,609.26 2,152,793.08 11,634,180.08 13,117,500.50 17,823,907.02 18,652,833.85 43,212,825.69 29,009,535.45 196,995,510.96 145,261.32 $197,140,772.28 The compensation and employee benefits category increased by $583,930.97. The minimal change in total personal service expenses is the result of the absence of merit salary increases in fiscal year 2004 despite additional increases in health insurance premiums for the employees of the institution. Delays in filling vacant positions due to budget reductions minimized the effect of increase health insurance premiums. Utility costs increased by $853,722.75 during the past year. The increase was primarily associated with the increased fuel costs and the introduction of new classroom buildings during the year. Non-operating revenues (expenses) decreased by ($4,544,360.34). The reduction is primarily due to additional reductions in state appropriations and reduced investment income. The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Georgia Southern University. Statement of Cash Flows The final statement presented by the Georgia Southern University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from Georgia Southern University Annual Financial Report FY 2004 6 investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 5 9 ,5 9 0 ,4 0 7 .0 8 ) 7 2 ,6 7 4 ,6 0 5 .6 5 (1 2 ,9 6 5 ,6 3 0 .4 2 ) 2 ,0 1 1 ,9 9 7 .3 0 2 ,1 3 0 ,5 6 5 .4 5 1 8 ,1 1 0 ,4 2 9 .9 8 $ 2 0 ,2 4 0 ,9 9 5 .4 3 June 30, 2003 ($ 7 1 ,3 8 8 ,1 4 3 .4 8 ) 7 5 ,1 4 4 ,6 6 3 .7 6 (5 ,3 2 1 ,4 2 1 .1 1 ) 4 5 6 ,9 2 0 .2 3 (1 ,1 0 7 ,9 8 0 .6 0 ) 1 9 ,2 1 8 ,4 1 0 .5 8 $ 1 8 ,1 1 0 ,4 2 9 .9 8 Capital Assets The University had one significant capital asset addition of facilities in fiscal year 2004. Two residence halls were constructed by the GSU Housing Foundation, Inc. The Foundation entered into a capital lease with Georgia Southern University through a lease/lease back agreement. The lease is considered a capital lease because ownership of the facilities returns to the institution at the end of the 27 year lease term for a nominal value of $10.00. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Georgia Southern University has included the financial statements and notes for all required component units for FY2004. The Georgia Southern University Foundation had endowment investments of $28M as of June 30, 2004. The Georgia Southern Housing Foundation had financing lease investment of $34.5M. The Southern Boosters, Inc. had total assets of $2.7M and long-term liability of $250,636. The Georgia Southern University Research and Service Foundation had no long-term investments or debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Dr. Bruce Grube, President Georgia Southern University Georgia Southern University Annual Financial Report FY 2004 7 Statement of Net Assets GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D eposits Deferred Revenue Other Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $20,240,995.43 2,000,000.00 333,765.74 3,355,033.01 1,859,366.99 2,679,858.75 30,469,019.92 2,227,258.50 2,940,781.84 213,699,394.65 218,867,434.99 249,336,454.91 2,542,239.14 1,162,302.00 6,929,232.85 68,233.53 890,168.43 1,082,148.51 2,479,070.29 15,153,394.75 1,351,976.36 43,794,559.95 45,146,536.31 60,299,931.06 168,704,364.49 2,347,834.09 3,259,429.73 14,724,895.54 $189,036,523.85 Georgia Southern University Annual Financial Report FY 2004 8 Georgia Southern University Foundations Balance Sheet Georgia Southern University Foundations Balance Sheet (FASB) June 30, 2004 Georgia Southern University Housing Foundation Georgia Southern University Foundation Southern Boosters Inc. Georgia Southern University Research and Service Foundation Assets Cash and Cash Equivalents Notes and Mortgages Receivable Endowment Investments Pledges Receivable, net Other Assets Investments in Real Estate Capital Assets, net Total Assets $40,978,441.00 38,480,020.00 33,442,636.00 112,901,097.00 $106,440.00 27,982,180.00 1,440,585.00 264,192.00 1,004,150.00 424,749.00 31,222,296.00 $909,258.00 950,220.00 574,000.00 351,021.00 2,784,499.00 $471,072.00 450,195.00 921,267.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Long-Term Debt Liabilities under Split-Interest Agreements Other Liabilities Total Liabilities 2,778,302.00 74,721,649.00 34,463,250.00 111,963,201.00 52,742.00 52,742.00 61,655.00 279,000.00 81,600.00 422,255.00 775,702.00 775,702.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 2,150,921.00 (1,213,025.00) $937,896.00 1,987,281.00 7,784,437.00 21,397,836.00 $31,169,554.00 677,051.00 1,685,193.00 $2,362,244.00 145,565.00 $145,565.00 Georgia Southern University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $40,754,529.71 7,775,810.42 32,182.98 60,222,137.31 322,817.38 1,209,290.36 1,961,030.71 10,136,040.74 8,977,659.15 6,823,521.55 1,209,572.75 2,402,907.07 5,767,949.74 670,210.76 991,744.48 133,641,418.31 36,995,526.82 46,087,026.96 22,587,387.84 354.04 1,378,159.99 51,234,533.32 6,088,040.34 31,625,748.91 7,147,305.18 203,144,083.40 (69,502,665.09) Georgia Southern University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 73,061,699.00 10,923.17 541,521.30 (1,693,405.61) (398,825.46) 71,521,912.40 2,019,247.31 3,679,185.77 27,477.79 3,706,663.56 5,725,910.87 183,334,462.90 (23,849.92) 183,310,612.98 $189,036,523.85 Georgia Southern University Annual Financial Report FY 2004 11 Georgia Southern University Housing Foundation Statement of Activities Georgia Southern University Housing Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 2,171,917.00 2,171,917.00 $0.00 311,012.00 194,250.00 505,262.00 $0.00 0.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 20,996.00 1,719,523.00 20,996.00 2,150,921.00 1,719,523.00 (1,214,261.00) 0.00 0.00 Net Assets Beginning Net Assets Ending Net Assets 0.00 $2,150,921.00 1,236.00 ($1,213,025.00) 0.00 $0.00 Total $0.00 311,012.00 0.00 0.00 2,366,167.00 0.00 0.00 0.00 0.00 2,677,179.00 0.00 0.00 0.00 0.00 1,740,519.00 0.00 0.00 1,740,519.00 936,660.00 1,236.00 $937,896.00 Georgia Southern University Annual Financial Report FY 2004 12 Georgia Southern University Foundation Statement of Activities Georgia Southern University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted Permanently Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $452,667.00 61,200.00 $1,097,091.00 460,013.00 225,115.00 1,164,993.00 78,715.00 1,801,252.00 198,223.00 (1,783,743.00) 2,618,949.00 1,136,577.00 $5,326,468.00 $6,876,226.00 521,213.00 109,578.00 1,390,108.00 0.00 0.00 386,516.00 (17,509.00) 5,418,537.00 0.00 0.00 0.00 9,174,063.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 1,042,130.00 991,494.00 272,290.00 2,305,914.00 313,035.00 0.00 1,136,577.00 0.00 5,418,537.00 0.00 0.00 1,042,130.00 991,494.00 0.00 0.00 272,290.00 2,305,914.00 6,868,149.00 Net Assets Beginning Net Assets Ending Net Assets 1,674,246.00 $1,987,281.00 6,647,860.00 $7,784,437.00 15,979,299.00 $21,397,836.00 24,301,405.00 $31,169,554.00 Georgia Southern University Annual Financial Report FY 2004 13 Georgia Southern University - Southern Boosters, Inc. Statement of Activities Southern Boosters Inc Statement of Activ ities (F unctional Display ) (F ASB) F or the Year Ended June 30, 2004 Unr e s tr ic te d T e m p o r a r ily Re stricte d Pe r m a ne ntly Re stricte d Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition T im e Total Rev enues $730,763.00 13,129.00 144,200.00 43,581.00 247,773.00 1,179,446.00 $865,767.00 45,000.00 37,101.00 (247,773.00) 700,095.00 $0.00 0.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu n d r a is ing Total Ex penses C hange in Net A ssets 671,440.00 481,000.00 148,768.00 1,301,208.00 (121,762.00) 0.00 700,095.00 0.00 0.00 Net Assets B eginning Net A ssets Ending Net A ssets 798,813.00 $677,051.00 985,098.00 $1,685,193.00 $0.00 T o ta l $1,596,530.00 58,129.00 0.00 0.00 144,200.00 80,682.00 0.00 0.00 0.00 1,879,541.00 0.00 0.00 671,440.00 481,000.00 0.00 0.00 148,768.00 1,301,208.00 578,333.00 1,783,911.00 $2,362,244.00 Georgia Southern University Annual Financial Report FY 2004 14 Georgia Southern University Research & Service Foundation Statement of Activities Georgia Southern University Research & Service Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Rev enues G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $0.00 1,996.00 2,417,611.00 2,419,607.00 $0.00 0.00 $0.00 0.00 $0.00 1,996.00 0.00 0.00 0.00 2,417,611.00 0.00 0.00 0.00 0.00 2,419,607.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 278,354.00 1,855,212.00 207,467.00 14,558.00 2,355,591.00 64,016.00 0.00 0.00 0.00 0.00 278,354.00 1,855,212.00 207,467.00 0.00 14,558.00 0.00 0.00 2,355,591.00 64,016.00 Net Assets Beginning Net Assets Ending Net Assets 81,549.00 $145,565.00 $0.00 $0.00 81,549.00 $145,565.00 Georgia Southern University Annual Financial Report FY 2004 15 Statement of Cash Flows GEORGIA SOUTHERN UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $41,132,785.17 19,367,520.85 1,965,002.25 (62,003,982.63) (82,986,833.30) (14,700,380.74) (469,570.91) 537,890.08 10,452,085.09 8,781,036.53 6,816,777.57 1,209,572.75 2,408,028.18 5,736,746.66 853,475.83 1,309,439.54 (59,590,407.08) 73,061,699.00 (398,016.52) 10,923.17 72,674,605.65 875,376.83 (11,277,405.20) (1,010,691.38) (1,552,910.67) (12,965,630.42) 1,394,924.26 617,073.04 2,011,997.30 2,130,565.45 18,110,429.98 $20,240,995.43 Georgia Southern University Annual Financial Report FY 2004 16 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Incom e (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($69,502,665.09) 7,147,305.18 2,287,454.56 (174,117.49) 1,133,365.44 310,191.00 446,954.40 (1,236,207.57) (2,687.51) ($59,590,407.08) ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations C hange in fair value of investm ents recognized as a com ponent of interest i $42,668,051.33 $75,768.31 Georgia Southern University Annual Financial Report FY 2004 17 GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Georgia Southern University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Georgia Southern University is one of thirty-four (34) State supported member institutions of higher education in Georgia, which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Southern University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Southern University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Southern University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Georgia Southern University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Georgia Southern University is reporting the activity for the Georgia Southern University Foundation, Inc., the Georgia Southern University Housing Foundation, Inc., Georgia Southern University Research and Service Foundation, Inc., and Southern Boosters Athletic Foundation. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended Georgia Southern University Annual Financial Report FY 2004 18 by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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 intrauniversity transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Total Return Fund is included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made Georgia Southern University Annual Financial Report FY 2004 19 pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies and Resale inventories are valued at cost using the weighted average cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Southern University when complete. For the year ended June 30, 2004 GSFIC transferred capital additions valued at $2,436,332.88 to Georgia Southern University and recorded as gift revenue. GSFIC also reimburses universities for certain predetermined items of loose equipment and maintenance, repairs and replacements (MRR) for which the University records as capital assets and gift revenue as the cost is incurred. For the year ended June 30, 2004 Georgia Southern University recorded loose equipment additions valued at cost of $ 367,476.06 and MRR valued at cost of $875,376.83. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Georgia Southern University Annual Financial Report FY 2004 20 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Georgia Southern University had accrued liability for compensated absences in the amount of $3,833,734.16 as of 7-1-2003. For FY2004, $2,884,015.28 was earned in compensated absences and employees were paid $2,886,702.79, for a net decrease of $2,687.51. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $3,831,046.65. Noncurrent Liabilities Noncurrent 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 University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A cti $151,699.97 Federal Loans 3,052,208.45 Institutional Loans 55,521.31 Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable $3,259,429.73 Georgia Southern University Annual Financial Report FY 2004 21 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $1,309,754.91 6,740,188.14 139,000.00 6,535,952.49 $14,724,895.54 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Georgia Southern University, 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 University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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 Georgia Southern University Annual Financial Report FY 2004 22 defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Georgia Southern University Annual Financial Report FY 2004 23 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Georgia Southern University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia Southern University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Georgia Southern University Annual Financial Report FY 2004 24 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits Carrying Amount $20,203,391.79 Bank Balances $21,981,658.86 $20,203,391.79 $21,981,658.86 Risk Categories 1 2 $0.00 $21,981,658.86 $0.00 $21,981,658.86 3 $0.00 $0.00 Georgia Southern University Annual Financial Report FY 2004 25 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Type of Investments Life Insurance Corporate Bonds U.S. Government Securities and Corporate Obligations Risk Categories 1 2 $0.00 $7,846.19 3 $0.00 Carrying Amount $7,846.19 0.00 0.00 Totals $0.00 Investments Not Subject to Categorizations: Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments Total Investments $7,846.19 $0.00 $7,846.19 37,603.64 2,219,412.31 2,000,000.00 $4,264,862.14 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Georgia Southern University Annual Financial Report FY 2004 26 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $300,923.51 1,020,843.30 333,765.74 2,033,266.20 3,688,798.75 Net A ccounts Receiv able $3,688,798.75 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $1,442,024.90 164,086.53 68,354.58 184,900.98 $1,859,366.99 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. Georgia Southern University Annual Financial Report FY 2004 27 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,912,099.58 2,618,707.36 4,530,806.94 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 13,311,925.00 208,290,003.52 7,294.00 17,338,247.38 74,866.40 30,333,140.21 237,545.39 269,593,021.90 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 10,062,003.83 62,355,976.90 794.24 12,898,013.40 34,832.07 24,502,114.81 224,847.78 110,078,583.03 Total Capital Assets, Being Depreciated, Net 159,514,438.87 Capital Assets, net $164,045,245.81 Additions $2,319,995.31 2,853,797.29 5,173,792.60 5,915,634.19 13,287.45 1,508,154.45 43,339,994.62 1,237,986.17 11,430.00 52,026,486.88 274,174.76 3,708,221.47 437.64 1,517,096.74 8,942.74 1,210,308.00 25.00 6,719,206.35 45,307,280.53 $50,481,073.13 Reductions $0.00 0.00 Ending Balance 6/30/2004 $4,232,094.89 5,472,504.65 9,704,599.54 5,320,000.00 1,083,538.24 29,061.80 53,476.00 9,640.00 6,495,716.04 13,311,925.00 208,885,637.71 20,581.45 17,762,863.59 43,385,799.22 31,517,650.38 239,335.39 315,123,792.74 4,571,606.25 1,014,597.70 29,061.80 53,476.00 50.00 5,668,791.75 10,336,178.59 61,492,592.12 1,231.88 13,400,512.44 14,713.01 25,658,946.81 224,822.78 111,128,997.63 826,924.29 203,994,795.11 $826,924.29 $213,699,394.65 Georgia Southern University Annual Financial Report FY 2004 28 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $6,085,443.45 843,789.40 $6,929,232.85 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $2,628,978.54 Additions Reductions $43,300,243.28 $1,052,513.36 Ending Balance June 30, 2004 Current Portion $44,876,708.46 $1,082,148.51 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 3,833,734.16 3,833,734.16 $6,462,712.70 2,884,015.28 2,886,702.79 2,884,015.28 2,886,702.79 $46,184,258.56 $3,939,216.15 3,831,046.65 0.00 3,831,046.65 2,479,070.29 2,479,070.29 $48,707,755.11 $3,561,218.80 Georgia Southern University Annual Financial Report FY 2004 29 Note 9. Lease Obligations Georgia Southern University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $3,260,863.05 3,226,753.84 3,112,748.34 3,090,078.66 3,079,657.26 15,216,180.50 15,216,180.50 15,216,180.50 14,292,240.05 3,310,912.00 $143,291.24 2,620.26 79,021,794.70 34,145,086.24 $44,876,708.46 $145,911.50 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2031. Expenditures for fiscal year 2004 were $2,705,096.99 of which $1,693,405.61 represented interest. Total principal paid on capital leases was $1,010,691.38 for the fiscal year ended June 30, 2004. Interest rates range from 4.89 percent to 5.60 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Buildings Equipment Totals $48,075,051.33 $ 717,747.89 $48,792,799.22 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Georgia Southern University Annual Financial Report FY 2004 30 Georgia Southern University had two capital leases with related entities in the current fiscal year. In March 1995, Georgia Southern University entered into a capital lease of $3,000,000.00 at 5.50 percent with the Georgia State Financing and Investment Commission, a party external to the system, whereby the University leases a building for a thirty-year period that began in March 1995 and expires February 2025. The outstanding liability at June 30, 2004 on this capital lease is $2,505,614.80. In October 2002, the University entered into a capital lease of $42,668,051.33 (recorded at Net Present Value of Lease Payments) at 4.89 percent with the Georgia Southern University Housing Foundation, Inc., a related party, whereby the University leases land and buildings for a twentyseven year period that began September 2003 and expires October 2031. The outstanding liability at June 30, 2004 on this capital leases is $38,849,881.66. Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2004 in the amount of $521,212.00. OPERATING LEASES Georgia Southern University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2006. Certain operating leases provide for renewal options at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are office space and small business equipment. In 2003, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $7,000.00. The agreement does contain a renewal options on a year-to-year basis. Under this agreement, the University paid $84,000.00 in the current year. In 2003, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $766.67. The agreement does contain a renewal options on a year-to-year basis. Under this agreement, the University paid $9,200.00 in the current year. In 2003, Georgia Southern University entered into a real property operating lease with unrelated parties, for office space for monthly rentals of $2,500.00. The agreement does contain a renewal options on a year-to-year basis. Under this agreement, the University paid $30,000.00 in the current year. Noncancellable operating lease expenditures in 2004 were $123,200 for real property. Georgia Southern University Annual Financial Report FY 2004 31 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia Southern University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia Southern University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Southern University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $3,956,990.06 $4,303,790.46 $4,000,635.60 Regents Retirement Plan (ORP) Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia Southern University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in Georgia Southern University Annual Financial Report FY 2004 32 accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Georgia Southern University and the covered employees made the required contributions of $3,133,253.62 (10.03%) and $1,561,945.47 (5%), respectively. Georgia Defined Contribution Plan Plan Description Georgia Southern University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $201,761.81 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Southern University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board Georgia Southern University Annual Financial Report FY 2004 33 of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Georgia Southern University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a SelfInsurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Southern University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Southern University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-331, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for Georgia Southern University Annual Financial Report FY 2004 34 retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 515 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Georgia Southern University recognized as incurred $2,057,864.97 of expenditures, which was net of $822,374.39 of participant contributions. Georgia Southern University Annual Financial Report FY 2004 35 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $35,979,631.31 6,855,093.41 10,642,969.95 479,318.83 133,202.00 579,894.14 4,167,762.15 718,718.50 $587,878.33 723,208.55 178,542.50 145,063.51 8,426.00 15,051.74 491,849.03 19,229.53 $153,033.07 854,475.36 191,243.08 60,728.63 217,333.87 24,101.75 911,146.49 2,999.98 $262,585.76 6,746,073.35 1,627,826.22 156,347.32 161,145.60 144,890.95 1,338,808.17 1,345,660.52 $9,173.35 7,689,275.40 1,935,425.51 152,840.50 500.00 182,731.04 2,974,313.41 75,613.25 $3,150.00 8,818,102.25 4,257,065.94 111,996.49 171,083.08 3,055,045.92 212,133.66 Total Expenses $59,556,590.29 $2,169,249.19 $2,415,062.23 $11,783,337.89 $13,019,872.46 $16,628,577.34 Natural C lassification Plant O p e r a tio n s & Maintenance Func tional Classific at ion FY 2004 S c ho la r ship s & Fellowships Auxiliary Unallocated Enterprises Expenses Fa c u lty S ta ff B e n e fits Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Others Services D epreciation $ 0.00 5,805,704.09 1,980,673.68 18,853.25 3,226,500.20 3,061,042.09 3,731,825.36 $ 0.00 49,000,601.61 7,046.10 $ 75.00 8,595,094.55 1,773,640.96 354.04 253,011.46 1,713,324.24 1,743,787.44 15,618,735.55 1,041,124.38 $ 0.00 Total Expenses $ 17,824,598.67 $ 49,007,647.71 $ 30,739,147.62 $ 0.00 T o ta l Expenses $ 36,995,526.82 46,087,026.96 22,587,387.84 354.04 1,378,159.99 51,234,533.32 6,088,040.34 31,625,748.91 7,147,305.18 $ 203,144,083.40 Georgia Southern University Annual Financial Report FY 2004 36 Note 15. Component Units Georgia Southern University Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The fortyone member board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $960,008 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the University Advancement Office, P.O. Box 8040, Statesboro, Georgia 30461. Southern University Housing Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation constructs auxiliary and student services buildings and facilities for use by the university and then leases the completed buildings to the institution. The sixmember board of the foundation is self-perpetuating and consists of graduates and friends of the university. The majority of resources or income thereon that the foundation holds and invests are restricted to the real estate activities of the university. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. Financing lease investment valued at $33 million and associated long-term receivables of $34 million are included in the financial statements of the foundation. The corresponding capital leases and associated long-term debt are included in the university's report and will be eliminated for CAFR reporting. Complete financial statements for the foundation can be obtained from the Georgia Southern Legal Office, P.O. Box 8020, Statesboro, Georgia 30461. Georgia Southern University Annual Financial Report FY 2004 37 Southern Boosters, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University. The foundation acts primarily as a fund-raising organization to supplement resources that are available to the university in support of its athletic programs. The fifty-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the athletic activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university and their management role is significant to the accomplishment of the University's mission, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, Southern Boosters distributed $199,836 to the university for unrestricted purposes. Complete financial statements for the foundation can be obtained from the Southern Boosters Cowart Building, Lanier Road, P.O. Box 8086, Statesboro, GA 30461. Georgia Southern University Research and Services Foundation, Inc. is a legally separate, taxexempt component unit of Georgia Southern University. The foundation solicits Federal, State and private sponsored research opportunities for the university. The six-member board of the foundation is self-perpetuating and consists of graduates and friends of the university. The majority of income held by the foundation is restricted to research and academic support of the university. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation received $2 million in contract revenues from Federal, State and private grantors. Complete financial statements for the foundation can be obtained from the Georgia Southern University Provost Office, P.O. Box 8022, Statesboro, GA 30461. Georgia Southern University Annual Financial Report FY 2004 38 Investments for Component Units: Georgia Southern University Foundation, Inc. holds endowment investments in the amount of $28 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia Southern University Housing Foundation, Inc. holds investment in direct financing lease with two Georgia Southern University residence halls, Southern Courtyard and Southern Pines in the amount of $33.5 million. Interest income from the lease agreement is used to retire related bond debt. Georgia Southern University Annual Financial Report FY 2004 39 Long Term Liabilities for Component Units: Student Housing Bonds are issued by the Georgia Southern University Housing Foundation, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Georgia Southern University. The interest rate is 4.89%. Southern Boosters, Inc. issued a note payable to Sea Island Bank, payable in annual installments of $35,220 beginning September 15, 2004 including interest at a variable rate (4.75% at June 30, 2004), through September 14, 2013, unsecured. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Balance July 1, 2003 Southern Boosters, Inc Note Payable Ga Sou Univ Housing Foundation Bonds Payable-South Trust Ga Sou Univ Housing Foundation Bonds Payable-BB&T $0.00 Additions Reductions $279,000.00 38,737,928.00 35,983,721.00 $0.00 0.00 0.00 Ending Balance June 30, 2004 Amounts due within One Year $279,000.00 38,737,928.00 35,983,721.00 $23,636.00 395,000.00 Total Long Term Debt $0.00 $75,000,649.00 $0.00 $75,000,649.00 $418,636.00 Georgia Southern University Annual Financial Report FY 2004 40 Debt Service Obligations for Component Units A nnual debt s ervice requirements to maturity for Southern Boos ters , Inc. note payable to Sea Is land Bank are as follows : Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Prin c ip a l $28,364.00 22,855.00 23,982.00 25,166.00 26,382.00 152,251.00 Interes t Total $6,856.00 12,365.00 11,238.00 10,054.00 8,838.00 26,209.00 $35,220.00 35,220.00 35,220.00 35,220.00 35,220.00 178,460.00 0.00 0.00 0.00 0.00 0.00 0.00 $279,000.00 $75,560.00 $354,560.00 A nnual debt s ervice requirements to maturity for Georgia Southern Univers ity Hous ing Foundation revenue bonds payable to South Trus t Bank are as follows : Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Bonds Payable Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Prin c ip a l $395,000.00 885,000.00 910,000.00 955,000.00 985,000.00 5,460,000.00 6,695,000.00 8,520,000.00 13,375,000.00 Interes t Total $1,718,831.26 1,706,981.26 1,680,431.26 1,634,931.26 1,606,281.26 7,480,056.30 6,275,906.26 4,447,250.00 2,184,405.00 $2,113,831.26 2,591,981.26 2,590,431.26 2,589,931.26 2,591,281.26 12,940,056.30 12,970,906.26 12,967,250.00 15,559,405.00 0.00 0.00 0.00 $38,180,000.00 $28,735,073.86 $66,915,073.86 Georgia Southern University Annual Financial Report FY 2004 41 Debt Service Obligations for Component Units, cont. Debt S ervice Obligations A nnual debt s ervice requirements to maturity for Georgia Southern Univers ity Hous ing Foundation revenue bonds payable to BB&T are as follows : Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Prin c ip a l $0.00 100,000.00 875,000.00 755,000.00 840,000.00 5,105,000.00 6,190,000.00 7,760,000.00 9,810,000.00 4,465,000.00 Interes t Total $297,321.50 1,698,980.00 1,696,230.00 1,672,167.50 1,650,461.26 7,739,493.80 6,561,690.00 4,851,587.50 2,636,462.50 330,000.00 $297,321.50 1,798,980.00 2,571,230.00 2,427,167.50 2,490,461.26 12,844,493.80 12,751,690.00 12,611,587.50 12,446,462.50 4,795,000.00 0.00 0.00 $35,900,000.00 $29,134,394.06 $60,239,394.06 Georgia Southern University Annual Financial Report FY 2004 42 GEORGIA SOUTHWESTERN STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Georgia Southwestern State University Americus, Georgia President Dr. Michael Hanes Vice President for Business and Finance Dr. Alan Parks GEORGIA SOUTHWESTERN STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Georgia Southwestern State University Foundations Balance Sheet ..........................8 Statement of Revenues, Expenses, and Changes in Net Assets ............................... 9 Georgia Southwestern State University Foundation, Inc. Statement of Activities .........11 Georgia Southwestern Research & Development Corporation Statement of Activities ...12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 28 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 32 Note 15 Component Units ........................................................................ 33 GEORGIA SOUTHWESTERN STATE UNIVERSITY Management's Discussion and Analysis Introduction Georgia Southwestern State University is one of the 34 institutions of the University System of Georgia. The University, located in Americus, Georgia, was founded in 1906. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,400 students each year. Faculty Students FY2004 FY2003 FY2002 104 2,410 109 2,508 111 2,535 Overview of the Financial Statements and Financial Analysis Georgia Southwestern State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Southwestern State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The Georgia Southwestern State University Annual Financial Report FY 2004 1 corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $4,990,451.23 16,108,854.64 1,208,781.93 22,308,087.80 June 30, 2003 $3,967,968.09 17,203,160.12 1,369,429.89 22,540,558.10 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,699,908.49 288,681.77 2,988,590.26 3,185,012.86 376,899.76 3,561,912.62 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 16,108,854.64 382,106.22 1,452,890.07 1,375,646.61 $19,319,497.54 17,203,160.12 353,799.58 1,421,685.78 $18,978,645.48 The total assets of the institution decreased by ($232,470.30). A review of the Statement of Net Assets will reveal that the decrease was primarily due to an decrease of ($1,094,305.48) of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($573,322.36). The primary cause for the decrease was in current liabilities, primarily ($ 830,985.49) in Deposits Held for Other Organizations. The combination of the decrease in total assets of ($232,470.30) and the decrease in total liabilities of ($573,322.36) yields an increase in total net assets of $340,852.06. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking Georgia Southwestern State University Annual Financial Report FY 2004 2 operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $16,528,736.41 June 30, 2003 $15,918,991.54 Operating Expenses Operating Loss 29,862,690.35 (13,333,953.94) 30,435,301.75 (14,516,310.21) Nonoperating Revenues and Expenses 13,012,732.52 13,272,546.45 Income (Loss) Before other revenues, expenses, gains or losses (321,221.42) (1,243,763.76) Other revenues, expenses, gains or losses 2,035,305.11 Increase in Net Assets (321,221.42) 791,541.35 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 18,978,645.48 662,073.48 19,640,718.96 16,564,289.57 1,622,814.56 18,187,104.13 Net Assets at End of Year $19,319,497.54 $18,978,645.48 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Georgia Southwestern State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $4,348,443.82 6,271,972.59 1,637,849.12 4,161,986.71 108,484.17 16,528,736.41 12,616,989.28 317,403.96 78,684.48 (345.20) 13,012,732.52 0.00 $29,541,468.93 June 30, 2003 $4,329,484.15 6,012,838.17 1,414,504.66 3,958,320.88 203,843.68 15,918,991.54 13,217,457.35 55,089.10 13,272,546.45 2,035,305.11 2,035,305.11 $31,226,843.10 Georgia Southwestern State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $10,335,315.67 310,001.99 1,610,965.91 2,529,301.19 1,932,090.13 4,112,411.52 3,304,367.43 1,640,447.33 4,087,789.18 29,862,690.35 0.00 $29,862,690.35 June 30, 2003 $10,639,180.70 307,858.42 1,564,402.09 2,454,121.86 1,997,103.72 4,202,857.16 3,514,870.07 1,871,160.87 3,883,746.86 30,435,301.75 0.00 $30,435,301.75 The compensation and employee benefits category decreased by approximately ($528,140.29). This decrease was due to a reduction in faculty and a one-time decrease in health care expenses related to the E&G fund. Utilities decreased by approximately ($92,642.82) during the past year. The decrease was primarily associated with energy cost savings in fiscal year 2004. Under non-operating revenues (expenses) state appropriations decreased by approximately ($600,468.07). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Georgia Southwestern State University. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by the Georgia Southwestern State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Georgia Southwestern State University Annual Financial Report FY 2004 5 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 1 ,5 5 8 ,4 4 0 .8 6 ) 1 2 ,6 4 3 ,4 7 0 .4 5 (3 5 8 ,0 6 2 .6 7 ) 2 3 0 ,9 6 0 .6 6 9 5 7 ,9 2 7 .5 8 2 ,5 0 3 ,5 8 3 .2 5 $ 3 ,4 6 1 ,5 1 0 .8 3 June 30, 2003 ($ 1 3 ,9 4 8 ,8 4 4 .4 8 ) 1 3 ,6 2 9 ,8 8 0 .3 2 (3 5 6 ,7 6 5 .6 7 ) 4 6 ,7 2 9 .9 8 (6 2 8 ,9 9 9 .8 5 ) 3 ,1 3 2 ,5 8 3 .1 0 $ 2 ,5 0 3 ,5 8 3 .2 5 Capital Assets The University has no significant capital asset additions for facilities in fiscal year 2004. Currently there is a $ 20 million dollar Student Success Center that is to be completed in 2005. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Georgia Southwestern State University has included the financial statements and notes for all required component units for FY2004. The Georgia Southwestern State University Foundation had endowment investments in the amount of $22.4 million. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a reduction in state appropriations of seven percent, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _________________________ Dr Michael Hanes, President Georgia Southwestern State University Georgia Southwestern State University Annual Financial Report FY 2004 6 Statement of Net Assets GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $3,461,510.83 Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance 43,059.94 Receivables - State General Appropriations Allotment Receivables - Other 946,257.08 I n v e nto r ie s 473,508.21 Other Assets 66,115.17 Total C urrent Assets 4,990,451.23 Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 523,594.30 685,187.63 16,108,854.64 17,317,636.57 22,308,087.80 260,906.92 43,500.00 1,872,897.85 44,394.00 38,971.58 439,238.14 2,699,908.49 270,544.90 18,136.87 288,681.77 2,988,590.26 16,108,854.64 382,106.22 1,452,890.07 1,375,646.61 $19,319,497.54 Georgia Southwestern State University Annual Financial Report FY 2004 7 Georgia Southwestern State University Foundations Balance Sheet Georgia Southwestern State Univ ersity Foundations Balance Sheet (FASB) June 30, 2004 G eorgia S outhwestern S tate University Foundation, Inc. G eorgia S outhwestern Research and Development C orporation, Inc. A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets $1,808,208.00 32,797.00 22,407,673.00 418,633.00 737,575.00 25,404,886.00 ($9,809.00) 9,809.00 782,340.00 782,340.00 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 22,198.00 6,201.00 28,399.00 0.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 14,906,304.00 4,132,359.00 6,337,824.00 $25,376,487.00 782,340.00 $782,340.00 Georgia Southwestern State University Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $5,808,277.81 1,459,833.99 3,771,010.45 219,988.28 2,280,973.86 1,637,849.12 1,253,198.86 985,783.46 787,042.74 86,627.30 299,639.04 719,108.30 30,587.01 108,484.17 16,528,736.41 5,801,811.91 7,802,176.34 3,842,729.61 207,847.65 2,140,373.69 1,161,303.32 7,705,643.51 1,200,804.32 29,862,690.35 (13,333,953.94) Georgia Southwestern State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 12,616,989.28 317,403.96 78,684.48 (345.20) 13,012,732.52 (321,221.42) 0.00 (321,221.42) 18,978,645.48 662,073.48 19,640,718.96 $19,319,497.54 Georgia Southwestern State University Annual Financial Report FY 2004 10 Georgia Southwestern State University Foundation, Inc. Statement of Activities Georgia Southwestern State University Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Re v e nue s G ifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income R e c la s s ific a tio ns Program Equipment Acquisition Time Total Revenues $17,381.00 470,177.00 1,044,824.00 (76,293.00) 736,098.00 2,192,187.00 $822,479.00 98,535.00 576,097.00 187,997.00 (736,098.00) 949,010.00 $196,478.00 13,069.00 209,547.00 $1,036,338.00 568,712.00 1,620,921.00 0.00 0.00 124,773.00 0.00 0.00 0.00 3,350,744.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fund r a is ing Total Expenses C hange in Net Assets 242,308.20 428,435.92 242,341.72 478,144.52 433,966.64 1,825,197.00 366,990.00 0.00 949,010.00 0.00 209,547.00 0.00 0.00 242,308.20 428,435.92 242,341.72 478,144.52 433,966.64 1,825,197.00 1,525,547.00 Net Assets Beginning Net Assets Ending Net Assets 14,532,869.00 $14,899,859.00 3,189,794.00 $4,138,804.00 6,128,277.00 $6,337,824.00 23,850,940.00 $25,376,487.00 Georgia Southwestern State University Annual Financial Report FY 2004 11 Georgia Southwestern Research and Development Corporation, Inc. Statement of Activities Georgia Southwestern Research and Developm ent C orporation, Inc. Statem ent of Activ ities (Functional Display) (FASB) For the Year Ended June 30, 2004 Tem porarily Perm anently Unrestricted Restricted Restricted To ta l Re v e nue s G ifts Investm ent Incom e Net Realized and Unrealized G ain on S ecurities G ain on S ale of Real Estate Rental Incom e Other Incom e R e c la s s ific a tio n s Program Equipm ent A cquisition Tim e Total Revenues $0.00 135,009.00 135,009.00 $0.00 0.00 $0.00 0.00 $0.00 0.00 0.00 0.00 0.00 135,009.00 0.00 0.00 0.00 135,009.00 Expenses I n s tr u c tio n Research Institutional S upport Academic Support S tudent S ervices S tudent Financial A id Fu nd r a is in g Total Expenses C hange in Net A ssets 376,664.00 376,664.00 (241,655.00) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 376,664.00 0.00 0.00 0.00 376,664.00 (241,655.00) Net Assets B eginning Net A ssets Ending Net Assets 1,023,995.00 $782,340.00 $0.00 $0.00 1,023,995.00 $782,340.00 Georgia Southwestern State University Annual Financial Report FY 2004 12 Statement of Cash Flows GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITA L A ND RELA TE D F INA NCING A CTIVIT IES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $5,766,547.37 6,593,832.93 1,637,849.12 (8,707,893.06) (17,427,831.52) (3,600,207.68) (72,500.00) 84,070.96 1,150,419.00 985,783.46 787,042.74 86,627.30 299,639.04 719,108.30 30,587.01 108,484.17 (11,558,440.86) 12,616,989.28 26,481.17 12,643,470.45 (358,062.67) (358,062.67) 152,276.18 78,684.48 230,960.66 957,927.58 2,503,583.25 $3,461,510.83 Georgia Southwestern State University Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other A ssets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($13,333,953.94) 1,200,804.32 (99,318.97) (14,867.94) 42,341.71 46,175.81 570,047.21 17,417.92 12,913.02 ($11,558,440.86) Geo rgia So uthwes tern State Univ ersity had no N o n-C as h Inves ting, N o n-C apital Financing, o r C apital and R elated Financing Transactio ns Georgia Southwestern State University Annual Financial Report FY 2004 14 GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Georgia Southwestern State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Georgia Southwestern State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Southwestern State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Southwestern State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Southwestern State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Georgia Southwestern State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Georgia Southwestern State University is reporting the activity for the Georgia Southwestern Research and Development Corporation, Inc. and the Georgia Southwestern State University Foundation, Inc. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 Georgia Southwestern State University Annual Financial Report FY 2004 15 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Georgia Southwestern State University Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are recorded on the consumption method and are valued at cost, using the weighted average method. Resale inventories are valued at costing using the weighted average method. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Southwestern State University when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Georgia Southwestern State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Georgia Southwestern State University Annual Financial Report FY 2004 17 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Georgia Southwestern State University had accrued liability for compensated absences in the amount of $755,501.51 as of 7-1-2003. For FY2004, $484,309.81 was earned in compensated absences and employees were paid $530,028.28, for a net decrease of (45,718.47). The ending balance as of 6-30-2004 in accrued liability for compensated absences was $709,783.04. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Georgia Southwestern State University Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and Other Organized Acti $0.00 Federal Loans 782,898.32 Institutional Loans 287,885.53 Term Endowments 382,106.22 Quasi-Endowments Total Restricted Expendable $1,452,890.07 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $1,102,674.72 909,594.89 473,508.21 (1,110,131.21) $1,375,646.61 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Georgia Southwestern State University, 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. Georgia Southwestern State University Annual Financial Report FY 2004 19 Classification of Revenues The University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Georgia Southwestern State University Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Georgia Southwestern State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia Southwestern State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Georgia Southwestern State University Annual Financial Report FY 2004 21 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Carrying Amount Cash Deposits $1,131,173.36 Investment Portfolio Accounts Total Cash Deposits $1,131,173.36 Bank Balances $2,137,615.03 $2,137,615.03 Risk Categories 1 2 3 $208,438.86 $1,641,753.80 $287,422.37 $208,438.86 $1,641,753.80 $287,422.37 Georgia Southwestern State University Annual Financial Report FY 2004 22 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents Risk Ca te gorie s 1 2 C om m on S tock C orporate Bonds S ecurities and C orporate O bligations $100,000.00 $193,810.71 229,783.59 3 $0.00 Ca rry ing Amount $293,810.71 229,783.59 T o ta ls $100,000.00 $423,594.30 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $523,594.30 2,330,337.47 $2,853,931.77 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Georgia Southwestern State University Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts $86,004.40 228,296.30 43,059.94 650,885.81 1,008,246.45 18,929.43 Net A ccounts Receiv able $989,317.02 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $432,515.33 40,992.88 $473,508.21 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 Georgia Southwestern State University had no allowance for uncollectible loans. Georgia Southwestern State University Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $529,207.00 529,207.00 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $529,207.00 0.00 529,207.00 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 28,028,039.11 1,267,167.00 2,647,022.49 5,928,097.00 37,870,325.60 361,068.38 205,322.61 566,390.99 8,218.59 218,066.79 303,897.00 530,182.38 0.00 28,028,039.11 1,258,948.41 2,790,024.08 0.00 5,829,522.61 0.00 37,906,534.21 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 13,536,032.78 1,008,870.44 2,154,274.26 4,497,195.00 21,196,372.48 Total Capital Assets, Being Depreciated, Net 16,673,953.12 Capital Assets, net $17,203,160.12 919,429.69 82,114.06 324,683.84 215,434.00 1,541,661.59 (975,270.60) ($975,270.60) 210,155.36 27,322.99 159,236.15 14,433.00 411,147.50 0.00 14,245,307.11 1,063,661.51 2,319,721.95 0.00 4,698,196.00 0.00 22,326,886.57 119,034.88 15,579,647.64 $119,034.88 $16,108,854.64 Georgia Southwestern State University Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $834,444.84 1,038,453.01 $1,872,897.85 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004. Leases Lease Obligations Beginning Balance July 1, 2003 $47,723.37 Additions $0.00 Reductions Ending Balance June 30, 2004 $29,586.50 $18,136.87 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 755,501.51 484,309.81 755,501.51 484,309.81 $803,224.88 $484,309.81 530,028.28 709,783.04 530,028.28 709,783.04 $559,614.78 $727,919.91 Current Portion $0.00 439,238.14 439,238.14 $439,238.14 Georgia Southwestern State University Annual Financial Report FY 2004 26 Note 9. Lease Obligations Georgia Southwestern State University is obligated under various operating leases dealing with copier machines. It has no capital leases. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 21-25 26-30 31-35 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $0.00 $7,635.24 5,781.64 3,077.40 1,642.59 0.00 $0.00 $18,136.87 . OPERATING LEASES Georgia Southwestern State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2008. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Georgia Southwestern State University Annual Financial Report FY 2004 27 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia Southwestern State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia Southwestern State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Southwestern State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $740,629.03 $774,092.97 $784,154.40 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia Southwestern State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal Georgia Southwestern State University Annual Financial Report FY 2004 28 year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Georgia Southwestern State University and the covered employees made the required contributions of $ 420,941.46 (10.03%) and $ 209,842.22 (5%), respectively. Georgia Defined Contribution Plan Plan Description Georgia Southwestern State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $ 25,419.84 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Southwestern State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Georgia Southwestern State University Annual Financial Report FY 2004 29 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Georgia Southwestern State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Southwestern State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Southwestern State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Georgia Southwestern State University Annual Financial Report FY 2004 30 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 141 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Georgia Southwestern State University recognized as incurred $442,724.90 of expenditures, which was net of $ 201,169.58 of participant contributions. Georgia Southwestern State University Annual Financial Report FY 2004 31 Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 5,731,425.77 1,040,351.53 1,679,637.13 51,829.26 7,683.44 61,776.89 1,757,895.76 4,715.89 $ 32,440.30 148,489.10 19,025.32 2,919.82 949.00 955.34 101,887.36 3,335.75 $ 29,515.84 608,866.03 143,953.45 45,047.21 95,953.28 9,195.65 676,125.85 2,308.60 $ 2,500.00 1,554,203.89 373,031.37 25,530.88 35,210.17 312,138.29 226,686.59 $ 0.00 1,135,164.00 271,573.73 38,336.05 56,781.01 18,282.89 410,437.02 1,515.43 $ 0.00 2,091,663.84 1,035,288.89 32,392.63 3,897.32 33,757.75 890,968.40 24,442.69 Total Expenses $ 10,335,315.67 $ 310,001.99 $ 1,610,965.91 $ 2,529,301.19 $ 1,932,090.13 $ 4,112,411.52 Na tu ra l C la s s ifica tio n P la n t O perations & Mainte nance F unc t ional Classific at ion FY 2004 S c ho la rs hip s A uxiliary Unallocate d & Fe llowships Ente rprise s Ex pe nse s Fa cu lty Sta ff Be n e fits P e rs o na l Se rvice s Tra ve l Sch o la rs h ip s a nd Fe llo w s hip s Utilitie s Su p p lie s a n d O th e rs Se rvice s De p re cia tio n $ 0.00 717,990.99 194,649.94 (255,539.46) 3,054.78 925,535.58 949,595.80 769,079.80 $ 0.00 3,000.00 1,637,447.33 $ 5,930.00 502,446.96 125,569.78 255,539.46 8,737.02 337,662.31 76,589.05 2,606,595.03 168,719.57 $ 0.00 To ta l Expe ns e s $ 3,304,367.43 $ 1,640,447.33 $ 4,087,789.18 $ 0.00 T o ta l Expenses $ 5,801,811.91 7,802,176.34 3,842,729.61 0.00 207,847.65 2,140,373.69 1,161,303.32 7,705,643.51 1,200,804.32 $ 29,862,690.35 Georgia Southwestern State University Annual Financial Report FY 2004 32 Note 15. Component Units The Georgia Southwestern Foundation, Inc. is a legally separate, tax-exempt component unit of Georgia Southwestern State University. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The 36-member Board of Trustees of the Foundation is self-perpetuating and consists of graduates, community members and other friends of the university. Although the university does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the university by donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The Georgia Southwestern Research and Development Corporation, Inc. (GSWR&DC) is also a legally separate, tax-exempt component unit of Georgia Southwestern State University. The GSWR&DC acts primarily to manage research grants and contracts in support of the university's mission. The 12-member Board of Trustees is composed of university personnel and community members. The GSWR&DC does not regularly distribute income to the university. The activities of the GSWR&DC support the research mission of the university and, accordingly, it is considered a component unit of the university The Foundation and GSWR&DC are private nonprofit organizations that report under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $1,391,230 to the university for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 512 West Forsyth Street, Americus, Georgia 31709. Investments for Component Units: Georgia Southwestern Foundation holds endowment investments in the amount of $22.4 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia Southwestern Foundation, in conjunction with the donors, has established a spending plan whereby 5% to 6% of the earnings may be used for expenses. The remaining earnings are set aside as a reserve. Long Term Liabilities for Component Units: The Foundation does not have any long-term debt. Georgia Southwestern State University Annual Financial Report FY 2004 33 KENNESAW STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Betty L. Siegel President Kennesaw State University Kennesaw, Georgia B. Earle Holley Vice President for Business and Finance KENNESAW STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Kennesaw State University Foundation Balance Sheet ..........................................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Kennesaw State University Foundation Statement of Activities ..............................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 29 Note 11 Risk Management................................................................................................ 32 Note 12 Contingencies...................................................................................................... 33 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 33 Note 14 Natural Classifications With Functional Classifications..................................... 34 Note 15 Component Units ........................................................................ 35 KENNESAW STATE UNIVERSITY Management's Discussion and Analysis Introduction Kennesaw State University is one of the 34 institutions of the University System of Georgia. The University, located in Kennesaw, Georgia, was founded in 1963 and is recognized as a highly valued resource for the region's educational, economic, social, and cultural advancement. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a growing student body as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 469 17,485 409 15,654 389 13,951 Overview of the Financial Statements and Financial Analysis Kennesaw State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Kennesaw State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Kennesaw State University Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $31,647,916.62 109,735,940.82 4,311,146.28 145,695,003.72 June 30, 2003 $40,900,277.18 96,421,090.53 2,336,722.85 139,658,090.56 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 18,692,145.43 30,580,521.62 49,272,667.05 29,195,594.16 21,323,622.02 50,519,216.18 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 80,055,927.70 757,572.98 2,348,479.34 13,260,356.65 $96,422,336.67 75,967,477.39 774,990.24 1,485.12 12,394,921.63 $89,138,874.38 The total assets of the institution increased by $6,036,913.16. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $13,314,850.29 of investment in plant, net of accumulated depreciation. The University entered into three additional capital leases for office space and added parking facilities. The increase in investment in plant was offset by a reduction in accounts receivable which is primarily attributable to a change in the presentation of receivables for fall registration and is mirrored by a decrease in deferred revenue in current liabilities. The total liabilities for the year decreased by ($1,246,549.13). Again, the decrease is primarily attributable to the change in presentation of deferred revenue. Capital lease liabilities increased by $9,226,399.98 due to the addition of capital leases discussed above. The combination of the increase in total assets of $6,036,913.16 and the decrease in total liabilities of ($1,246,549.13) yields an increase in total net assets of $7,283,462.29. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $4,088,450.31. Kennesaw State University Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $75,461,073.73 June 30, 2003 $64,120,616.38 Operating Expenses Operating Loss 126,416,628.83 (50,955,555.10) 123,570,980.22 (59,450,363.84) Nonoperating Revenues and Expenses 56,162,444.39 58,333,502.14 Income (Loss) Before other revenues, expenses, gains or losses 5,206,889.29 (1,116,861.70) Other revenues, expenses, gains or losses 35,948.00 970,021.00 Increase in Net Assets 5,242,837.29 (146,840.70) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 89,138,874.38 2,040,625.00 91,179,499.38 89,495,685.23 (209,970.15) 89,285,715.08 Net Assets at End of Year $96,422,336.67 $89,138,874.38 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Kennesaw State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 $42,331,338.09 12,494,396.30 4,420,862.93 15,234,886.91 979,589.50 75,461,073.73 $34,276,483.95 12,001,253.57 5,223,917.32 12,109,827.57 509,133.97 64,120,616.38 54,560,008.88 197,561.06 580,107.86 2,321,365.54 57,659,043.34 56,344,125.14 701,816.33 2,098,160.26 59,144,101.73 35,948.00 35,948.00 $133,156,065.07 970,021.00 970,021.00 $124,234,739.11 Kennesaw State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $55,246,853.38 429,409.42 4,668,199.75 13,639,437.09 7,662,827.84 17,446,376.58 10,514,275.78 3,262,726.36 13,546,522.63 126,416,628.83 June 30, 2003 $53,149,024.93 6,739,114.49 13,478,677.24 7,536,092.48 17,034,043.12 11,918,815.96 3,327,888.06 11,113,959.56 (726,635.62) 123,570,980.22 1,496,598.95 $127,913,227.78 810,599.59 $124,381,579.81 Total revenues increased by $8,921,325.96. Tuition and fees increased by $8,054,854.14 due to continued double-digit growth rate in the student population and a small increase in tuition rates. Auxiliary contributed $3,125,059.34 to the increase, again due to the growth in student population. Under non-operating revenues (expenses) state appropriations decreased by ($1,784,116.26). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Kennesaw State University. We are hopeful that the economy is now on an upward trend. Total expenses increased by $3,531,647.97. The compensation and employee benefits category increased by $3,354,177.84 primarily reflecting the addition of faculty required to accommodate the increase in student population. Utilities increased by $100,675.39 during the past year. The increase was primarily associated with the increased electricity costs due to the addition of new facilities. Statement of Cash Flows The final statement presented by the Kennesaw State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. Kennesaw State University Annual Financial Report FY 2004 5 The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 2 ,1 2 8 ,3 1 5 .0 6 ) 5 7 ,2 9 0 ,5 5 1 .9 9 (6 ,9 0 2 ,5 9 0 .1 4 ) (1 ,4 3 8 ,1 1 8 .8 1 ) 6 ,8 2 1 ,5 2 7 .9 8 1 7 ,4 2 7 ,5 3 7 .0 2 $ 2 4 ,2 4 9 ,0 6 5 .0 0 June 30, 2003 ($ 5 3 ,4 6 7 ,0 9 5 .8 9 ) 5 6 ,6 1 5 ,0 4 8 .4 8 (5 ,7 2 8 ,5 2 9 .6 6 ) 6 5 9 ,4 0 2 .6 6 (1 ,9 2 1 ,1 7 4 .4 1 ) 1 9 ,3 4 8 ,7 1 1 .4 3 $ 1 7 ,4 2 7 ,5 3 7 .0 2 Capital Assets The University entered into three additional capital leases for office space in fiscal year 2004. Additional parking spaces were added to the parking decks already under capital lease, thereby increasing the rental payment and the value of the lease. In addition, the Bobby Bailey Athletic Facility and two additional parking lots were completed, both of which were under construction in fiscal year 2003. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Kennesaw State University has included the financial statements and notes for all required component units for FY2004. The Kennesaw State University Foundation had endowment investments of $12,010,588.00 as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively Kennesaw State University Annual Financial Report FY 2004 6 flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. _______________________ Betty L. Siegel, President Kennesaw State University Kennesaw State University Annual Financial Report FY 2004 7 Statement of Net Assets KENNESAW STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $24,249,065.00 775,441.79 5,296,331.07 952,689.72 374,389.04 31,647,916.62 3,921,954.76 389,191.52 109,735,940.82 114,047,087.10 145,695,003.72 2,722,180.27 10,329,764.37 3,006,352.43 763,815.39 1,870,032.97 18,692,145.43 1,664,323.89 28,916,197.73 30,580,521.62 49,272,667.05 80,055,927.70 757,572.98 2,348,479.34 13,260,356.65 $96,422,336.67 Kennesaw State University Annual Financial Report FY 2004 8 Kennesaw State University Foundation Balance Sheet Kennesaw State Univ ersity F oundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net O ther A ssets Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue O ther Liabilities Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $4,080,252.00 28,312,460.00 12,010,588.00 2,068,437.00 31,215,326.00 13,800.00 94,000,655.00 171,701,518.00 12,751,792.00 98,597.00 184,927.00 15,895,730.00 126,880,621.00 246,163.00 156,057,830.00 1,585,281.00 4,341,975.00 9,716,432.00 $15,643,688.00 Kennesaw State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets KENNESAW STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $46,878,163.65 4,398,592.42 148,233.14 9,548,513.76 1,739,248.43 1,206,634.11 4,420,862.93 427,077.71 7,593,473.72 461,951.48 2,653,128.49 972,990.78 3,126,064.73 200.00 979,589.50 75,461,073.73 34,188,385.04 35,283,646.48 15,613,796.52 1,136,949.57 6,343,032.31 2,475,809.36 28,410,002.89 2,965,006.66 126,416,628.83 (50,955,555.10) Kennesaw State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 54,560,008.88 197,561.06 580,107.86 (1,496,598.95) 2,321,365.54 56,162,444.39 5,206,889.29 35,948.00 35,948.00 5,242,837.29 89,138,874.38 2,040,625.00 91,179,499.38 $96,422,336.67 Kennesaw State University Annual Financial Report FY 2004 11 Kennesaw State University Foundation Statement of Activities Kennesaw State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $227,726.00 1,831,504.00 137,301.00 6,614,378.00 3,470,221.00 2,824,413.00 15,105,543.00 $999,783.00 222,813.00 858,284.00 (2,824,413.00) (743,533.00) $419,896.00 419,896.00 $1,647,405.00 2,054,317.00 995,585.00 0.00 6,614,378.00 3,470,221.00 0.00 0.00 0.00 14,781,906.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 11,274,071.00 1,062,123.00 379,225.00 49,072.00 12,764,491.00 2,341,052.00 0.00 (743,533.00) 0.00 419,896.00 0.00 0.00 11,274,071.00 1,062,123.00 0.00 379,225.00 49,072.00 12,764,491.00 2,017,415.00 Net Assets Beginning Net Assets Ending Net Assets (755,771.00) $1,585,281.00 5,085,508.00 $4,341,975.00 9,296,536.00 $9,716,432.00 13,626,273.00 $15,643,688.00 Kennesaw State University Annual Financial Report FY 2004 12 Statement of Cash Flows KENNESAW STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $43,282,052.94 12,494,396.30 4,552,516.61 (46,475,044.65) (69,156,512.79) (6,343,032.61) (213,179.82) 256,983.06 427,077.71 7,015,525.50 461,951.48 2,333,441.82 832,617.12 4,050,601.54 200.00 4,352,090.73 (42,128,315.06) 54,560,008.88 2,177,943.93 552,599.18 57,290,551.99 35,948.00 (4,707,594.32) (734,344.87) (1,496,598.95) (6,902,590.14) 580,107.86 (2,018,226.67) (1,438,118.81) 6,821,527.98 17,427,537.02 $24,249,065.00 Kennesaw State University Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other A ssets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations June 30, 2004 ($50,955,555.10) 2,965,006.66 15,633,068.30 12,390.34 472,233.14 2,372,870.87 (12,960,573.61) 332,244.34 ($42,128,315.06) $9,960,744.85 Kennesaw State University Annual Financial Report FY 2004 14 KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Kennesaw State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Kennesaw State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Kennesaw State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Kennesaw State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Kennesaw State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Kennesaw State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for Foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Kennesaw State University is reporting the activity for the Kennesaw State University Foundation. See Note 15. Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Kennesaw State University Annual Financial Report FY 2004 15 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund and certain investments managed by the Kennesaw State University Foundation are included under investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Kennesaw State University Annual Financial Report FY 2004 16 Inventories Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values of 10% of the cost of infrastructure, buildings and building improvements and facilities and other improvements is taken into consideration in calculating depreciation. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Kennesaw State University when complete. For the year ended June 30, 2004, there were no capital additions transferred to Kennesaw State University. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Kennesaw State University had accrued liability for compensated absences in the amount of $3,202,112.52 as of 7-1-2003. For FY2004, $2,720,605.28 was earned in compensated absences and employees were paid $2,388,360.94, for Kennesaw State University Annual Financial Report FY 2004 17 a net increase of $332,244.34. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $3,534,356.86. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Expendable ($672,009.65) 369,667.59 123,708.46 2,527,112.94 $2,348,479.34 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Kennesaw State University Annual Financial Report FY 2004 18 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $3,843,043.50 1,910,524.58 7,506,788.57 $13,260,356.65 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Kennesaw State University, 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 University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Kennesaw State University Annual Financial Report FY 2004 19 Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Kennesaw State University Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Kennesaw State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Kennesaw State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Kennesaw State University Annual Financial Report FY 2004 21 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $6,888,810.44 Bank Balances $9,185,936.75 $6,888,810.44 $9,185,936.75 Risk C ategories 1 2 3 $100,000.00 $0.00 $9,085,936.75 $100,000.00 $0.00 $9,085,936.75 Kennesaw State University Annual Financial Report FY 2004 22 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Type of Investments C ommon Stock C orporate Bonds Securities and C orporate Obligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 668,482.78 C arrying Amount $0.00 0.00 668,482.78 Totals $0.00 Investments Not Subject to C ategorizations: Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments Total Investments $0.00 $668,482.78 $668,482.78 17,360,254.56 1,059,434.50 2,194,037.48 $21,282,209.32 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Kennesaw State University Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $703,824.50 591,850.09 775,441.79 4,097,154.04 6,168,270.42 96,497.56 $6,071,772.86 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $952,689.72 $952,689.72 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Kennesaw State University Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2003 $3,302,820.87 2,440,326.87 5,743,147.74 Additions $0.00 711,613.65 711,613.65 Reductions $0.00 2,440,326.87 2,440,326.87 Ending Balance 6/30/2004 3,302,820.87 711,613.65 4,014,434.52 1,819,221.00 83,926,596.66 2,022,385.00 10,131,999.19 21,016,937.82 16,308,748.99 616,400.00 135,842,288.66 2,557,779.32 2,217,757.02 753,622.72 9,960,744.85 841,474.57 2,106,675.56 18,438,054.04 1,048,040.73 100,562.22 1,148,602.95 1,819,221.00 85,436,335.25 4,240,142.02 10,785,059.69 30,977,682.67 17,150,223.56 2,723,075.56 153,131,739.75 813,191.89 21,241,065.05 1,585,499.36 9,051,707.47 700,564.59 11,494,408.30 277,909.21 45,164,345.87 90,677,942.79 $96,421,090.53 65,491.96 1,523,460.27 176,127.73 (791,120.04) 931,249.24 1,040,566.11 19,231.39 2,965,006.66 716,838.69 2,280.39 719,119.08 878,683.85 22,047,686.63 1,761,627.09 8,260,587.43 1,631,813.83 12,534,974.41 294,860.21 47,410,233.45 15,473,047.38 429,483.87 105,721,506.30 $16,184,661.03 $2,869,810.74 $109,735,940.82 Kennesaw State University had significant unearned, outstanding construction or renovation contracts executed in the amount of $1,696,020.85 as of June 30, 2004. This amount is not reflected in the accompanying financial statements. Kennesaw State University Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $8,363,782.45 1,965,981.92 $10,329,764.37 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $20,453,613.14 Additions $9,960,744.85 Reductions Ending Balance June 30, 2004 $734,344.87 $29,680,013.12 Current Portion $763,815.39 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 3,202,112.52 3,202,112.52 2,720,605.28 2,388,360.94 2,720,605.28 2,388,360.94 3,534,356.86 0.00 3,534,356.86 1,870,032.97 1,870,032.97 $23,655,725.66 $12,681,350.13 $3,122,705.81 $33,214,369.98 $2,633,848.36 Kennesaw State University Annual Financial Report FY 2004 26 Note 9. Lease Obligations Kennesaw State University is obligated under various capital and operating leases for the use of real property (land, buildings, and office facilities. Future commitments for capital lease and for non-cancelable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 6-10 11-15 16-20 21-25 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal O utstanding Real Property C apital Leases O perating Leases $2,400,397.83 2,399,193.01 2,392,291.66 2,388,909.52 2,388,668.59 11,867,568.75 11,719,612.15 11,476,013.21 5,598,303.64 $1,416,390.00 1,416,390.00 1,416,390.00 52,630,958.36 21,350,089.45 1,600,855.79 $29,680,013.12 $4,249,170.00 CAPITAL LEASES Capital leases are generally payable in monthly installments and have terms expiring in various years between 2019 and 2029. Expenditures for fiscal year 2004 were $2,272,361.99 of which $1,496,598.95 represented interest and $70,444.17 represented executory costs. Total principal paid on capital leases was $705,318.87 for the fiscal year ended June 30, 2004. Interest rates range from 2.00 percent to 9.14 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Buildings Totals 29,345,868.84 $29,345,868.84 All capital leases are for one year periods and provide for renewal options covering the remaining term. Non-renewal is considered a remote possibility. Kennesaw State University had four capital leases with Kennesaw State University Foundation, Inc., a discretely presented component unit, in the current fiscal year. Kennesaw State University Annual Financial Report FY 2004 27 In May 2002, Kennesaw State University entered into a capital lease of $3,965,767.73 at 9.14 percent whereby the University leases nine houses for a twenty-five-year period that began May 2002 and expires April 2027. The outstanding liability at June 30, 2004 on this capital lease is $3,827,805.96. In August 2002, the University entered into a capital lease of $21,016,937.82 at 4.7 percent whereby the University leases two parking decks for a twenty-four-year period that began August 2002 and expires July 2026. In August 2003 the lease payments increased because additional space was added to one of the decks bringing the value of the lease to $24,093,887.21. The decks are constructed on land owned by the University and leased to Kennesaw State University Foundation, Inc. for $1.00 annually for a period of 25 years commencing in June 2001. At the expiration of the ground lease, ownership of the parking decks transfers to the University. The outstanding liability at June 30, 2004 on this capital lease is $22,976,018.41. In January 2004 the University entered into a capital lease of $2,718,027.73 at 5.5 percent whereby the University leases a portion of a building for a twenty-five-year period that began January 2004 and expires June 2029. The University has the right of first refusal to lease additional space in the building complex. Should the cumulative value of the rent payments equal the value of the Foundation's financing instrument and all additional rent under the terms of the agreement, Kennesaw State University Foundation, Inc. will gift the property to the University. The outstanding liability at June 30, 2004 on this capital lease is $2,680,973.09. In February 2004 the University entered into a capital lease of $200,000 at 2.0 percent whereby the University leases a house for a fifteen-year period that began February 2004 and expires January 2019. The outstanding liability at June 30, 2004 on this capital leases is $195,215.65. OPERATING LEASES In 1999, Kennesaw State University entered into a real property operating lease with the Kennesaw State University Foundation, Inc., a discretely presented component unit, for office and classroom space from 1999 through 2007 for annual rentals of $1,365,993.00, payable monthly. In fiscal year 2004, annual rent payments increased by $50,400.00 because the University rented more space under the lease. Under this agreement, Kennesaw State University paid the Kennesaw State University Foundation $1,416,390.00 in the current year. All operating lease agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. In addition to the ground lease for the parking facility discussed above, Kennesaw State University entered into a ground lease in August 2001 for $1.00 annually whereby it leases to Kennesaw State University Foundation, Inc. the land on which the Foundation has constructed and operates a student housing facility. The lease is for a period of 30 years with an option to renew for an additional 5 year period. At the expiration of the lease, the ownership of the housing facility transfers to the University. Kennesaw State University Annual Financial Report FY 2004 28 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Kennesaw State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Kennesaw State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Kennesaw State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 3,306,631.56 $ 3,182,344.59 $ 3,173,892.98 Employees' Retirement System of Georgia Plan Description Kennesaw State University 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Kennesaw State University Annual Financial Report FY 2004 29 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $154,000.19. The University's total payroll for all employees was $66,663,786.02. All of the University's employees covered by ERS are under the old plan whereby member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University 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 University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University amount to 10.5 % of covered payroll. Total contributions to the plan made during fiscal year 2004 amounted to $18,600.50, of which $16,290.46 was made by the University and $2,310.04 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Kennesaw State University Annual Financial Report FY 2004 30 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Kennesaw State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Kennesaw State University and the covered employees made the required contributions of $2,400,143.97 (10.03%) and $1,196,999.87 (5%), respectively. Georgia Defined Contribution Plan Plan Description Kennesaw State University 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. Contributions 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 Kennesaw State University Annual Financial Report FY 2004 31 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. Total contributions made by employees during fiscal year 2004 amounted to $393,113.39 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Kennesaw State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Kennesaw State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Kennesaw State University Annual Financial Report FY 2004 32 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Kennesaw State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Kennesaw State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 168 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Kennesaw State University recognized as incurred $689,616.79 of expenditures, which was net of $234,853.90 of participant contributions. Kennesaw State University Annual Financial Report FY 2004 33 Note 14. Natural Classifications With Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below. Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $32,012,855.07 6,579,141.78 8,423,083.69 560,613.31 421,853.81 307,746.30 6,150,703.38 790,856.04 $96,869.00 134,505.93 31,871.87 14,209.27 2,000.00 723.59 112,661.48 36,568.28 $734,701.38 2,039,621.20 550,357.26 141,698.68 8,973.85 50,431.84 1,138,145.78 4,269.76 $1,134,978.14 7,520,817.65 1,911,189.64 $4,400.00 4,945,369.62 1,126,132.26 157,015.06 700.00 141,621.94 2,810,972.47 (37,857.81) 64,236.71 92,169.24 1,209,714.20 220,805.81 $9,385.60 8,986,111.63 2,361,996.81 129,264.18 1,769,035.29 155,790.37 3,679,395.13 355,397.57 Total Expenses $55,246,853.38 $429,409.42 $4,668,199.75 $13,639,437.09 $7,662,827.84 $17,446,376.58 Natural C lassification Plant Operations & Maintenance Functional Classification FY 2004 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 3,149,336.00 762,694.96 (78,240.61) 9,192.75 1,677,999.35 4,223,793.23 769,500.10 $ 0.00 3,262,726.36 $ 195,195.85 1,928,742.67 446,470.03 78,240.61 60,719.61 877,743.00 49,326.73 9,084,617.22 825,466.91 $ 0.00 Total Expenses $ 10,514,275.78 $ 3,262,726.36 $ 13,546,522.63 $ 0.00 Total Expenses $ 34,188,385.04 35,283,646.48 15,613,796.52 0.00 1,136,949.57 6,343,032.31 2,475,809.36 28,410,002.89 2,965,006.66 $ 126,416,628.83 Kennesaw State University Annual Financial Report FY 2004 34 Note 15. Component Units Kennesaw State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Kennesaw State University (University). The Foundation's mission is to be advocates for the University and to receive, invest, account for and allocate private gifts and contributions in support of the University. The Foundation provides student housing and parking and leases administrative space to the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $2,542,605.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1000 Chastain Rd. Kennesaw, GA 30114. Investments for Component Units: Kennesaw State University Foundation holds endowment investments in the amount of $12,010,588.00. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Kennesaw State University Foundation, in conjunction with the donors, has established a spending plan whereby 4% of the earnings may be used for academic scholarships. Long Term Liabilities for Component Units: During the year ended June 30, 2004, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation in a variable interest rate loan which is secured by three letters of credit. The Series 2003A Student Housing Facilities Bonds were issued to finance student housing on University Property and mature August 2031. The Series 2003B University Facilities Bonds were issued to finance parking facilities on University property and mature August 2026. During the year Series 2001A and 2001A bonds that were issues in 2001 were refunded. During the year ended June 30, 2004, the Foundation assumed Educational Facilities Bonds issued by the Development Authority of Cobb County. The bonds were used to finance the acquisition of existing teaching and administrative facilities and mature August 2031. Kennesaw State University Annual Financial Report FY 2004 35 During the year ended June 30, 2004, the Foundation purchased an apartment complex and assumed a note payable to a financial institution. The note matures April 2010 with a final payment of the entire outstanding principal balance. The note bears interest at a rate of 8.58%. The obligations of the Foundation to repay these liabilities are secured by a deed to secure debt, an assignment of rents and leases, and by a security agreement which encumbers the Foundation's interest in the projects and revenues. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year Student Housing Facilities Bonds University Facilities Bonds Educational Facilities Revenue Bonds Note Payable Total Long Term Debt $37,755,000.00 22,940,000.00 $60,695,000.00 $85,705,785.00 $25,045,000.00 $15,990,000.00 2,474,836.00 $129,215,621.00 $37,755,000.00 22,940,000.00 2,335,000.00 $63,030,000.00 $85,705,785.00 25,045,000.00 13,655,000.00 2,474,836.00 $126,880,621.00 $705,000.00 550,000.00 650,000.00 24,795.00 $1,929,795.00 Debt Service Obligations for Component Units Annual debt servic e requirement s on long t erm liabilit ies are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Bonds Payable P r in c ip a l I n te r e s t T o ta l $ 1,929,795.00 2,987,008.00 3,139,418.00 3,307,044.00 3,469,904.00 22,316,667.00 25,610,000.00 25,740,000.00 28,615,000.00 9,765,785.00 $ 0.00 $ 1,929,795.00 2,987,008.00 3,139,418.00 3,307,044.00 3,469,904.00 22,316,667.00 25,610,000.00 25,740,000.00 28,615,000.00 9,765,785.00 0.00 0.00 $ 126,880,621.00 $ 0.00 $ 126,880,621.00 Kennesaw State University Annual Financial Report FY 2004 36 MACON STATE COLLEGE Financial Report For the Year Ended June 30, 2004 Macon State College Macon, Georgia David A. Bell, Ph.D. President Levy G. Youmans, Jr. Vice President for Fiscal Affairs MACON STATE COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Macon State College Foundation Balance Sheet .................................................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Macon State College Foundation Statement of Activities .....................................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 30 Note 12 Contingencies...................................................................................................... 31 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 14 Natural Classifications With Functional Classifications..................................... 32 Note 15 Component Units ........................................................................ 33 MACON STATE COLLEGE Management's Discussion and Analysis Introduction Macon State College is one of the 34 institutions of the University System of Georgia. Since its inception, the College has grown and expanded in many areas. Initially offering two-year transfer programs, career programs, and one-year certificates, the College received approval from the Board of Regents in October 1996 to begin offering baccalaureate programs in Information Technology, Health Services Administration, and Health Information Management. With the addition of other baccalaureate programs the College has further expanded its level of programming and service to the region. The College's main campus, located in Macon, Georgia, is complemented by the new Warner Robins Center in Warner Robins, Georgia. Enrollment at the College has increased well over 50% since the mission change in 1996. Enrollment for Fall 2003 continued to increase with a total enrollment of over 5,400 students. The continued emphasis on its focused mission and its professionally oriented baccalaureate degrees has positioned the College to continue as a major economic driver in the Central Georgia region. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 166 5,403 159 4,991 118 4,485 Overview of the Financial Statements and Financial Analysis Macon State College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Macon State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Macon State College Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $9,165,703.08 26,844,400.65 1,096,484.29 37,106,588.02 June 30, 2003 $6,445,115.61 21,274,906.74 985,331.85 28,705,354.20 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 6,221,478.66 342,662.36 6,564,141.02 4,190,186.51 356,243.29 4,546,429.80 Net A ssets: Invested in C apital A ssets, net of debt R estricted - nonexpendable R estricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 26,844,400.65 42,980.00 53,430.60 3,601,635.75 $30,542,447.00 21,274,906.74 73,449.96 53,430.60 2,757,137.10 $24,158,924.40 The total assets of the institution increased by $8,401,233.82. A review of the Statement of Net Assets will reveal that the increase was primarily due to the increase in investment in plant less accumulated depreciation. The Georgia State Financing and Investment Commission transferred title to the Warner Robins Campus to Macon State College which accounted for $5 Million. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $2,017,711.22. This increase was due to an increase in deferred revenue of $1,101,557.39 and an increase in other liabilities of $608,928.96. Other Macon State College Annual Financial Report FY 2004 2 liabilities are comprised of payments by students which have not yet been applied to their future semester. The combination of the increase in total assets of $8,401,233.82 and the increase in total liabilities of $2,017,711.22 yields an increase in total net assets of $6,383,522.60. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $5,569,493.91. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $10,661,465.66 June 30, 2003 $9,603,885.35 Operating Expenses Operating Loss 33,815,297.41 (23,153,831.75) Nonoperating Revenues and Expenses 23,380,387.37 Income (Loss) Before other revenues, expenses, gains or losses 226,555.62 Other revenues, expenses, gains or losses 6,085,040.81 Increase in Net Assets 6,311,596.43 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 24,158,924.40 71,926.17 24,230,850.57 Net Assets at End of Year $30,542,447.00 31,212,523.97 (21,608,638.62) 20,972,693.65 (635,944.97) (635,944.97) 23,841,911.03 952,958.34 24,794,869.37 $24,158,924.40 The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with an increase 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: Macon State College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $6,184,274.42 734,523.71 528,368.07 2,929,725.11 284,574.35 10,661,465.66 15,589,607.39 7,166,747.17 622,046.19 23,855.55 (21,868.93) 23,380,387.37 5,305,040.81 780,000.00 6,085,040.81 $40,126,893.84 June 30, 2003 $4,962,836.72 1,301,308.43 350,211.20 2,478,670.76 510,858.24 9,603,885.35 15,014,794.60 5,908,826.53 53,867.52 (4,795.00) 20,972,693.65 0.00 $30,576,579.00 Macon State College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $14,087,906.33 375,646.00 2,098,606.33 2,536,708.94 3,513,092.72 3,692,919.41 3,806,301.42 2,801,648.69 902,467.57 33,815,297.41 0.00 $33,815,297.41 June 30, 2003 $13,600,996.67 342,301.06 2,320,613.18 2,279,556.80 3,432,326.73 2,893,635.84 2,959,077.84 2,391,808.72 992,207.13 31,212,523.97 0.00 $31,212,523.97 Total revenue increased by $9,550,314.84. The largest increase was in the capital gifts and grants which consisted of the transfer of the Warner Robins Campus to Macon State College. Included in these capital gifts and grants is the land and the former Thomas Elementary School donated by the City of Warner Robins which was valued at $788,000.00. Also included in this category is $5,305,040.81 from the State which funded construction of the project. Student tuition and fees, net of sponsored and unsponsored scholarships, increased by $1,221,437.70 or 25%. Several factors contributed to this increase including an increase in the cost of tuition over the previous year, an increase in the number of students and credit hours, and an increase in the number of students taking upper level courses which are charged at a higher rate. Overall, grants and contracts increased $691,135.92. The large differences between the current and previous year in the Federal Grants are a result of reclassifying grants between operating and non-operating. Other modest increases were seen in the areas of sales and services of educational departments which includes the Continuing Education Department, Institute for Business and Information Management, and the Educational Technology Training Center. The Bookstore also recorded an increase in revenue of $431,726.31. Total operating expenses increased $2,602,773.44. There were modest increases in all areas except Scholarships and Fellowships which increased $849,420.24 or 28% and Supplies and Other Services which increased $797,391.66 or 12%. The increase in Scholarships and Fellowships is due to the increase in the number of students enrolled. A large portion of the increase in supplies and other services is due to increased utility and maintenance costs, as well Macon State College Annual Financial Report FY 2004 5 as one time costs, associated with the three new buildings put into service during Fiscal Year 2004. Salaries for both faculty and staff increased almost solely as a result of new positions created due to the growth in student enrollment. Statement of Cash Flows The final statement presented by Macon State College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 2 0 ,7 4 2 ,2 4 3 .3 0 ) 2 2 ,7 8 3 ,6 3 0 .7 8 (2 1 8 ,7 1 7 .3 1 ) 1 0 9 ,5 4 7 .0 6 1 ,9 3 2 ,2 1 7 .2 3 2 ,0 4 6 ,6 0 2 .6 6 $ 3 ,9 7 8 ,8 1 9 .8 9 June 30, 2003 ($ 2 1 ,8 3 9 ,7 8 6 .0 0 ) 2 0 ,7 1 1 ,9 8 5 .4 0 (2 9 7 ,1 2 1 .2 7 ) 5 0 ,9 9 7 .5 8 (1 ,3 7 3 ,9 2 4 .2 9 ) 3 ,4 2 0 ,5 2 6 .9 5 $ 2 ,0 4 6 ,6 0 2 .6 6 Capital Assets The College had a significant number of facilities added to capital assets this fiscal year. Among the additions were the completion of the Warner Robins Campus consisting of the renovation of the Thomas Hall, construction of the Administrative Services Building, and completion of all associated infrastructure work for the campus. Title to the Warner Robins Campus was transferred to the College by GSFIC. The Jones Building was also completed and occupied on the Macon campus during Fiscal Year 2004; however, title to the building had not been transferred to the College as of June 30, 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Macon State College Annual Financial Report FY 2004 6 Component Units In compliance with GASB Statement No. 39 Macon State College has included the financial statements and notes for all required component units for FY 2004. The Macon State College Foundation, Inc. holds $5,818,673 in net endowed assets as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate an increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _________________________ David A. Bell, Ph.D., President Macon State College Macon State College Annual Financial Report FY 2004 7 Statement of Net Assets MAC ON STATE C OLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents S hort-term Investm ents A ccounts Receivable, net Receivables - Federal Financial A ssistance Receivables - S tate G eneral A ppropriations A llotm ent Receivables - Other I n v e n to r ie s O ther A ssets Total C urrent A ssets Noncurrent Assets Noncurrent C ash Investm ents Notes Receivable, net C apital A ssets, net Total Noncurrent A ssets TOTAL ASSETS LIA BILIT IE S Current Liabilities A ccounts Payable and A ccrued Liabilities D eposits Deferred Revenue O ther Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term D ebt C om pensated A bsences (current portion) Total C urrent Liabilities Noncurrent Liabilities C om pensated A bsences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital A ssets, net of related debt Restricted for No ne x p e nda b le Ex p e nd a ble C apital Projects U n r e s tr ic te d TOTAL NET ASSETS June 30, 2004 $3,978,819.89 100,000.00 978,785.97 3,604,576.31 492,289.80 11,231.11 9,165,703.08 1,092,128.18 4,356.11 26,844,400.65 27,940,884.94 37,106,588.02 347,676.50 4,421,705.01 534,415.65 483,890.94 433,790.56 6,221,478.66 342,662.36 342,662.36 6,564,141.02 26,844,400.65 42,980.00 53,430.60 3,601,635.75 $30,542,447.00 Macon State College Annual Financial Report FY 2004 8 Macon State College Foundation Balance Sheet M a c o n S ta te C o lle g e F o u n d a tio n B a la n c e S h e e t (F A S B ) June 30, 2004 A sse ts C a s h a n d C a s h E q u iv a le n ts N o te s a n d M o rtg a g e s R e c e iv a b le E n d o w m e n t In v e s tm e n ts P le d g e s R e ce iv a b le , ne t In v e s tm e n ts C a p ita l A s s e ts , n e t T o ta l A s s e ts Lia b ilitie s A c c o u n ts P a y a b le a n d A c c ru e d Lia b ilitie s D e p o s its Long-Term D ebt Lia b ilitie s u n d e r S p lit -In te re s t A g re e m e n ts T o ta l Lia b ilitie s Ne t A sse ts U n re s tric te d T e m p o ra rily R e s tric te d P e rm a n e n tly R e s tric te d T o ta l N e t A s s e ts $ 2 9 8 ,5 1 3 .0 0 2 ,9 0 3 ,7 7 9 .0 0 4 ,5 7 8 ,7 2 2 .0 0 1 ,9 0 1 ,9 9 6 .0 0 9 ,6 8 3 ,0 1 0 .0 0 8 5 7 ,0 0 1 .0 0 8 5 7 ,0 0 1 .0 0 4 5 2 ,3 1 5 .0 0 2 ,5 5 5 ,0 2 1 .0 0 5 ,8 1 8 ,6 7 3 .0 0 $ 8 ,8 2 6 ,0 0 9 .0 0 Macon State College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets MAC ON STATE C OLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VENUES Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a ns p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $8,310,581.37 2,025,539.51 100,767.44 244,774.40 393,583.75 96,165.56 528,368.07 2,900,452.96 29,272.15 284,574.35 10,661,465.66 9,677,045.89 6,487,453.33 4,163,303.21 175,678.56 3,843,331.78 1,008,539.19 7,437,905.38 1,022,040.07 33,815,297.41 (23,153,831.75) Macon State College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investment Incom e (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 15,589,607.39 6,860,509.62 35,540.00 270,697.55 622,046.19 23,855.55 (21,868.93) 23,380,387.37 226,555.62 5,305,040.81 780,000.00 6,085,040.81 6,311,596.43 24,158,924.40 71,926.17 24,230,850.57 $30,542,447.00 Macon State College Annual Financial Report FY 2004 11 Macon State College Foundation Statement of Activities Macon State College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES, GAIN AND OTHER SUPPORT Gifts Investment Income Net Unrealized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $59,213.00 1,892.00 (670.00) 782,912.00 843,347.00 $1,587,757.00 78,924.00 6,140.00 55,125.00 (782,912.00) 945,034.00 $493,957.00 211,940.00 705,897.00 $2,140,927.00 80,816.00 217,410.00 55,125.00 0.00 0.00 2,494,278.00 EXPENSES: Instuction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 243,916.00 170,029.00 69,182.00 112,196.00 595,323.00 248,024.00 243,916.00 0.00 170,029.00 0.00 945,034.00 0.00 705,897.00 69,182.00 112,196.00 595,323.00 1,898,955.00 NET ASSETS Beginning Net Assets Ending Net Assets 204,291.00 $452,315.00 1,609,987.00 $2,555,021.00 5,112,776.00 $5,818,673.00 6,927,054.00 $8,826,009.00 Macon State College Annual Financial Report FY 2004 12 Statement of Cash Flows MACON STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2004 $8,433,175.97 590,940.62 541,719.79 (12,585,280.99) (16,191,787.72) (5,868,871.29) (11,082.07) 2,892,464.62 29,272.15 1,427,205.62 (20,742,243.30) 15,589,607.39 47,956.59 7,146,066.80 22,783,630.78 (218,717.31) (218,717.31) 100,000.00 9,547.06 109,547.06 1,932,217.23 2,046,602.66 $3,978,819.89 Macon State College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities June 30, 2004 ($23,153,831.75) 1,000,039.69 92,045.59 (126,377.16) (7,702.11) (34,800.03) 847,496.65 608,928.96 31,956.86 ($20,742,243.30) Macon State College had no Non-Cash Investing, Non-Capital Financing, or Capital and Related Financing Transactions Macon State College Annual Financial Report FY 2004 14 MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations The purpose of Macon State College is to advance the intellectual, cultural, social, economic, recreational, and physical development of those within commuting distance of the College's two campuses. The College's primary objective is to provide students with the knowledge and skills needed for full constructive lives in a rapidly changing and increasingly global environment. The College is strongly committed to quality education and student success through excellence and innovation in teaching. Reporting Entity Macon State College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Macon State College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Macon State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Macon State College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Macon State College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Macon State College is reporting the activity for the Macon State College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 Macon State College Annual Financial Report FY 2004 15 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Macon State College Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Resale Inventories are valued at cost using the first in first out basis. Non-current Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as non-current assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Macon State College when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $5,000,000.00 to Macon State College. Deposits The College held no student deposits at June 30, 2004 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Macon State College Annual Financial Report FY 2004 17 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Macon State College had accrued liability for compensated absences in the amount of $808,409.78 as of July 1, 2003. For FY 2004, $2,510,734.41 was earned in compensated absences and employees were paid $2,542,691.27 for a net decrease of $31,956.86. The ending balance as of June 30, 2004 in accrued liability for compensated absences was $776,452.92. 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Macon State College Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: Restricted - E&G and Other Organized A ctivities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Expendable June 30, 2004 ($12,992.51) 88.58 55,883.93 $42,980.00 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $530,179.39 274,130.36 344,396.92 2,452,929.08 $3,601,635.75 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Macon State 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. Macon State College Annual Financial Report FY 2004 19 Classification of Revenues The College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Non-operating revenues: Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Macon State College Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Macon State 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Macon State College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Macon State College Annual Financial Report FY 2004 21 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Carrying Amount Cash Deposits Investment Portfolio Accounts $3,152,122.73 25,493.11 Total Cash Deposits $3,177,615.84 Bank Balances $3,978,819.89 25,493.11 $4,004,313.00 Risk Categories 1 2 3 $100,000.00 25,493.11 $0.00 $3,878,819.89 $125,493.11 $0.00 $3,878,819.89 Macon State College Annual Financial Report FY 2004 22 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Type of Investments C ommon Stock C orporate Bonds Securities and C orporate Obligations Risk Categories 1 2 3 $0.00 $0.00 $770,812.17 10,317.90 285,505.00 Ca r r y ing Amount $770,812.17 10,317.90 285,505.00 Totals $0.00 Investments Not Subject to C ategorizations: Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments Total Investments $0.00 $1,066,635.07 $1,066,635.07 826,697.16 100,000.00 $1,993,332.23 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Macon State College Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctivities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $2,251,992.68 140,286.34 978,785.97 1,212,297.29 4,583,362.28 $4,583,362.28 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ook store Food Services Physical Plant O ther T o ta l June 30, 2004 $492,289.80 $492,289.80 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. At June 30, 2004 the College had no allowance for uncollectible loans. Macon State College Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004. Note 6 - Capital Assets Disclosure Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $483,411.84 216,563.58 699,975.42 Additions $124,000.00 124,000.00 Reductions $0.00 216,563.58 216,563.58 Ending Balance 6/30/2004 $607,411.84 0.00 607,411.84 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 26,266,532.42 1,506,199.00 1,942,510.78 3,145,996.47 32,861,238.67 6,194,629.80 214,137.00 190,095.50 130,248.47 6,729,110.77 180,781.66 27,640.00 208,421.66 0.00 32,461,162.22 1,720,336.00 1,951,824.62 0.00 3,248,604.94 0.00 39,381,927.78 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 7,670,936.54 534,792.31 1,336,071.16 2,744,507.34 12,286,307.35 Total Capital Assets, Being Depreciated, Net 20,574,931.32 Capital Assets, net $21,274,906.74 676,641.24 62,156.90 221,263.10 130,075.25 1,090,136.49 5,638,974.28 $5,762,974.28 62,398.70 5,697.72 135,768.45 27,640.00 231,504.87 0.00 8,285,179.08 591,251.49 1,421,565.81 0.00 2,846,942.59 0.00 13,144,938.97 (23,083.21) 26,236,988.81 $193,480.37 $26,844,400.65 Macon State College Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Pre paid Tuition and Fe es Research O the r D e ferre d R e v e nue T o ta ls June 30, 2004 $3,888,809.48 532,895.53 $4,421,705.01 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Current Portion $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 808,409.78 2,510,734.41 808,409.78 2,510,734.41 2,542,691.27 2,542,691.27 776,452.92 0.00 776,452.92 433,790.56 433,790.56 Total Long Term Obligations $808,409.78 $2,510,734.41 $2,542,691.27 $776,452.92 $433,790.56 Note 9. Lease Obligations Macon State College had no capital leases or installment purchase agreements for the acquisition of real property during fiscal year 2004. Macon State College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Macon State College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Macon State College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Macon State College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $903,953.15 $904,218.21 $1,073,549.80 Employees' Retirement System of Georgia Plan Description Macon State 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Macon State College Annual Financial Report FY 2004 27 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2004, for employees covered by ERS was $79,539.42. The College's total payroll for all employees was $16,503,678.31. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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 College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the amount to 10.41% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $9,337.49, of which $8,161.53 was made by the College and $1,175.96 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Macon State College Annual Financial Report FY 2004 28 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Macon State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employees' earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Macon State College and the covered employees made the required contributions of $465,472.46 (10.03%) and $ 232,040.43 (5%), respectively. Georgia Defined Contribution Plan Plan Description Macon State 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. Contributions 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 Macon State College Annual Financial Report FY 2004 29 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. Total contributions made by employees during fiscal year 2004 amounted to $39,675.08 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Macon State College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Macon State College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Macon State College Annual Financial Report FY 2004 30 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Macon State College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Macon State College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 71 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Macon State College recognized as incurred $326,548.28 of expenditures, which was net of $127,690.92 of participant contributions. Macon State College Annual Financial Report FY 2004 31 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $9,587,912.07 803,472.70 2,419,358.20 112,369.71 72,284.41 1,058,572.62 33,936.62 $0.00 $18,129.71 109,261.92 25,109.47 4,411.10 4,551.47 214,182.33 $13,250.00 1,477,209.32 378,542.73 9,713.90 3,118.36 156,065.21 51,834.01 8,872.80 $57,754.11 1,506,781.11 404,193.52 20,728.07 33,912.00 32,055.85 476,655.42 4,628.86 $0.00 1,713,399.44 677,891.27 20,165.98 60,821.03 1,022,272.15 18,542.85 Total Expenses $14,087,906.33 $0.00 $375,646.00 $2,098,606.33 $2,536,708.94 $3,513,092.72 Natural C lassification Plant Operations & Maintenance Functional Classification FY 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 710,169.97 218,888.07 3,510.62 679,697.77 2,071,382.26 9,270.72 $ 0.00 3,806,301.42 $ 0.00 167,158.87 39,319.95 4,779.18 3,063.45 2,543,006.59 44,320.65 $ 0.00 902,467.57 Total Expenses $ 3,692,919.41 $ 3,806,301.42 $ 2,801,648.69 $ 902,467.57 Total Expenses $ 9,677,045.89 6,487,453.33 4,163,303.21 0.00 175,678.56 3,843,331.78 1,008,539.19 7,437,905.38 1,022,040.07 $ 33,815,297.41 Macon State College Annual Financial Report FY 2004 32 Note 15. Component Units Component Unit Notes Macon State College Foundation, Inc. (foundation) is a legally separate, non-profit corporation existing to support and enhance public higher education in the middle Georgia area. The foundation operates as a tax-exempt organization under Section 501(c) (3) of the Internal Revenue Code as a charitable organization whereby only unrelated business income, as defined by Section 512(a) (1) of the Code, is subject to federal income tax. The foundation is not a private foundation within the meaning of section 509(a)(1) and 170(b)(1)(A)(vi). Twenty-five foundation trustees represent central Georgia leaders from business, education, healthcare, and government. New trustees are elected by the current trustees, and members may serve an unlimited number of three year terms. Although the College does not control the timing or amount of receipts from the Foundation, the majority of the resources or income thereon are restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by or for the benefit of the College, the foundation is considered a component unit of the College and is discreetly presented in the College's financial statements. The foundation reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information as presented in this report; however, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $483,127.00 on behalf of the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Office of Development and Alumni Affairs at 100 College Station Drive, Macon, GA 31206. Investments for Component Units: Macon State College Foundation holds $5,818,673 net endowed assets. The corpus or the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The foundation has established a spending plan whereby 4-6% of the earnings may be used within the parameters of the donor's restrictions. Long Term Liabilities for Component Units: Macon State College Foundation had no long term liabilities as of June 30, 2004. Macon State College Annual Financial Report FY 2004 33 MEDICAL COLLEGE OF GEORGIA Financial Report For the Year Ended June 30, 2004 Medical College of Georgia Augusta, Georgia President Daniel W. Rahn, M.D. Vice President for Finance/CFO Diane C. Wray, CPA MEDICAL COLLEGE OF GEORGIA ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ..................................................................................... 1 Statement of Net Assets ....................................................................................7 Medical College of Georgia Affiliates Statement of Net Assets .....................................8 Statement of Revenues, Expenses and Changes in Net Assets.................................................... 9 Medical College of Georgia Foundation, Inc. Statement of Activities.............................11 Medical College of Georgia Dental Foundation Statement of Activities ..........................12 Medical College of Georgia Research Institute Statement of Activities ...........................13 Medical College of Georgia Physicians Practice Group Foundation Statements of Activities..14 Statement of Cash Flows ........................................................................................................... 15 Note 1. Summary of Significant Accounting Policies ............................................................. 17 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments.................................... 23 Note 3. Accounts Receivable................................................................................................... 26 Note 4. Inventories................................................................................................................... 26 Note 5. Notes/Loans Receivable.............................................................................................. 26 Note 6. Capital Assets.............................................................................................................. 27 Note 7. Deferred Revenue........................................................................................................ 28 Note 8. Long-Term Liabilities ................................................................................................. 28 Note 9. Lease Obligations........................................................................................................ 29 Note 10. Retirement Plans ....................................................................................................... 30 Note 11. Risk Management...................................................................................................... 35 Note 12. Contingencies............................................................................................................. 36 Note 13. Post-Employment Benefits Other Than Pension Benefits ........................................ 36 Note 14. Natural Classifications With Functional Classifications........................................... 37 Note 15. Component Units ....................................................................................................... 38 MEDICAL COLLEGE OF GEORGIA Management's Discussion and Analysis Introduction Medical College of Georgia (MCG), the oldest school of medicine in Georgia, was incorporated in 1828 as the Medical Academy of Georgia and is one of the 34 institutions of the University System of Georgia. The College, located in Augusta, Georgia, has become known for its worldclass instructional, clinical, and research programs. The college offers more than 40 academic programs in allied health sciences, dentistry, graduate studies, medicine, and nursing at the certificate, baccalaureate, masters, doctoral and first professional levels. Additionally, MCG offers residency training in medical and dental specialty areas. This wide range of educational opportunities attracts a highly qualified faculty and student body of more than 2,400 students each year. A brief historical comparison of faculty and student levels follows: Faculty Students FY2004 FY2003 FY2002 646 2,526 625 2,453 590 2,377 Overview of the Financial Statements and Financial Analysis Medical College of Georgia is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Medical College of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Medical College of Georgia Annual Financial Report FY 2004 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $112,839,659.90 170,755,830.81 22,488,692.00 306,084,182.71 June 30, 2003 $106,507,810.45 168,815,412.70 12,533,283.65 287,856,506.80 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 65,940,794.12 14,086,444.49 80,027,238.61 57,656,742.24 10,857,869.01 68,514,611.25 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 166,179,353.77 1,669,065.78 59,242,686.23 22,352,303.00 (23,386,464.68) $226,056,944.10 168,555,739.14 1,573,714.52 46,123,898.57 3,088,543.32 $219,341,895.55 The total assets of the institution increased by $18,227,675.91. A review of the Statement of Net Assets will reveal that the increase was primarily due to increases in current and other assets of $6,331,849.45 and $9,955,408.35 respectively and $1,940,418.11 in capital assets, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $11,512,627.36. This was due to an increase in current liabilities of $8,284,051.88 and an increase in noncurrent liabilities of $3,228,575.48. The increase in long-term liabilities, primarily capital payables, contributed to the increase in invested in capital assets, net of debt. The combination of the increase in total assets of $18,227,675.91 and the net increase in total liabilities of $11,512,627.36 yields an increase in total net assets of $6,715,048.55. The increase in total net assets primarily reflects an increase in restricted net assets. Medical College of Georgia Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $332,891,106.38 June 30, 2003 $297,335,091.29 Operating Expenses Operating Loss 446,384,729.61 (113,493,623.23) 425,524,783.73 (128,189,692.44) Nonoperating Revenues and Expenses 119,042,764.60 127,300,150.25 Income (Loss) Before other revenues, expenses, gains or losses 5,549,141.37 (889,542.19) Other revenues, expenses, gains or losses 1,490,820.25 Increase in Net Assets 7,039,961.62 (889,542.19) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 219,341,895.55 (324,913.07) 219,016,982.48 218,082,277.80 2,149,159.94 220,231,437.74 Net Assets at End of Year $226,056,944.10 $219,341,895.55 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Medical College of Georgia Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $15,751,515.21 303,827,108.46 6,653,351.45 6,674,361.66 (15,230.40) 332,891,106.38 107,453,347.20 11,174,456.00 916,259.17 (415,767.40) 119,128,294.97 1,480,700.52 10,119.73 1,490,820.25 $453,510,221.60 June 30, 2003 $13,601,178.73 268,074,697.59 4,188,326.49 4,411,014.01 7,059,874.47 297,335,091.29 112,519,021.42 15,016,134.48 598,332.14 (833,337.79) 127,300,150.25 0.00 $424,635,241.54 Medical College of Georgia Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $97,818,931.20 33,756,591.93 86,491,804.43 19,600,869.75 2,829,557.78 29,383,761.98 10,382,572.07 (529,372.42) 8,050,496.73 0.00 158,599,516.16 446,384,729.61 June 30, 2003 $101,533,959.65 24,896,048.38 75,224,195.42 17,102,033.04 2,305,987.28 32,428,783.55 11,740,310.09 1,769,388.80 4,828,598.23 0.00 153,695,479.29 425,524,783.73 85,530.37 $446,470,259.98 0.00 $425,524,783.73 Total operating revenues increased by $35,556,015.09 from 2003 to 2004 due in part to increased tuition and fees of $2,150,336.48, and increased federal, state and non-governmental grants of $11,867,364.70, $8,033,401.94 and $15,851,644.23 respectively. Increases in other operating revenues include $2,465,024.96 in sales and services of educational departments and $2,263,347.65 in auxiliary activity for the year. Increases were offset by a decrease in other operating revenues of ($7,075,104.87). The compensation and employee benefits category increased by approximately $9,675,267.63. The increase reflects incremental positions and increased salaries at the College. The increase also reflects costs of health insurance for the employees of the institution. Utilities decreased by approximately ($135,573.37) during the past year. The decrease was due to efficiencies realized during the past year. Under non-operating revenues (expenses) state appropriations decreased by approximately ($5,065,674.22). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Medical College of Georgia. We are hopeful that the economy is now on an upward trend. Other non-operating activity includes a decrease of ($3,841,678.48) in non-governmental grants, which were offset in part by a $317,927.03 increase in investment income. Statement of Cash Flows The final statement presented by the Medical College of Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects Medical College of Georgia Annual Financial Report FY 2004 5 the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 8 9 ,9 5 8 ,7 2 5 .7 6 ) 1 1 7 ,4 0 3 ,8 4 2 .1 2 (8 ,9 7 9 ,8 2 7 .1 4 ) (9 ,4 9 5 ,1 9 5 .2 5 ) 8 ,9 7 0 ,0 9 3 .9 7 4 6 ,3 8 3 ,2 5 1 .0 8 $ 5 5 ,3 5 3 ,3 4 5 .0 5 June 30, 2003 ($ 1 0 3 ,1 4 1 ,5 8 1 .1 5 ) 1 2 0 ,4 7 4 ,8 9 6 .0 9 (1 1 ,3 6 4 ,0 4 5 .1 3 ) 6 5 6 ,7 9 2 .5 8 6 ,6 2 6 ,0 6 2 .3 9 3 9 ,7 5 7 ,1 8 8 .6 9 $ 4 6 ,3 8 3 ,2 5 1 .0 8 Capital Assets The College had no significant capital asset additions for facilities in fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Medical College of Georgia has included the financial statements and notes for all required component units for FY2004: Medical College of Georgia Foundation, Inc., Medical College of Georgia Physicians Practice Group Foundation, Medical College of Georgia Research Institute, Medical College of Georgia Dental Foundation, and Medical College of Georgia Health, Inc. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. ____________________________ Daniel W. Rahn, M.D., President Medical College of Georgia Medical College of Georgia Annual Financial Report FY 2004 6 Statement of Net Assets MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Patient Accounts Receivables - Other Inventories Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash Investments Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Due to related party - margin allocation Estimated third-party payor settlements Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unrestricted TOTAL NET ASSETS Medical College of Georgia $55,353,345.05 4,188,722.49 21,461,254.24 448,839.77 31,387,498.35 112,839,659.90 17,593,389.65 4,895,302.35 170,755,830.81 193,244,522.81 306,084,182.71 30,945,934.87 19,400,997.20 1,140,876.48 1,502,221.73 1,336,043.98 11,614,719.86 65,940,794.12 11,413,161.23 2,673,283.26 14,086,444.49 80,027,238.61 166,179,353.77 1,669,065.78 59,242,686.23 22,352,303.00 (23,386,464.68) $226,056,944.10 Medical College of Georgia Health, Inc. $30,645,058.00 66,342,578.00 555,791.00 76,208,788.00 6,906,269.00 1,216,506.00 181,874,990.00 15,306,844.00 60,207,828.00 75,514,672.00 257,389,662.00 16,795,354.00 373,863.00 652,779.00 8,101,765.00 11,300,141.00 10,774,000.00 47,997,902.00 7,769,934.00 7,769,934.00 55,767,836.00 58,113,115.00 143,508,711.00 $201,621,826.00 Medical College of Georgia Annual Financial Report FY 2004 7 Medical College of Georgia Affiliates Statement of Net Assets Medical College of Georgia Affiliates Statement of Net Assets (FASB) June 30, 2004 MCG Foundation, Inc. MCG Dental MCG Research Foundation Institute PPG Foundation Assets Cash and Cash Equivalents Notes and Mortgages Receivable Endowment Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $17,832,187.00 378,370.00 92,246,839.00 4,327,339.00 $114,488.00 529,235.00 2,780,552.00 $3,781,960.00 5,836,218.00 99,000.00 $15,058,820.00 280,760.00 39,743,119.00 3,526,436.00 245,088.00 118,556,259.00 3,424,275.00 5,486,690.00 9,717,178.00 60,569,389.00 Liabilities Accounts Payable and Accrued Liabilities Deposits Long-Term Debt Liabilities under Split-Interest Agreements Total Liabilities 178,873.00 3,424,275.00 2,018,579.00 2,197,452.00 3,424,275.00 6,347,921.00 7,500.00 6,355,421.00 6,587,030.00 446,483.00 7,033,513.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 7,317,280.00 22,766,394.00 86,275,133.00 $116,358,807.00 3,361,757.00 53,535,876.00 $0.00 $3,361,757.00 $53,535,876.00 Medical College of Georgia Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2004 REVENUES Medical College of Georgia Medical College of Georgia Health, Inc. Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations Grants and C ontracts Federal State Other Sales and Services of Educational Departments Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Net Patient Service Revenue Revenue from C ontractual Services Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation C ombined Margin Allocation Total Operating Expenses Operating Income (loss) $17,846,924.65 1,896,226.42 199,183.02 $0.00 35,044,210.43 134,953,027.91 133,829,870.12 6,653,351.45 813,428.04 1,595,230.09 865,992.53 782,473.43 2,617,237.57 (15,230.40) 332,891,106.38 314,804,658.00 7,415,177.00 322,219,835.00 86,744,873.31 150,758,369.06 68,446,584.49 2,069,220.16 2,065,988.19 5,396,341.52 119,126,233.41 11,777,119.47 446,384,729.61 (113,493,623.23) 127,716,273.00 42,328,938.00 38,111,691.00 257,037.00 2,896,070.00 111,498,527.00 10,234,404.00 333,042,940.00 (10,823,105.00) Medical College of Georgia Annual Financial Report FY 2004 9 Statement of Revenues, Expenses, and Changes in Net Assets, Continued Medical C ollege of G eorgia Medical College of Georgia Health, Inc. NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and C ontracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) C ombined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital Grants and Gifts Federal State Other Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 107,453,347.20 178,610.00 10,995,846.00 916,259.17 (85,530.37) (415,767.40) 119,042,764.60 5,549,141.37 1,480,700.52 10,119.73 1,490,820.25 7,039,961.62 219,341,895.55 (324,913.07) 219,016,982.48 $226,056,944.10 33,168,087.00 4,692,522.00 1,280,503.00 (11,300,141.00) (2,038,610.00) 25,802,361.00 14,979,256.00 0.00 14,979,256.00 186,642,570.00 186,642,570.00 $201,621,826.00 Medical College of Georgia Annual Financial Report FY 2004 10 Medical College of Georgia Foundation, Inc. Statement of Activities Medical College of Georgia Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Unrestricted $206,023.00 934,111.00 15,029.00 456,629.00 10,367.00 5,927,521.00 7,549,680.00 Temporarily Restricted Permanently Restricted $5,847,442.00 128,744.00 8,820.00 $3,377,786.00 701,423.00 10,373,948.00 256,970.00 275,985.00 (5,552,345.00) 689,631.00 (375,176.00) 14,353,966.00 Total $9,431,251.00 1,764,278.00 10,397,797.00 456,629.00 543,322.00 0.00 22,593,277.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 7,468,220.00 157,843.00 7,626,063.00 (76,383.00) 0.00 689,631.00 0.00 14,353,966.00 0.00 0.00 7,468,220.00 0.00 0.00 0.00 157,843.00 7,626,063.00 14,967,214.00 Net Assets Beginning Net Assets Ending Net Assets 8,146,414.00 $8,070,031.00 21,324,012.00 $22,013,643.00 71,921,167.00 $86,275,133.00 101,391,593.00 $116,358,807.00 Medical College of Georgia Annual Financial Report FY 2004 11 Medical College of Georgia Dental Foundation Statement of Activities Medical College of Georgia Dental Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Temporarily Unrestricted Restricted Permanently Restricted $0.00 99,694.00 $0.00 $0.00 3,498,509.00 3,598,203.00 0.00 0.00 Total $0.00 99,694.00 0.00 0.00 3,498,509.00 0.00 3,598,203.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 991,662.00 1,393,903.00 1,212,638.00 3,598,203.00 0.00 0.00 0.00 0.00 0.00 991,662.00 0.00 1,393,903.00 1,212,638.00 0.00 0.00 0.00 3,598,203.00 0.00 Net Assets Beginning Net Assets Ending Net Assets $0.00 $0.00 $0.00 0.00 $0.00 Medical College of Georgia Annual Financial Report FY 2004 12 Medical College of Georgia Research Institute Statement of Activities Medical College of Georgia Research Institute Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Unrestricted $0.00 36,146.00 2,233,468.00 39,688,261.00 41,957,875.00 Temporarily Restricted Permanently Restricted Total $0.00 39,688,261.00 $0.00 $0.00 36,146.00 0.00 0.00 41,921,729.00 (39,688,261.00) 0.00 0.00 0.00 41,957,875.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 41,236,469.00 236,752.00 41,473,221.00 484,654.00 0.00 0.00 0.00 0.00 0.00 41,236,469.00 236,752.00 0.00 0.00 0.00 0.00 41,473,221.00 484,654.00 Net Assets Beginning Net Assets Ending Net Assets 2,877,103.00 $3,361,757.00 $0.00 $0.00 2,877,103.00 $3,361,757.00 Medical College of Georgia Annual Financial Report FY 2004 13 Medical College of Georgia Physicians Practice Group Foundation Statement of Activities Medical College of Georgia Physicians Practice Group Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Revenues Gifts Investment Income Net Realized/Unrealized Gain on Securities Rental Income Other Income Reclassifications Time Total Revenues Unrestricted Temporarily Restricted Permanently Restricted $0.00 1,173,888.00 2,299,320.00 281,006.00 82,639,907.00 $0.00 $0.00 86,394,121.00 0.00 0.00 Total $0.00 1,173,888.00 2,299,320.00 281,006.00 82,639,907.00 0.00 86,394,121.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 82,597,573.00 82,597,573.00 3,796,548.00 0.00 0.00 0.00 0.00 0.00 0.00 82,597,573.00 0.00 0.00 0.00 0.00 82,597,573.00 3,796,548.00 Net Assets Beginning Net Assets Ending Net Assets 49,739,328.00 $53,535,876.00 $0.00 $0.00 49,739,328.00 $53,535,876.00 Medical College of Georgia Annual Financial Report FY 2004 14 Statement of Cash Flows MEDICAL COLLEGE OF GEORGIA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $16,176,089.35 303,409,686.03 6,865,755.52 (186,177,962.77) (235,317,259.28) (2,065,988.19) (949,309.25) 1,410,355.32 1,020,597.11 1,596,763.58 865,992.53 919,439.43 2,601,357.05 (314,242.19) (89,958,725.76) 107,453,347.20 (899,817.73) 10,850,312.65 117,403,842.12 (52,943.21) (8,091,827.74) (749,525.82) (85,530.37) (8,979,827.14) 4,986.25 1,154,269.87 (10,654,451.37) (9,495,195.25) 8,970,093.97 46,383,251.08 $55,353,345.05 Medical College of Georgia Annual Financial Report FY 2004 15 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by O perating Activities ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations June 30, 2004 ($113,493,623.23) 11,777,119.47 4,669,623.13 (12,066.59) (427,178.97) 8,158,785.89 (3,958,245.03) 1,140,876.48 2,185,983.09 ($89,958,725.76) $4,499,179.50 Medical College of Georgia Annual Financial Report FY 2004 16 MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Medical College of Georgia serves the local, State, and national communities by providing educational programs for health professionals, biomedical scientists, and educators at the undergraduate, graduate, and postgraduate levels and for lifelong learning through excellence in teaching and the total development of students in response to the health needs of the State of Georgia. The College strives to be a leading center of excellence in research through the generation and application of biomedical knowledge and technology to human health and disease, and to play an expanding role in the transfer of technology to the health care delivery system. Reporting Entity Medical College of Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Medical College of Georgia as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Medical College of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Medical College of Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Medical College of Georgia) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Medical College of Georgia is reporting the activity for the Medical College of Georgia Foundation, Inc., Medical College of Georgia Physicians Practice Group Foundation, Medical College of Georgia Research Institute, Medical College of Georgia Dental Foundation, and Medical College of Georgia Health, Inc. Medical College of Georgia Annual Financial Report FY 2004 17 See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Medical College of Georgia Annual Financial Report FY 2004 18 Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies and fuel oil are recorded on the consumption method and are valued at cost using the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the firstin, first-out method. Detailed information on Inventories is included within Note 4 to the financial statements. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Medical College of Georgia when Medical College of Georgia Annual Financial Report FY 2004 19 complete. For the year ended June 30, 2004, GSFIC did not transfer any capital additions to Medical College of Georgia. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. Medical College of Georgia had accrued liability for compensated absences in the amount of $20,841,898.00 as of 7-1-2003. For FY2004, $16,174,056.45 was earned in compensated absences and employees were paid $13,988,073.36, for a net increase of $2,185,983.09. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $23,027,881.09. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Medical College of Georgia Annual Financial Report FY 2004 20 Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and O ther O rganized A ctivities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable $45,868,269.64 6,129,805.30 1,317,774.32 5,926,836.97 $59,242,686.23 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. The Medical College of Georgia has $22,352,303.00 in Capital Projects. These funds are on deposit with GSFIC and will be used for the construction of the Health Sciences Building, the Cancer Research Center and the expansion of the Interdisciplinary Research Building, which will be capitalized when completed. Expected dates of completion range from fiscal year 2005 to 2006. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $2,078,189.72 14,358,055.99 444,189.56 (40,266,899.95) ($23,386,464.68) Since the Medical College of Georgia is an on-going entity, the $23,027,881.09 in compensated absence liability will not be realized and will cover the $23,386,464.68 deficit in Unrestricted Net Assets in the short-term. Medical College of Georgia Annual Financial Report FY 2004 21 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Medical College of Georgia, 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 College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Medical College of Georgia Annual Financial Report FY 2004 22 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Medical College 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 any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Medical College of Georgia), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Medical College of Georgia Annual Financial Report FY 2004 23 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits Carrying Amount $44,972,984.87 4,494,582.90 $49,467,567.77 Bank Balances $54,237,373.13 $54,237,373.13 Risk Categories 1 2 3 $100,000.00 $0.00 $54,137,373.13 $100,000.00 $0.00 $54,137,373.13 Medical College of Georgia Annual Financial Report FY 2004 24 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 110,000.00 5,418,862.33 3 $0.00 C arrying Amount $0.00 110,000.00 5,418,862.33 T o ta ls $0.00 $5,528,862.33 Inv estm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Inv estm ents Total Inv estm ents $0.00 $5,528,862.33 7,104,244.01 465,700.41 10,380,360.18 $23,479,166.93 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Medical College of Georgia Annual Financial Report FY 2004 25 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $17,156.40 30,066.59 4,188,722.49 21,414,031.25 25,649,976.73 $25,649,976.73 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $399,287.00 49,552.77 $448,839.77 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was approximately $199,183.02. Medical College of Georgia Annual Financial Report FY 2004 26 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $8,998,281.93 8,998,281.93 Additions $0.00 2,262,912.42 2,262,912.42 Reductions $0.00 0.00 Ending Balance 6/30/2004 $8,998,281.93 2,262,912.42 11,261,194.35 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 222,018,980.33 2,339,679.00 48,094,418.52 417,436.60 14,020,412.62 286,890,927.07 6,755,845.13 4,499,179.50 563,890.43 11,818,915.06 263,318.99 1,710,980.61 132,770.60 495,685.95 2,602,756.15 0.00 221,755,661.34 2,339,679.00 53,139,283.04 4,783,845.50 14,088,617.10 0.00 296,107,085.98 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 86,289,203.46 1,248,106.20 30,098,086.64 283,779.00 9,154,621.00 127,073,796.30 5,407,988.60 91,405.19 4,777,532.90 741,440.76 758,752.02 11,777,119.47 111,910.58 1,512,490.49 118,379.23 495,685.95 2,238,466.25 0.00 91,585,281.48 1,339,511.39 33,363,129.05 906,840.53 9,417,687.07 0.00 136,612,449.52 Total Capital Assets, Being Depreciated, Net 159,817,130.77 Capital Assets, net $168,815,412.70 41,795.59 $2,304,708.01 364,289.90 159,494,636.46 $364,289.90 $170,755,830.81 Medical College of Georgia Annual Financial Report FY 2004 27 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $3,489,231.21 15,911,765.99 $19,400,997.20 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 $259,673.56 $4,499,179.50 $749,525.82 $4,009,327.24 20,841,898.00 20,841,898.00 16,174,056.45 13,988,073.36 16,174,056.45 13,988,073.36 23,027,881.09 0.00 23,027,881.09 $21,101,571.56 $20,673,235.95 $14,737,599.18 $27,037,208.33 Current Portion $1,336,043.98 11,614,719.86 11,614,719.86 $12,950,763.84 Medical College of Georgia Annual Financial Report FY 2004 28 Note 9. Lease Obligations Medical College of Georgia is obligated under various operating leases for the use of equipment. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal O utstanding Real Property C apital Leases O perating Leases $1,336,043.98 924,046.10 832,191.05 803,085.68 113,960.43 $6,564.00 6,564.00 4,009,327.24 0.00 $4,009,327.24 $13,128.00 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2009. Expenditures for fiscal year 2004 were $697,353.84 of which $85,529.92 represented interest. Total principal paid on capital leases was $611,823.92 for the fiscal year ended June 30, 2004. Interest rates range from 3.25 percent to 3.90 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Equipment $ 4,009,327.24. Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Medical College of Georgia has various leases for equipment with an outstanding balance at June 30, 2004 in the amount of $4,009,327.24. OPERATING LEASES Medical College of Georgia's noncancellable operating leases having remaining terms of more than one year expire in fiscal year 2006. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Medical College of Georgia Annual Financial Report FY 2004 29 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Medical College of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Medical College of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Medical College of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $12,164,375.94 $11,850,917.51 $11,359,998.41 Employees' Retirement System of Georgia Plan Description Medical College of Georgia 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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. Medical College of Georgia Annual Financial Report FY 2004 30 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2004, for employees covered by ERS was $233,288.00. The College's total payroll for all employees was $236,793,840.73. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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 College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the College amount to 10.48% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $27,956.02, of which $24,438.52 was made by the College and $3,517.50 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Medical College of Georgia Annual Financial Report FY 2004 31 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Medical College of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Medical College of Georgia and the covered employees made the required contributions of $6,735,777.31 (10.03%) and $ 3,357,172.12 (5%), respectively. Georgia Defined Contribution Plan Plan Description Medical College of Georgia 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. Contributions 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 Medical College of Georgia Annual Financial Report FY 2004 32 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. Total contributions made by employees during fiscal year 2004 amounted to $217,707.80 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Early Retirement Pension Plan Plan Description Medical College of Georgia Early Retirement Pension Plan (ERP) is a single-employer defined benefit pension plan administered by Buck Consultants. The plan was devised by MCG as a means of manpower reduction and was approved by the Board of Regents of the University System of Georgia (BOR) effective January 1, 2000. The manpower reduction plan was designed to allow vested employees aged 55 or employees of any age with 25 years of creditable service to retire without penalties as applied by the Teachers Retirement System of Georgia (TRS) for early retirement. The plan would allow for all participants to retire as if they were vested and aged 60 or had attained 30 years of creditable service. No other benefits will be paid by this plan. A financial statement is maintained by the Medical College of Georgia, Controller's Division, and is available for review during normal business hours. Funding Policy The plan is to be funded by the purchase of an annuity utilizing salary savings of departed employees. The funding period for the annuity is 15 years. The fund sources that provided for an employees salary, as of December 31, 1999, would be responsible for funding the annuity to provide the retiree benefits. There is no additional funding cost to the employee/retiree, BOR, or the State of Georgia for this plan. Since this plan was not pre-funded, MCG is taking an aggressive approach to collect and deposit as much into the annuity fund in the earlier years as is possible, thereby realizing a greater return on investment. Medical College of Georgia Annual Financial Report FY 2004 33 Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for Fiscal Year 2004 was as follows: Fiscal Year 2004 Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Total MCG Other Units $15,260,789.00 $8,235,882.56 $7,024,906.44 (693,403.24) (645,601.23) (47,802.02) 1,195,222.24 1,112,825.69 82,396.55 Annual Pension Cost Contribution Made 15,762,607.99 8,703,107.02 7,059,500.97 15,848,347.28 8,613,230.00 7,235,117.28 Increase (Decrease) in Net Pension Obligation (85,739.29) 89,877.02 (175,616.31) Net Pension Obligation Beginning of Year (9,245,376.60) (8,608,016.38) (637,360.22) Net Pension Obligation End of Year $(9,331,115.89) $(8,518,139.36) $(812,976.53) Three-Year Trend Information FY 2004 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year Total $15,762,607.99 100.54% $(9,331,115.89) MCG Other Units $8,703,107.02 $7,059,500.97 98.97% 102.49% $(8,518,139.36) $(812,976.53) Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation FY 2003 Total $15,723,093.77 97.63% $(9,245,376.60) MCG Other Units $8,676,620.11 $7,046,473.66 93.53% 102.68% $8,608,016.38) $(637,360.22) FY 2002 Total $16,394,952.15 96.68% $(10,163,057.52) MCG Other Units $9,023,758.08 $7,371,194.07 95.32% 98.35% $(9,592,366.57) $(448,716.88) Medical College of Georgia Annual Financial Report FY 2004 34 The annual required contribution for the current year was determined as part of the November 20, 2002 actuarial valuation using the Entry Age actuarial cost method. The remaining amortization period is 13 years utilizing the Level Dollar, Closed method. The asset valuation method is 5 year smoothed market value. The actuarial assumptions included (a) 7.5% rate of return on investment, (b) annual inflation of 3.5%, and (c) annual cost of living increases of 3.0%. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Medical College of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Medical College of Georgia, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Medical College of Georgia Annual Financial Report FY 2004 35 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Medical College of Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Medical College of Georgia (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 1,986 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Medical College of Georgia recognized as incurred $6,192,986.32 of expenditures, which was net of $2,387,060.91 of participant contributions. Medical College of Georgia Annual Financial Report FY 2004 36 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $35,541,611.35 23,204,667.08 17,121,746.28 700,778.26 436,682.50 752,795.95 11,752,793.28 8,307,856.50 $7,167,255.08 10,233,054.32 3,790,264.02 $36,880,385.97 30,461,803.84 11,659,309.06 577,571.25 2,425.32 71,729.80 11,565,406.54 348,885.60 254,790.42 23,863.82 431,193.93 6,604,332.05 176,125.34 $1,580,765.17 8,889,938.84 5,630,913.08 146,574.06 22,092.00 201,432.25 2,107,869.61 1,021,284.74 Total Expenses $97,818,931.20 $33,756,591.93 $86,491,804.43 $19,600,869.75 Student Services Institutional Support $22,683.08 1,143,676.23 292,403.32 $24,871.60 9,845,188.83 11,797,968.35 23,120.64 5,999.97 19,414.02 1,283,919.91 38,340.61 147,208.57 2,104,297.00 181,679.10 4,697,054.43 585,494.10 $2,829,557.78 $29,383,761.98 Natural Classification Functional Classification FY2004 Plant Operations Scholarships Auxiliary Unallocated & Maintenance & Fellowships Enterprises Expenses MCG only Patient Care Total Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 3,830,694.03 1,117,509.13 (429,998.90) 4,709.40 3,405,740.83 2,402,436.30 51,481.28 $0.00 (529,372.42) $63,475.75 1,865,666.66 597,453.35 429,998.90 10,047.01 71,554.32 3,764,649.44 1,247,651.30 $0.00 $5,463,825.31 61,283,679.23 16,439,017.90 204,420.55 260,801.32 74,947,771.85 $86,744,873.31 150,758,369.06 68,446,584.49 (0.00) 2,069,220.16 2,065,988.19 5,396,341.52 119,126,233.41 11,777,119.47 Total Expenses $10,382,572.07 ($529,372.42) $8,050,496.73 $0.00 $158,599,516.16 $446,384,729.61 Medical College of Georgia Annual Financial Report FY 2004 37 Note 15. Component Units Medical College of Georgia Foundation, Inc. Medical College of Georgia Foundation (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirty-eight member Board of Directors including fourteen ex officio members has the legal responsibility to govern the corporation. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources and income that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $6.6 million to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Alumni Center at 919 15th Street, Augusta, GA 30912 or from the foundation's website at www.mcgfoundation.org. Investments for Component Unit: Medical College of Georgia Foundation holds endowment investments in the amount of $91.2 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation, in conjunction with the donors, disburses funds that are used to provide financial assistance to students as well as maintain and improve the high standard of instruction, advance study and research at the Medical College of Georgia. Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (the "Foundation") is a legally separate, taxexempt component unit of Medical College of Georgia (College). The Foundation receives and manages funds that are ultimately used to maintain and improve the high standard of instruction at the Medical College of Georgia Dental School. Substantially all revenue of the Foundation is received from clinical and patient fees for dental services performed for the public by resident and faculty of the College. The Foundation does not have any employees, and depends on MCG for staff support. Resources of the Foundation are used for research and advanced study at the Medical College of Georgia Annual Financial Report FY 2004 38 Medical College of Georgia. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the college and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is from March 1, 2003 through February 29, 2004. During the year ended February 29, 2004, the foundation distributed $1,393,903 to the College for both advanced study and research purposes. Complete financial statements for the foundation can be obtained from the Administrative Office of Medical College of Georgia, School of Dentistry, AD 1104, Augusta, Georgia 30912. Investments for Component Units: Medical College of Georgia Dental Foundation holds investments in the amount of $2.8 million. The Foundation's by-laws allow the annual increases in net assets to be used for support of the Dental School. The Foundation has established a spending plan whereby 75% of earnings are used for Dental School support, 10% are used for the Dental School Dean's Fund, and 15% are used for Dental School departmental support. Medical College of Georgia Research Institute The Medical College of Georgia Research Institute (the "Institute") is a legally separate, taxexempt component unit of the Medical College of Georgia (College). The Institute was established in 1980 to contribute to the educational, research and service functions of the Medical College of Georgia. Managed by an Executive Committee reporting to a twenty-seven member Board of Directors, the Institute obtains contracts from individuals, industrial, government and public agencies for the performance of sponsored research, development, and other programs by the various departments and units of the College. All research contracts awarded to the Institute are sub-contracted to the College, which is responsible for the fiscal administration of the research projects. Although the College does not control the timing or amount of activity, all grant awards are sub-contracted and managed by the College. Because of this special relationship, the Institute is considered a component unit of the College and is discretely presented in the College's financial statements. The Institute is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue Medical College of Georgia Annual Financial Report FY 2004 39 recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Institute sub-contracted $39.7 of research programs to the College. Complete financial statements for the Institute can be obtained from the Administrative Office at 1120 15th St, Augusta, Georgia 30912 or from the Institute's website at www.mcg.edu/grantscontracts/mcgri. Investments for Component Units: The Research Institute holds investments of $99,000, these funds are used to support research related activities at the Medical College of Georgia. Medical College of Georgia Physicians Practice Group Foundation The Medical College of Georgia Physicians Practice Group Foundation (PPG) is a legally separate, tax-exempt component unit of the Medical College of Georgia (College). The foundation acts primarily as a nonprofit organization for the purpose of enhancing the clinical, research, and educational missions of the College and billing and collecting for medical services provided to patients. Revenues are obtained primarily from physician fees charged to patients at Medial College of Georgia Hospital and Clinics, which is operated by Medical College of Georgia Health Inc. The PPG Properties, LLC is a limited liability company formed in 2001 by PPG to manage real estate rental properties. PPG Alternative Collections, LLC is a limited liability company formed in 2003 by PPG to bill and collect for anesthesia services provided to patients. PPG is the sole partner and has sole voting control of both LLC's. Because the PPG Foundation's purpose is to support the clinical, research, and educational missions of the College, it is considered a component unit of the College and is discretely presented in the College's financial statements. The PPG is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations with the exceptions as noted below. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The Foundation's consolidated financial statements have been prepared substantially on the basis of cash receipts and cash disbursements with the exception of the following: interest earned on investments, salary supplements due to College, incentive compensation, and retirement plan contribution expense are accounted for using the accrual method of accounting. Additionally, four-year scholarships awarded to College students are expensed in the year awarded, and property and equipment are capitalized and depreciated. Prior to fiscal 2003, PPG recorded its investments in mutual funds, equity securities, and debt securities at amortized cost. On July 1, 2002, PPG elected to apply the provisions of Statement of Financial Accounting Standards (SFAS) No. 124, Accounting Investments Held by Not-for-Profit Organizations. SFAS No. 124 requires that investment in equity securities with readily determinable fair values and all investments in debt securities be reported at fair value with gains and losses included in a statement of activities. The adjustment to record its investments at fair value at the date of adoption was an unrealized Medical College of Georgia Annual Financial Report FY 2004 40 loss of approximately $518,000 and is included in the statement of revenues collected and expenses paid for the year ended June 30, 2003. Other adjustments required under accounting principles generally accepted in the United Sates of America for the accrual basis of accounting have not been reflected in the accompanying financial statements, including the equity method of accounting for PPG's investments in a joint venture. The equity method of accounting requires that the carrying value of investments meeting certain criteria be adjusted to reflect the investor's share of the investee's income and losses with the income or losses included in a statement of activities. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $48,935,000 to the College for salaries and departmental support. Complete financial statements for the foundation can be obtained from the Administrative Office at 1499 Walton Way, Suite 1400, Augusta, Georgia 30901. Investments for Component Units: The Medical College of Georgia Physicians Practice Group Foundation holds investments in the amount of $39.3 million; these funds are used to support the salaries and department activities at the Medical College of Georgia. Medical College of Georgia Health, Inc. Medical College of Georgia Health, Inc. (the Company) is a legally separate, tax-exempt component unit of Medical College of Georgia (the College). The Company is organized to further the health sciences, patient care, research, and education missions of the Medical College of Georgia Hospitals and Clinics (the Hospital). The Hospital, which is owned by the Board of Regents of the University System of Georgia (Regents), consists of a 632 licensed bed acute care hospital and related outpatient care facilities principally located in Augusta, Georgia. Because of the special relationship with the College, the Company is considered a component unit and is discretely presented in the college's financial statements. The Company utilizes the accrual basis of accounting using the economic resources measurement focus. Pursuant to, and as permitted by GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the Company has elected to apply the provisions of all relevant pronouncements of the Financial Accounting Standards Board (FASB), including those issued after November 30, 1989, that do not conflict with or contradict GASB pronouncements. The Company's fiscal year is July 1 through June 30. Complete financial statements for the Company can be obtained from the Administrative Office at 1120 15th Street, Augusta, Georgia 30912. Medical College of Georgia Annual Financial Report FY 2004 41 Investments for Component Units: The Medical College of Georgia Health, Inc. (the Company) holds investments in the amount of $15.3 million. These funds are used to support on-going operations. Long-Term Liabilities for Component Units: The Medical College of Georgia Health, Inc. is the lessee of certain equipment under noncancelable leases expiring in various years through 2008. Interest rates range from 5.45% to 6.68%. Professional liability is the self-insured portion of professional liability risks. Accrued professional liability costs are determined actuarially. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Leases Lease Obligations Other Liabilities Professional Liabilities Beginning Balance July 1, 2003 Additions Reductions $2,046,548.00 $1,007,868.00 $959,703.00 3,462,000.00 2,866,000.00 Ending Balance June 30, 2004 Amounts due within One Year $2,094,713.00 $652,779.00 6,328,000.00 Total Long Term Debt $5,508,548.00 $3,873,868.00 $959,703.00 $8,422,713.00 $652,779.00 Leas e Obligations Year Ending June 30: 2005 2006 2007 2008 Year 1 2 3 4 Leas e Obligations Prin c ip a l Interes t Total $652,779.00 642,371.00 613,216.00 186,347.00 $108,239.00 70,882.00 32,434.00 5,697.00 $761,018.00 713,253.00 645,650.00 192,044.00 $2,094,713.00 $217,252.00 $2,311,965.00 The Company is the les s ee of certain equipment under noncancelable leas es expiring in various years through 2008. Interes t rates range from 5.45% to 6.68%. Medical College of Georgia Annual Financial Report FY 2004 42 MIDDLE GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2004 Middle Georgia College Cochran, Georgia Richard J. Federinko President Lynn E. Hobbs Vice President for Fiscal Affairs MIDDLE GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Middle Georgia College Foundation, Inc. Balance Sheet .......................................8 Statement of Revenues, Expenses and Changes in Net Assets...................................9 Middle Georgia College Foundation, Inc. Statement of Activities ...........................11 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 20 Note 3 Accounts Receivable............................................................................................. 23 Note 4 Inventories............................................................................................................. 23 Note 5 Notes/Loans Receivable........................................................................................ 23 Note 6 Capital Assets........................................................................................................ 24 Note 7 Deferred Revenue.................................................................................................. 25 Note 8 Long-Term Liabilities ........................................................................................... 25 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 28 Note 12 Contingencies...................................................................................................... 29 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 MIDDLE GEORGIA COLLEGE Management's Discussion and Analysis Introduction Middle Georgia College is one of the 34 institutions of the University System of Georgia. The college was founded in 1884. Middle Georgia College is both a comprehensive two-year college serving central Georgia and a residential college serving traditional and non-traditional students from throughout Georgia and, to a limited extent, from other states and countries. The main campus in Cochran serves both commuting and residential students. The Dublin Center and selected off-campus sites serve commuting students from the middle Georgia area. Middle Georgia College awards associate degrees designed to transfer to four-year institutions or to prepare students for careers in 90 majors and concentrations, with popular programs including business administration, education and nursing. Enrollment for the college's 2004 Fall Semester is approximately 2,600 students, with the majority coming from the immediate area. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 135 2,517 126 2,214 133 2,164 Overview of the Financial Statements and Financial Analysis Middle Georgia College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Middle Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Middle Georgia College Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $4,076,577.61 21,706,619.19 1,183,275.93 26,966,472.73 June 30, 2003 $3,090,255.19 17,931,272.36 1,053,937.86 22,075,465.41 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 2,105,224.64 256,729.08 2,361,953.72 1,615,673.70 228,725.96 1,844,399.66 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 21,706,619.19 31,431.43 1,182,931.14 1,683,537.25 $24,604,519.01 17,929,688.36 32,829.99 1,109,592.47 1,158,954.93 $20,231,065.75 The total assets of the institution increased by $4,891,007.32. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,775,346.83 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $517,554.06. The primary cause for the increase was in current liabilities, primarily $274,854.48 in deposits held for other organizations and $112,744.61 in deferred revenue. The combination of the increase in total assets of $4,891,007.32 and the increase in total liabilities of $517,554.06 yields an increase in total net Middle Georgia College Annual Financial Report FY 2004 2 assets of $4,373,453.26. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $3,776,930.83. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $9,626,248.60 June 30, 2003 $7,812,569.50 Operating Expenses Operating Loss 21,420,055.41 (11,793,806.81) 18,967,619.36 (11,155,049.86) Nonoperating Revenues and Expenses 11,399,693.86 10,815,125.57 Income (Loss) Before other revenues, expenses, gains or losses (394,112.95) (339,924.29) Other revenues, expenses, gains or losses 4,767,566.21 Increase in Net Assets 4,373,453.26 (339,924.29) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 20,231,065.75 20,231,065.75 17,116,790.18 3,454,199.86 20,570,990.04 Net Assets at End of Year $24,604,519.01 $20,231,065.75 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Middle Georgia College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $2,026,324.32 3,091,986.89 107,909.90 4,323,808.99 76,218.50 9,626,248.60 10,511,874.96 248,688.99 521,281.88 123,464.03 (5,616.00) 11,399,693.86 4,767,566.21 4,767,566.21 $25,793,508.67 June 30, 2003 $1,793,191.92 2,541,945.92 55,723.99 3,324,312.43 97,395.24 7,812,569.50 10,579,967.61 282,447.43 6,020.00 (58,414.33) 8,716.58 10,818,737.29 0.00 $18,631,306.79 Middle Georgia College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $4,459,045.10 73,967.76 1,536,561.20 1,933,818.18 2,233,984.54 2,419,070.31 3,052,550.89 4,056,442.68 1,654,614.75 21,420,055.41 $21,420,055.41 June 30, 2003 $4,693,533.03 102,785.08 1,762,336.76 1,309,680.02 2,261,097.97 2,069,757.24 2,505,486.59 3,267,976.65 994,966.02 18,967,619.36 3,611.72 $18,971,231.08 Total operating revenue increased by $1,813,679.10. The increase is mainly due to a $999,496.56 increase in auxiliary revenue and a $550,040.97 increase in grants and contracts. Total operating expenses increased by $2,452,436.05. The increase was primarily due to an increase in supplies and other services of $2,626,811.53. The compensation and employee benefits category decreased by approximately ($433,187.69). Utilities increased by approximately $192,618.08 during the past year. Under non-operating revenues (expenses) state appropriations decreased by approximately ($68,092.65). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Middle Georgia College. We are hopeful that the economy is now on an upward trend. Also under nonoperating revenues, gift revenue increased by $515,261.88. State capital grants increased by $4,767,566.21. Statement of Cash Flows The final statement presented by the Middle Georgia College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The Middle Georgia College Annual Financial Report FY 2004 5 fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($10,703,155.20) 11,171,689.53 (39,537.68) (8,541.00) 420,455.65 2,059,637.23 $2,480,092.88 June 30, 2003 ($10,095,927.12) 11,153,093.21 (455,219.61) 31,178.18 633,124.66 1,426,512.57 $2,059,637.23 Capital Assets Construction of the wellness center was completed and placed into service during fiscal year 2004. The wellness center is a $5 million, 38,153 gross square foot building that will serve as a focus of campus and community life and provide needed space for recreation, student activities and physical education/health classes. This project was funded by the Georgia State Finance and Investment Commission (GSFIC). For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Middle Georgia College has included the financial statements and notes for all required component units for FY2004. The Middle Georgia College Foundation had endowment investments of $707,343 as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is stable. The College is continuing to manage the challenge of operating with reduced state appropriations. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________, Richard J. Federinko, President, Middle Georgia College Middle Georgia College Annual Financial Report FY 2004 6 Statement of Net Assets MIDDLE GEORGIA COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D eposits Deferred Revenue Other Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $2,480,092.88 3,701.32 840,928.33 360,595.96 391,259.12 4,076,577.61 1,014,223.85 169,052.08 21,706,619.19 22,889,895.12 26,966,472.73 671,882.66 103,437.17 859,795.78 150,922.68 319,186.35 2,105,224.64 256,729.08 256,729.08 2,361,953.72 21,706,619.19 31,431.43 1,182,931.14 1,683,537.25 $24,604,519.01 Middle Georgia College Annual Financial Report FY 2004 7 Middle Georgia College Foundation, Inc. Balance Sheet Middle Georgia C ollege Foundation, Inc. Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest Agreem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $311,685.00 707,343.00 63,150.00 1,082,178.00 25,655.00 25,655.00 17,612.00 251,738.00 787,173.00 $1,056,523.00 Middle Georgia College Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets MIDDLE GEORGIA C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $3,848,606.70 1,798,439.46 23,842.92 3,091,986.89 107,909.90 1,162,360.79 1,306,837.32 1,378,387.74 45,446.60 333,224.88 97,551.66 76,218.50 9,626,248.60 4,016,218.97 4,685,772.24 2,600,526.33 69,756.83 1,327,189.80 969,977.92 6,726,056.26 1,024,557.06 21,420,055.41 (11,793,806.81) Middle Georgia College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 10,511,874.96 539.00 21,078.45 227,071.54 521,281.88 123,464.03 (5,616.00) 11,399,693.86 (394,112.95) 4,767,566.21 4,767,566.21 4,373,453.26 20,231,065.75 20,231,065.75 $24,604,519.01 Middle Georgia College Annual Financial Report FY 2004 10 Middle Georgia College Foundation, Inc. Statement of Activities Middle Georgia College Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $21,495.00 373.00 $74,598.00 17,959.00 $219,759.00 398.00 (628.00) 49,434.00 (19,684.00) (29,750.00) 71,302.00 72,873.00 189,779.00 $315,852.00 18,730.00 (628.00) 0.00 0.00 0.00 0.00 0.00 0.00 333,954.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 13,532.00 16,869.00 33,232.00 9,754.00 73,387.00 (2,085.00) 0.00 72,873.00 0.00 189,779.00 0.00 0.00 13,532.00 0.00 16,869.00 33,232.00 9,754.00 73,387.00 260,567.00 Net Assets Beginning Net Assets Ending Net Assets 19,697.00 $17,612.00 178,865.00 $251,738.00 597,394.00 $787,173.00 795,956.00 $1,056,523.00 Middle Georgia College Annual Financial Report FY 2004 11 Statement of Cash Flows MIDDLE GEORGIA C OLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $3,919,663.16 2,862,699.96 140,020.43 (10,153,564.44) (8,684,501.23) (3,125,629.26) (18,983.00) 21,649.96 1,192,367.32 1,247,377.55 1,337,859.73 45,101.15 341,851.88 100,202.17 70,729.42 (10,703,155.20) 10,511,874.96 (110,156.30) 769,970.87 11,171,689.53 (37,953.68) (1,584.00) (39,537.68) 352,422.44 24,924.14 (385,887.58) (8,541.00) 420,455.65 2,059,637.23 $2,480,092.88 Middle Georgia College Annual Financial Report FY 2004 12 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Incom e (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by O perating Activities June 30, 2004 ($11,793,806.81) 1,024,557.06 (226,702.77) (61,327.58) (32,013.80) 261,045.32 112,744.61 0.00 12,348.77 ($10,703,155.20) ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS C hange in fair value of investm ents recognized as a com ponent of interest i G ift of capital assets reducing proceeds of capital grants and gifts $80,010.70 $4,767,566.21 Middle Georgia College Annual Financial Report FY 2004 13 MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations The mission of Middle Georgia College is to provide an accessible, comprehensive learning and cultural environment for its students and community. Reporting Entity Middle Georgia College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Middle Georgia College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Middle Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Middle Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Middle Georgia College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Middle Georgia College is reporting the activity for the Middle Georgia College Foundation, Inc. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the Middle Georgia College Annual Financial Report FY 2004 14 State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Middle Georgia College Annual Financial Report FY 2004 15 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Middle Georgia College when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $4,767,566.21 to Middle Georgia College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Middle Georgia College Annual Financial Report FY 2004 16 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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 College had accrued liability for compensated absences in the amount of $563,566.66 as of 7-1-2003. For FY2004, $336,501.72 was earned in compensated absences and employees were paid $324,152.95, for a net increase of $12,348.77. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $575,915.43. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Middle Georgia College Annual Financial Report FY 2004 17 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $30,699.34 167,343.07 4,727.93 626,999.37 353,161.43 $1,182,931.14 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserv e for Inv entory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $473,395.47 1,205,221.20 10,120.48 (5,199.90) $1,683,537.25 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Middle Georgia 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 College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Middle Georgia College Annual Financial Report FY 2004 18 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Middle Georgia College Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Middle Georgia 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Middle Georgia College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Middle Georgia College Annual Financial Report FY 2004 20 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $2,024,829.28 12,115.37 $2,036,944.65 Bank Balances $2,139,466.05 12,115.00 $2,151,581.05 Risk Categories 1 2 $2,139,466.05 12,115.00 $0.00 $2,151,581.05 $0.00 3 $0.00 $0.00 Middle Georgia College Annual Financial Report FY 2004 21 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents Risk C ategories 1 2 3 C om m on S tock C orporate B onds S ecurities and C orporate O bligations $857,188.00 C arrying Amount $857,188.00 0.00 0.00 T o ta ls $857,188.00 Investm ents Not S ubject to C ategorizations: B oard of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $857,188.00 455,263.60 144,920.48 $1,457,372.08 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Middle Georgia College Annual Financial Report FY 2004 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $83,320.84 230,983.84 3,701.32 535,455.88 853,461.88 8,832.23 $844,629.65 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $350,875.09 9,720.87 $360,595.96 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The College had no allowance for uncollectible loans at June 30, 2004. Middle Georgia College Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,974,301.48 1,974,301.48 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $1,974,301.48 0.00 1,974,301.48 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 494,674.00 27,337,848.23 2,721,441.50 1,709,703.68 364,584.54 2,222,654.74 34,850,906.69 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 372,557.75 12,981,647.77 1,924,185.46 1,466,210.89 190,134.94 1,959,199.00 18,893,935.81 Total Capital Assets, Being Depreciated, Net 15,956,970.88 Capital Assets, net $17,931,272.36 4,756,749.58 285,273.04 60,670.87 5,102,693.49 11,206.48 750,141.85 36,400.90 174,287.83 52,520.00 1,024,557.06 4,078,136.43 $4,078,136.43 145,208.00 103,213.80 364,584.54 15,143.00 628,149.34 494,674.00 32,094,597.81 2,576,233.50 1,891,762.92 0.00 2,268,182.61 0.00 39,325,450.84 120,081.80 190,134.94 15,143.00 325,359.74 383,764.23 13,731,789.62 1,960,586.36 1,520,416.92 0.00 1,996,576.00 0.00 19,593,133.13 302,789.60 19,732,317.71 $302,789.60 $21,706,619.19 Middle Georgia College Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $831,207.68 28,588.10 $859,795.78 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations Beginning Balance July 1, 2003 $1,584.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $1,584.00 $0.00 563,566.66 336,501.72 563,566.66 336,501.72 $565,150.66 $336,501.72 324,152.95 324,152.95 575,915.43 0.00 575,915.43 $325,736.95 $575,915.43 Current Portion $0.00 319,186.35 319,186.35 $319,186.35 Middle Georgia College Annual Financial Report FY 2004 25 Note 9. Lease Obligations Middle Georgia College is obligated under various operating leases for the use of equipment. Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Personal Property C apital Leases O perating Leases $0.00 $22,762.08 15,120.00 14,182.00 3,962.00 0.00 0.00 $0.00 $56,026.08 CAPITAL LEASES Total principal paid on capital leases was $1,584 for the fiscal year ended June 30, 2004. No interest was paid relating to capital leases for the fiscal year ended June 30, 2004. There were no capital leases outstanding as of June 30, 2004. OPERATING LEASES Middle Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2008. Certain operating leases provide for renewal options on a month-to-month basis. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Middle Georgia College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Middle Georgia College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Middle Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Middle Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $629,787.72 $628,566.40 $646,640.01 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Middle Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the Middle Georgia College Annual Financial Report FY 2004 27 employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Middle Georgia College and the covered employees made the required contributions of $111,132.72 (10.03%) and $55,400.45 (5%), respectively. Georgia Defined Contribution Plan Plan Description Middle Georgia 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $23,115.89 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Middle Georgia College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Middle Georgia College Annual Financial Report FY 2004 28 Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Middle Georgia College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Middle Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Middle Georgia College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the Middle Georgia College Annual Financial Report FY 2004 29 policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 107 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Middle Georgia College recognized as incurred $343,000.67 of expenditures, which was net of $205,600.90 of participant contributions. Middle Georgia College Annual Financial Report FY 2004 30 Note 14. Natural Classifications With Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below; Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $3,964,233.87 573,701.18 1,075,717.12 20,612.36 (1,798,439.46) 57,449.46 558,779.77 6,990.80 $0.00 $0.00 7,848.15 79.78 66,039.83 $6,033.44 799,822.13 237,373.10 11,011.37 260.00 9,385.91 408,593.94 64,081.31 $45,951.66 809,838.53 202,622.20 21,557.63 2,700.00 12,298.36 821,396.81 17,452.99 $0.00 1,171,169.31 662,399.55 12,921.71 462.00 21,769.34 363,928.24 1,334.39 Total Expenses $4,459,045.10 $0.00 $73,967.76 $1,536,561.20 $1,933,818.18 $2,233,984.54 Natural C lassification Plant Operations & Maintenance Functional Classification F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 975,156.43 310,270.77 (317,839.17) 1,834.29 862,700.75 572,454.79 14,492.45 $ 0.00 3,052,550.89 $ 0.00 348,236.51 93,475.95 317,839.17 1,819.47 69,656.37 6,374.10 3,207,691.62 11,349.49 $ 0.00 18,587.86 727,171.26 908,855.63 Total Expenses $ 2,419,070.31 $ 3,052,550.89 $ 4,056,442.68 $ 1,654,614.75 Total Expenses $ 4,016,218.97 4,685,772.24 2,600,526.33 0.00 69,756.83 1,327,189.80 969,977.92 6,726,056.26 1,024,557.06 $ 21,420,055.41 Middle Georgia College Annual Financial Report FY 2004 31 Note 15. Component Units Middle Georgia College Foundation, Inc. (foundation) is a legally separate, tax-exempt component unit of Middle Georgia College (college). The foundation acts primarily as a fundraising organization to supplement the resources that are available to the college in support of its programs. The foundation is supported primarily from alumni and public contributions. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including SB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $63,633 to the college or on the college's behalf for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Foundation Office at 1100 Second Street., SE, Cochran, GA 31014. Investments for Component Units: Middle Georgia College Foundation holds endowment investments in the amount of $707,343. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Middle Georgia College Foundation has established a spending plan whereby 100% of the realized income earned is available for current and future expenditures, except where restricted by the donor. Long Term Liabilities for Component Units: Middle Georgia College Foundation had no long-term liabilities at June 30, 2004. Middle Georgia College Annual Financial Report FY 2004 32 NORTH GEORGIA COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 North Georgia College & State University Dahlonega, Georgia President Nathaniel Hansford Vice President for Business and Finance Frank J. (Mac) McConnell NORTH GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 North Georgia College & State University Foundation Balance Sheet .......................8 Statement of Revenues, Expenses, and Changes in Net Assets .................................9 North Georgia College & State University Foundation Statement of Activities ...........11 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 20 Note 3 Accounts Receivable............................................................................................. 23 Note 4 Inventories............................................................................................................. 23 Note 5 Notes/Loans Receivable........................................................................................ 23 Note 6 Capital Assets........................................................................................................ 24 Note 7 Deferred Revenue.................................................................................................. 25 Note 8 Long-Term Liabilities ........................................................................................... 25 Note 9 Lease Obligations.................................................................................................. 25 Note 10 Retirement Plans ................................................................................................. 26 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 NORTH GEORGIA COLLEGE & STATE UNIVERSITY Management's Discussion and Analysis Introduction North Georgia College & State University is one of the 34 institutions of the University System of Georgia. The University, located in Dahlonega, Georgia, was founded in 1873 and is known for its academic excellence and leadership development programs. The University offers baccalaureate and masters degrees in a wide variety of academic disciplines as well as the education specialist degree in teacher leadership. This range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,500 students each year. The institution continues to grow as shown by the comparison numbers that represent full time students and faculty. Faculty Students FY2004 FY2003 FY2002 190 3,900 181 3,467 173 3,240 Overview of the Financial Statements and Financial Analysis North Georgia College & State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of North Georgia College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. North Georgia College and State University Annual Financial Report FY 2004 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $12,068,300.83 46,266,626.53 2,693,583.93 61,028,511.29 June 30, 2003 $11,156,214.11 46,315,978.89 2,653,980.36 60,126,173.36 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 4,416,479.45 494,910.00 4,911,389.45 3,818,604.17 391,866.31 4,210,470.48 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 46,266,626.53 2,620,088.26 1,441,158.52 5,789,248.53 $56,117,121.84 43,835,756.06 2,536,701.39 17,162,174.68 285,096.94 (7,904,026.19) $55,915,702.88 The total assets of the institution increased by $902,337.93. The consumption of assets follows the institutional philosophy to use available resources to improve all areas of the institution to better serve our instruction, research and public service missions. The total liabilities for the year increased by $700,918.97. The combination of the increase in total assets of $902,337.93 and the increase in total liabilities of $700,918.97 yields an increase in total net assets of $201,418.96. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other North Georgia College and State University Annual Financial Report FY 2004 2 revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $24,965,769.50 June 30, 2003 $21,641,970.26 Operating Expenses Operating Loss 45,425,588.32 (20,459,818.82) 40,318,462.30 (18,676,492.04) Nonoperating Revenues and Expenses 20,682,432.07 18,099,792.48 Income (Loss) Before other revenues, expenses, gains or losses 222,613.25 (576,699.56) Other revenues, expenses, gains or losses 305,593.29 Increase in Net Assets 222,613.25 (271,106.27) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 55,915,702.88 (21,194.29) 55,894,508.59 53,894,305.78 2,292,503.37 56,186,809.15 Net Assets at End of Year $56,117,121.84 $55,915,702.88 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: North Georgia College and State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal A ppropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $10,218,648.97 2,097,524.37 345,922.75 9,842,976.87 2,460,696.54 24,965,769.50 18,899,966.64 1,567,432.62 226,405.39 (11,372.58) 20,682,432.07 0.00 $45,648,201.57 June 30, 2003 $8,528,286.12 3,245,697.35 417,372.27 8,558,922.72 891,691.80 21,641,970.26 19,409,373.00 381,335.14 (1,690,915.66) 18,099,792.48 305,593.29 305,593.29 $40,047,356.03 North Georgia College and State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $18,775,587.72 3,470,276.95 3,033,864.33 4,438,183.07 5,263,659.90 1,028,802.35 9,415,214.00 45,425,588.32 0.00 $45,425,588.32 June 30, 2003 $17,708,246.31 3,287,555.41 2,865,028.10 4,491,821.43 10,127,865.12 890,556.72 947,389.21 40,318,462.30 0.00 $40,318,462.30 Nongovernmental grants and contracts increased in the amount of approximately $376,152.32. The compensation and employee benefits category increased by approximately $1,018,752.12. Utilities increased by approximately $198,150.80 during the past year. Under non-operating revenues (expenses) state appropriations decreased by approximately ($509,406.36). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for North Georgia College & State University. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by the North Georgia College & State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. North Georgia College and State University Annual Financial Report FY 2004 5 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 7 ,6 3 3 ,2 9 0 .2 9 ) 2 0 ,6 6 0 ,5 7 7 .4 9 (2 ,5 9 1 ,5 5 3 .3 3 ) 1 6 9 ,5 0 6 .6 7 6 0 5 ,2 4 0 .5 4 8 ,7 1 1 ,8 9 1 .0 8 $ 9 ,3 1 7 ,1 3 1 .6 2 June 30, 2003 ($ 1 8 ,1 7 7 ,5 1 6 .5 4 ) 1 9 ,7 8 6 ,9 4 9 .0 2 (2 ,2 5 8 ,8 6 7 .4 8 ) 6 5 7 ,7 7 3 .8 1 8 ,3 3 8 .8 1 8 ,7 0 3 ,5 5 2 .2 7 $ 8 ,7 1 1 ,8 9 1 .0 8 Capital Assets For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, North Georgia College & State University has included the financial statements and notes for all required component units for FY2004. Economic Outlook The University's overall financial position in strong. Continued depressed economic conditions and budget reductions will negatively impact the University. We anticipate the current fiscal year to be similar to last and will maintain a close watch over resources to assure compliance with our mission to create a more educated Georgia. _______________________ Nathaniel Hansford, President North Georgia College & State University North Georgia College and State University Annual Financial Report FY 2004 6 Statement of Net Assets North Georgia College & State University STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D eposits Deferred Revenue Other Liabilities D eposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects Un r e s tr ic te d TOTAL NET ASSETS June 30, 2004 $9,317,131.62 49,078.65 50,879.93 773,151.37 1,175,164.50 702,894.76 12,068,300.83 1,613,615.96 1,079,967.97 46,266,626.53 48,960,210.46 61,028,511.29 648,766.17 565,738.41 2,266,337.18 (24,560.89) 273,635.87 686,562.71 4,416,479.45 494,910.00 494,910.00 4,911,389.45 46,266,626.53 2,620,088.26 1,441,158.52 5,789,248.53 $56,117,121.84 North Georgia College and State University Annual Financial Report FY 2004 7 North Georgia College & State University Foundation Balance Sheet North Georgia C ollege & State University Foundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits D eferred Rental Incom e Long-Term Debt Liabilities under Split-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $1,704,735.00 132,957.00 14,079,379.00 160,525.00 2,755,679.00 9,121,410.00 27,954,685.00 3,138,567.00 109,500.00 23,717.00 10,895,000.00 30,957.00 14,197,741.00 (96,400.00) 2,879,140.00 10,974,204.00 $13,756,944.00 North Georgia College and State University Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets North Georgia C ollege & State University STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $11,485,600.06 1,216,862.42 50,088.67 2,097,524.37 345,922.75 2,391,999.17 3,040,486.49 2,252,052.76 287,111.50 524,290.96 1,075,769.09 271,266.90 2,460,696.54 24,965,769.50 11,406,832.29 10,526,846.56 5,975,375.00 346,709.50 1,389,665.37 1,776,689.20 11,408,555.41 2,594,914.99 45,425,588.32 (20,459,818.82) North Georgia College and State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O the r G ifts Investment Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O the r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 18,899,966.64 459,487.82 117,724.18 990,220.62 226,405.39 (11,372.58) 20,682,432.07 222,613.25 0.00 222,613.25 55,915,702.88 (21,194.29) 55,894,508.59 $56,117,121.84 North Georgia College and State University Annual Financial Report FY 2004 10 North Georgia College & State University Foundation Statement of Activities North Georgia College & State University Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted Permanently Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $416,860.00 145,613.00 1,410,653.00 600,355.00 1,194,889.00 3,768,370.00 $532,271.00 1,186,629.00 187,756.00 (1,194,889.00) 711,767.00 $128,492.00 128,492.00 $1,077,623.00 1,332,242.00 0.00 0.00 1,410,653.00 788,111.00 0.00 0.00 0.00 0.00 4,608,629.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 519,757.00 168,913.00 325,652.00 1,448,712.00 559,079.00 185,822.00 3,207,935.00 560,435.00 0.00 711,767.00 0.00 128,492.00 519,757.00 0.00 168,913.00 325,652.00 1,448,712.00 559,079.00 185,822.00 3,207,935.00 1,400,694.00 Net Assets Beginning Net Assets Ending Net Assets (656,835.00) ($96,400.00) 2,167,373.00 $2,879,140.00 10,845,712.00 $10,974,204.00 12,356,250.00 $13,756,944.00 North Georgia College and State University Annual Financial Report FY 2004 11 Statement of Cash Flows North Georgia College & State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL A ND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $11,676,944.06 1,816,433.14 354,440.21 (19,429,774.50) (21,792,773.77) (2,606,527.79) (223,785.51) 276,028.84 2,438,351.82 3,037,687.12 2,253,863.84 287,111.50 530,028.43 1,100,700.12 282,146.66 2,365,835.54 (17,633,290.29) 18,899,966.64 193,178.23 1,567,432.62 20,660,577.49 8,174.78 (2,599,728.11) (2,591,553.33) 169,506.67 169,506.67 605,240.54 8,711,891.08 $9,317,131.62 North Georgia College and State University Annual Financial Report FY 2004 12 Statement of Cash Flows, Continued RECONCILIA TION OF OPERA TING LOSS TO NET CA SH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($20,459,818.82) 2,594,914.99 (199,453.05) (45,565.36) (65,345.87) 206,491.41 192,438.28 25,605.28 117,442.85 ($17,633,290.29) North Georgia College and State University had no non-cash investing, non-capital financing, or capital and related financing transactions for FY 2004. North Georgia College and State University Annual Financial Report FY 2004 13 NORTH GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations North Georgia College & State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity North Georgia College & State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of North Georgia College & State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. North Georgia College & State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, North Georgia College & State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus North Georgia College & State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, North Georgia College & State University is reporting the activity for the North Georgia College & State University Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement North Georgia College and State University Annual Financial Report FY 2004 14 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. North Georgia College and State University Annual Financial Report FY 2004 15 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to North Georgia College & State University when complete. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred North Georgia College and State University Annual Financial Report FY 2004 16 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. North Georgia College & State University had accrued liability for compensated absences in the amount of $1,064,029.86 as of 7-1-2003. For FY2004, $805,049.95 was earned in compensated absences and employees were paid $687,607.10, for a net increase of $117,442.85. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,181,472.71. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. North Georgia College and State University Annual Financial Report FY 2004 17 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $48,430.83 736,289.27 656,438.42 $1,441,158.52 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $7,535,853.69 (138,822.11) 58,100.00 (1,665,883.05) $5,789,248.53 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes North Georgia College & State University, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: North Georgia College and State University Annual Financial Report FY 2004 18 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. North Georgia College and State University Annual Financial Report FY 2004 19 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus North Georgia College & State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus North Georgia College & State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. North Georgia College and State University Annual Financial Report FY 2004 20 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $9,005,100.68 Bank Balances $8,721,183.26 Risk Categories 1 2 3 $283,917.42 $0.00 $8,721,183.26 $9,005,100.68 $8,721,183.26 $283,917.42 $0.00 $8,721,183.26 North Georgia College and State University Annual Financial Report FY 2004 21 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $543,141.21 5,116.91 1,065,357.84 $0.00 3 $0.00 C arrying Amount $543,141.21 5,116.91 1,065,357.84 T o ta ls $1,613,615.96 Inv estm ents Not S ubject to C ategorizations: B oard of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Inv estm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Inv estm ents Total Investm ents $0.00 $0.00 $1,613,615.96 312,030.94 49,078.65 $1,974,725.55 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. North Georgia College and State University Annual Financial Report FY 2004 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $300,520.39 132,626.99 50,879.93 355,518.52 839,545.83 15,514.53 $824,031.30 Note 4. Inventories Inventories consisted of the following at June 30, 2004. C entral S tores B ookstore Print Services O th e r T o ta l June 30, 2004 $45,618.73 1,126,489.12 3,056.65 $1,175,164.50 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was approximately $15,514.53. North Georgia College and State University Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,179,845.43 1,924,378.50 3,104,223.93 Additions $0.00 2,099,960.84 2,099,960.84 Reductions $0.00 3,023,483.17 3,023,483.17 Ending Balance 6/30/2004 $1,179,845.43 1,000,856.17 2,180,701.60 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 2,574,194.00 55,551,199.95 3,098,430.00 4,280,801.03 3,204,199.00 68,708,823.98 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 1,977,401.92 16,703,033.41 1,566,386.47 2,766,892.22 2,483,355.00 25,497,069.02 Total Capital Assets, Being Depreciated, Net 43,211,754.96 Capital Assets, net $46,315,978.89 2,853,757.57 310,880.43 400,936.88 3,565,574.88 40,000.00 324,957.61 8,245.00 373,202.61 2,574,194.00 58,404,957.52 3,058,430.00 4,266,723.85 0.00 3,596,890.88 0.00 71,901,196.25 139,924.60 1,889,935.77 170,229.87 492,563.51 134,760.00 2,827,413.75 738,161.13 $2,838,121.97 13,992.46 188,993.58 52,122.99 245,857.42 8,245.00 509,211.45 2,103,334.06 18,403,975.60 1,684,493.35 3,013,598.31 0.00 2,609,870.00 0.00 27,815,271.32 (136,008.84) 44,085,924.93 $2,887,474.33 $46,266,626.53 North Georgia College and State University Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $1,981,383.00 284,954.18 $2,266,337.18 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total 1,064,029.86 1,064,029.86 805,049.95 805,049.95 687,607.10 687,607.10 1,181,472.71 0.00 1,181,472.71 Total Long Term Obligations $1,064,029.86 $805,049.95 $687,607.10 $1,181,472.71 Current Portion $0.00 686,562.71 686,562.71 $686,562.71 Note 9. Lease Obligations North Georgia College & State University had no capital or operating lease agreements as of June 30, 2004. North Georgia College and State University Annual Financial Report FY 2004 25 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description North Georgia College & State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of North Georgia College & State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. North Georgia College & State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,230,493.88 $1,231,911.49 $1,265,154.15 Employees' Retirement System of Georgia Plan Description North Georgia College & State University 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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 North Georgia College and State University Annual Financial Report FY 2004 26 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $116,685.10. The University's total payroll for all employees was $21,933,678.85. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University 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 University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University amount to 7.16% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $13,944.42, of which $8,058.10 was made by the University and $5,886.32 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. North Georgia College and State University Annual Financial Report FY 2004 27 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy North Georgia College & State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. North Georgia College & State University and the covered employees made the required contributions of $626,597.88 (10.03%) and $312,363.20 (5%), respectively. Georgia Defined Contribution Plan Plan Description North Georgia College & State University 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. North Georgia College and State University Annual Financial Report FY 2004 28 Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $56,173.94 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. North Georgia College & State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. North Georgia College & State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the North Georgia College and State University Annual Financial Report FY 2004 29 performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although North Georgia College & State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against North Georgia College & State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 185 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, North Georgia College & State University recognized as incurred $1,011,980.25 of expenditures, which was net of $241,840.18 of participant contributions. North Georgia College and State University Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $11,208,547.97 1,887,191.43 2,932,871.97 230,265.77 84,482.59 131,871.89 1,802,276.21 498,079.89 $0.00 $0.00 $59,276.56 2,013,797.73 479,071.70 34,346.32 101,620.57 604,609.27 177,554.80 $30,472.76 1,739,011.54 427,631.78 35,459.34 1,075.00 45,260.66 745,539.58 9,413.67 $25,700.00 2,153,827.70 1,376,699.69 27,920.24 2,511.00 48,282.00 750,154.55 53,087.89 Total Expenses $18,775,587.72 $0.00 $0.00 $3,470,276.95 $3,033,864.33 $4,438,183.07 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services D e pr e cia tio n $ 0.00 1,615,902.58 511,072.51 (738,911.16) 3,388.06 1,302,172.43 1,269,558.62 1,300,476.86 $ 0.00 1,028,517.35 285.00 $ 82,835.00 1,117,115.58 248,027.35 738,911.16 15,329.77 273,079.43 147,481.65 6,236,132.18 556,301.88 $ 0.00 Total Expenses $ 5,263,659.90 $ 1,028,802.35 $ 9,415,214.00 $ 0.00 Total Expenses $ 11,406,832.29 10,526,846.56 5,975,375.00 0.00 346,709.50 1,389,665.37 1,776,689.20 11,408,555.41 2,594,914.99 $ 45,425,588.32 North Georgia College and State University Annual Financial Report FY 2004 31 Note 15. Component Units The North Georgia College & State University Foundation, Inc. (Foundation) was formed and incorporated under the laws of the state of Georgia in January, 1959. The purpose of the Foundation is to support North Georgia College & State University (University), its students, faculty and staff and the educational programs designed for its students, potential students and alumni. The Foundation's support comes primarily from contributions and grants from alumni, corporations, foundations and other individuals. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The twenty-three-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. During the year ended June 30, 2004, the Foundation made distributions of $2,462,965 to or on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Institutional Advancement at 70 Alumni Drive, Dahlonega, GA 30533. The Foundation prepares its financial reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. With the exception of necessary presentation adjustments, no modifications have been made to the Foundation's financial information in the University's financial report for these differences. The Foundation manages a charitable gift annuity and currently pays 5% to the life beneficiary. Upon the death of the income beneficiary, the remaining funds will be unrestricted. The Foundation realized an eleven percent investment return on the endowments in its business year ending June 30, 2004. An Investment Committee determines the appropriate investment mix to provide performance results needed to produce adequate funding for the University. The investment mix currently is approximately 60% Equity and 40% Bonds and Cash Equivalents. North Georgia College and State University Annual Financial Report FY 2004 32 Long Term Liabilities for Component Units: Revenue Bonds Payable Student Housing Total Long Term Debt Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year $10,950,000.00 $10,950,000.00 $0.00 $0.00 $55,000.00 $55,000.00 $10,895,000.00 $10,895,000.00 $95,000.00 $95,000.00 Debt Service Obligations for Component Units A nnual debt s ervice requirements to maturity for Student Hous ing revenue bonds payable are as follows : Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Prin c ip a l Interes t Total $95,000.00 100,000.00 100,000.00 100,000.00 100,000.00 1,200,000.00 2,500,000.00 3,300,000.00 3,400,000.00 $464,700.00 459,000.00 454,750.00 450,500.00 446,250.00 2,069,750.00 1,653,250.00 1,015,750.00 225,250.00 $559,700.00 559,000.00 554,750.00 550,500.00 546,250.00 3,269,750.00 4,153,250.00 4,315,750.00 3,625,250.00 $10,895,000.00 $7,239,200.00 $18,134,200.00 North Georgia College and State University Annual Financial Report FY 2004 33 SAVANNAH STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Savannah State University Savannah, Georgia President Carlton Brown Vice President for Business and Finance Arthur Moncrief SAVANNAH STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Assets ................................ 8 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 18 Note 3 Accounts Receivable............................................................................................. 21 Note 4 Inventories............................................................................................................. 21 Note 5 Notes/Loans Receivable........................................................................................ 21 Note 6 Capital Assets........................................................................................................ 22 Note 7 Deferred Revenue.................................................................................................. 23 Note 8 Long-Term Liabilities ........................................................................................... 23 Note 9 Lease Obligations.................................................................................................. 23 Note 10 Retirement Plans ................................................................................................. 24 Note 11 Risk Management................................................................................................ 25 Note 12 Contingencies...................................................................................................... 26 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 14 Natural Classifications With Functional Classifications..................................... 28 SAVANNAH STATE UNIVERSITY Management's Discussion and Analysis Introduction Savannah State University is one of the 34 institutions of the University System of Georgia. The University, located in Savannah, Georgia, was founded in 1890 as a department of the State University for the education and training of Negro Students. Savannah State University now serves a diverse student population as a senior university of the University System of Georgia. The University serves a primarily African American student population, enriched by a diversity of traditional and nontraditional students from other countries, cultures, and races. The educational goal is realized through program offerings in the College of Business Administration, the College of Liberal Arts and Social Sciences, and the College of Science and Technology, which leads to baccalaureate and master's degrees. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,500 students each year. The institution continues to grow as shown by the comparison numbers that follows: Faculty Students FY2004 FY2003 FY2002 124 2504 122 2071 135 1831 Overview of the Financial Statements and Financial Analysis Savannah State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Savannah State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Savannah State University Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $4,681,467.24 49,865,039.10 2,093,556.40 56,640,062.74 June 30, 2003 $4,510,446.66 35,766,881.75 2,342,338.00 42,619,666.41 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 1,930,123.54 8,099,272.51 10,029,396.05 1,905,722.49 547,373.78 2,453,096.27 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 42,365,039.10 1,236,905.69 769,028.27 2,239,693.63 $46,610,666.69 35,766,881.75 1,170,405.57 1,048,516.19 2,180,766.63 $40,166,570.14 The total assets of the institution increased by $14,020,396.33. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $14,098,157.35 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. Total liabilities for the year increased by $7,576,299.78. The primary cause for the increase was in non-current liabilities, primarily $7,500,000.00 in capital payables, which contributed to the increase in invested in capital assets, net of debt. The combination of the increase in total assets of $14,020,396.33 and the increase in total liabilities of $7,576,299.78 yields an increase in total Savannah State University Annual Financial Report FY 2004 2 net assets of $6,444,096.55. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $6,598,157.35. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues earned by the institution, both operating and nonoperating, and the expenses incurred by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $36,126,542.50 June 30, 2003 $31,903,251.65 Operating Expenses Operating Loss 54,639,945.45 (18,513,402.95) 52,872,342.99 (20,969,091.34) Nonoperating Revenues and Expenses 17,079,272.50 19,516,755.08 Income (Loss) Before other revenues, expenses, gains or losses (1,434,130.45) (1,452,336.26) Other revenues, expenses, gains or losses 7,878,227.00 3,576,236.15 Increase in Net Assets 6,444,096.55 2,123,899.89 Net Assets at beginning of year, as originally rep Prior Year Adjustments Net Assets at beginning of year, restated 40,166,570.14 40,166,570.14 35,730,068.13 2,312,602.12 38,042,670.25 Net Assets at End of Year $46,610,666.69 $40,166,570.14 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Savannah State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $3,550,502.31 25,656,740.51 42,182.06 6,728,180.95 148,936.67 36,126,542.50 16,366,717.63 187,063.47 384,006.52 171,652.66 (30,167.78) 17,079,272.50 7,878,227.00 7,878,227.00 $61,084,042.00 June 30, 2003 $3,209,849.77 22,169,046.93 136,560.90 6,116,451.99 271,342.06 31,903,251.65 17,633,886.00 55,848.94 59,808.09 1,767,212.05 19,516,755.08 3,576,236.15 3,576,236.15 $54,996,242.88 Savannah State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $11,351,668.73 1,368,350.69 2,693,970.17 3,978,896.77 2,416,900.60 6,180,658.51 4,403,708.47 14,015,847.85 6,680,407.24 1,549,536.42 54,639,945.45 0.00 $54,639,945.45 June 30, 2003 $10,570,560.81 1,639,106.92 2,428,313.13 3,420,662.24 2,516,161.62 6,144,916.90 7,959,196.67 12,296,079.49 5,897,345.21 52,872,342.99 0.00 $52,872,342.99 Nongovernmental grants and contracts increased by $345,032.00. The compensation and employee benefits category increased by $26,942.57. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by $440,004.81 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004. Under non-operating revenues (expenses) state appropriations decreased by ($1,267,168.37). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Savannah State University. We are hopeful that the economy is now on an upward trend. Statement of Cash Flows The final statement presented by the Savannah State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Savannah State University Annual Financial Report FY 2004 5 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 2 3 ,5 0 2 ,6 9 0 .3 1 ) 1 6 ,6 8 2 ,6 1 7 .4 4 6 ,4 2 4 ,8 1 3 .3 5 1 7 1 ,6 5 2 .6 6 (2 2 3 ,6 0 6 .8 6 ) 7 5 6 ,2 8 6 .1 6 $ 5 3 2 ,6 7 9 .3 0 June 30, 2003 ($ 1 8 ,5 8 1 ,3 7 7 .7 9 ) 1 8 ,0 3 3 ,2 7 1 .7 6 (1 ,0 0 1 ,6 3 5 .2 9 ) 5 9 ,9 6 2 .5 0 (1 ,4 8 9 ,7 7 8 .8 2 ) 2 ,2 4 6 ,0 6 4 .9 8 $ 7 5 6 ,2 8 6 .1 6 Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2004. Construction of the Freshman Living and Learning Center was completed and placed into service early in fiscal year 2004. The $14,976,353 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC). Other renovations funded by the GSFIC included $423,603.00 for major renovations and improvements. Projected funding by GSFIC for FY2005 will be approximately the same. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Economic Outlook The University is aware of decisions or conditions that are expected to have a significant effect on the financial position or results of operations. Decreases in the level of State support, student tuition and fee increases, and energy and health insurance cost increases will have a significant adverse impact on the university's ability to expand programs, undertake new initiatives, and meet its core mission and ongoing operational needs. Since state allocation is the institution's largest funding source, further reductions will weaken the university's financial position. Additionally, the need to continue to address priority needs such as requirements for deferred maintenance, new technology, public safety, and student development is a large challenge facing the university in years to come. Various committees and individuals are assessing the university's performance toward identified goals, use of energy resources and ways to achieve greater efficiencies and reduce expenses in an effort to assist in meeting those future challenges. _______________________ Carlton Brown, President Savannah State University Savannah State University Annual Financial Report FY 2004 6 Statement of Net Assets SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Ex p e nda b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $281,663.05 2,152,602.98 2,123,751.88 56,914.41 66,534.92 4,681,467.24 251,016.25 1,058,950.88 783,589.27 49,865,039.10 51,958,595.50 56,640,062.74 510,079.72 147,810.00 6,738.39 6,981.99 711,291.76 547,221.68 1,930,123.54 599,272.51 7,500,000.00 8,099,272.51 10,029,396.05 42,365,039.10 1,236,905.69 769,028.27 2,239,693.63 $46,610,666.69 Savannah State University Annual Financial Report FY 2004 7 Statement of Revenues, Expenses and Changes in Net Assets SAVANNAH STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $8,029,903.84 4,427,015.49 52,386.04 25,003,788.83 159,790.00 493,161.68 42,182.06 1,692,208.03 266,075.84 2,565,951.24 7,878.32 379,746.50 1,772,500.88 43,820.14 148,936.67 36,126,542.50 7,595,566.59 10,898,132.50 5,222,129.64 2,424.00 399,432.62 15,373,668.60 2,377,937.80 10,626,796.00 2,143,857.70 54,639,945.45 (18,513,402.95) Savannah State University Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 16,366,717.63 187,063.47 384,006.52 171,652.66 (30,167.78) 17,079,272.50 (1,434,130.45) 7,878,227.00 7,878,227.00 6,444,096.55 40,166,570.14 40,166,570.14 $46,610,666.69 Savannah State University Annual Financial Report FY 2004 9 Statement of Cash Flows SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Em ployees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $3,602,888.35 24,940,125.68 69,327.77 (18,236,880.17) (18,865,628.11) (19,800,684.09) (73,332.00) 76,999.04 1,550,141.67 948,820.24 7,878.32 143,927.80 379,816.40 1,769,369.33 43,820.14 (59,280.68) (23,502,690.31) 16,366,717.63 (309,893.85) 625,793.66 16,682,617.44 7,878,227.00 (1,453,413.65) 6,424,813.35 171,652.66 171,652.66 (223,606.86) 756,286.16 $532,679.30 Savannah State University Annual Financial Report FY 2004 10 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS G ift of capital assets reducing proceeds of capital grants and gifts June 30, 2004 ($18,513,402.95) 2,143,857.70 (623,049.49) 678,815.53 394,444.29 6,348.46 (139,192.80) (7,509,651.68) 59,140.63 ($23,502,690.31) $7,878,227.00 Savannah State University Annual Financial Report FY 2004 11 SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Savannah State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Savannah State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Savannah State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Savannah State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Savannah State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Savannah State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2004, Savannah State University does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 Savannah State University Annual Financial Report FY 2004 12 required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and Savannah State University Annual Financial Report FY 2004 13 local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Savannah State University when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $14,976,353.00 to Savannah State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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. Savannah State University Annual Financial Report FY 2004 14 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Savannah State University had accrued liability for compensated absences in the amount of $1,087,353.56 as of 7-1-2003. For FY2004, $1,879,889.66 was earned in compensated absences and employees were paid $1,820,749.03, for a net increase of $59,140.63. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $1,146,494.19. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctivities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable June 30, 2004 ($153,659.12) 843,758.71 78,928.68 $769,028.27 Savannah State University Annual Financial Report FY 2004 15 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $959,115.76 1,390,017.66 3,273.86 (112,713.65) $2,239,693.63 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Savannah State University, 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 University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Savannah State University Annual Financial Report FY 2004 16 Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Savannah State University Annual Financial Report FY 2004 17 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Savannah State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Savannah State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Savannah State University Annual Financial Report FY 2004 18 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $257,480.94 Bank Balances $1,946,404.61 Risk C ategories 1 2 $1,946,404.61 $0.00 $257,480.94 $1,946,404.61 $1,946,404.61 $0.00 3 $0.00 $0.00 Savannah State University Annual Financial Report FY 2004 19 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 275,198.36 0.00 1,058,950.88 0.00 0.00 0.00 $1,334,149.24 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Savannah State University Annual Financial Report FY 2004 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial Assistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $2,152,602.98 2,176,137.92 4,328,740.90 52,386.04 $4,276,354.86 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $0.00 53,334.66 3,579.75 $56,914.41 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. At June 30, 2004 Savannah State University had no reverses for notes/loans receivable. Savannah State University Annual Financial Report FY 2004 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $575,975.16 575,975.16 Additions $0.00 401,874.00 401,874.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $575,975.16 401,874.00 977,849.16 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 46,126,297.31 2,520,259.00 5,952,896.01 5,913,722.93 55,285.00 60,568,460.25 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 17,072,221.18 932,193.16 3,504,576.83 3,865,836.06 2,726.43 25,377,553.66 Total Capital Assets, Being Depreciated, Net 35,190,906.59 Capital Assets, net $35,766,881.75 30,354,579.71 14,984,332.49 704,569.99 657,900.26 253,910.46 36,000.00 31,349,060.16 13,715.50 15,655,948.25 0.00 61,496,544.53 2,520,259.00 5,999,565.74 0.00 6,153,917.89 91,285.00 76,261,572.16 1,289,138.96 129,688.31 455,177.90 268,888.38 1,382.12 2,144,275.67 575.10 133,762.81 13,109.20 147,447.11 0.00 18,360,785.04 1,061,881.47 3,825,991.92 0.00 4,121,615.24 4,108.55 27,374,382.22 29,204,784.49 15,508,501.14 48,887,189.94 $29,606,658.49 $15,508,501.14 $49,865,039.10 Savannah State University Annual Financial Report FY 2004 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $0.00 6,738.39 $6,738.39 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 1,087,353.56 1,087,353.56 1,879,889.66 7,500,000.00 9,379,889.66 1,820,749.03 1,820,749.03 1,146,494.19 7,500,000.00 8,646,494.19 $1,087,353.56 $9,379,889.66 $1,820,749.03 $8,646,494.19 Current Portion $0.00 547,221.68 0.00 547,221.68 $547,221.68 Note 9. Lease Obligations Savannah State University had no lease obligations as of June 30, 2004. . Savannah State University Annual Financial Report FY 2004 23 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Savannah State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Savannah State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Savannah State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,266,238.90 $1,343,141.21 $1,404,295.15 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Savannah State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in Savannah State University Annual Financial Report FY 2004 24 accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Savannah State University and the covered employees made the required contributions of $1,266,238.90 (10.03%) and $684,933.51 (5%), respectively. Georgia Defined Contribution Plan Plan Description Savannah State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $26,140 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Savannah State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Savannah State University Annual Financial Report FY 2004 25 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Savannah State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Savannah State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Savannah State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Savannah State University Annual Financial Report FY 2004 26 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 156 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Savannah State University recognized as incurred $578,079.38 of expenditures, which was net of $269,044 of participant contributions. Savannah State University Annual Financial Report FY 2004 27 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $7,187,727.04 1,009,742.03 2,073,572.12 49,368.60 222,737.79 96,265.69 628,717.86 83,537.60 $267,331.14 162,832.30 81,741.28 36,374.87 311,093.37 3,965.01 483,052.89 21,959.83 $57,280.46 1,262,560.29 244,636.49 41,511.71 221,810.62 23,084.41 843,086.19 $68,646.95 2,073,946.26 520,062.81 80,721.96 75,528.42 863,260.42 296,729.95 $10,581.00 1,340,349.06 348,208.91 35,578.83 14,725.51 34,532.48 625,650.67 7,274.14 $4,000.00 2,804,622.08 1,292,079.53 2,424.00 135,653.93 66,012.37 1,844,859.63 31,006.97 Total Expenses $11,351,668.73 $1,368,350.69 $2,693,970.17 $3,978,896.77 $2,416,900.60 $6,180,658.51 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 1,358,954.67 469,057.80 (246,691.72) 1,577.93 1,810,445.63 866,176.13 144,188.03 $ 0.00 14,015,847.85 $ 0.00 885,125.81 192,770.70 246,691.72 18,644.79 587,453.46 268,103.79 4,471,992.21 9,624.76 $ 0.00 1,549,536.42 Total Expenses $ 4,403,708.47 $ 14,015,847.85 $ 6,680,407.24 $ 1,549,536.42 Total Expenses $ 7,595,566.59 10,898,132.50 5,222,129.64 2,424.00 399,432.62 15,373,668.60 2,377,937.80 10,626,796.00 2,143,857.70 $ 54,639,945.45 Savannah State University Annual Financial Report FY 2004 28 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Financial Report For the Year Ended June 30, 2004 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Savannah, Georgia James G. Sanders Director Marc M. Mascolo Assistant Director SKIDAWAY INSTITUTE OF OCEANOGRAPHY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Assets ................................8 Statement of Cash Flows ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ...................................................... 12 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 17 Note 3 Accounts Receivable............................................................................................. 19 Note 4 Inventories............................................................................................................. 19 Note 5 Notes/Loans Receivable........................................................................................ 19 Note 6 Capital Assets........................................................................................................ 20 Note 7 Deferred Revenue.................................................................................................. 21 Note 8 Long-Term Liabilities ........................................................................................... 21 Note 9 Lease Obligations.................................................................................................. 22 Note 10 Retirement Plans ................................................................................................. 23 Note 11 Risk Management................................................................................................ 24 Note 12 Contingencies...................................................................................................... 25 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 25 Note 14 Natural Classifications With Functional Classifications..................................... 27 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Management's Discussion and Analysis Introduction SKIDAWAY INSTITUTE OF OCEANOGRAPHY is a unique, multidisciplinary institute, within the University System of Georgia, dedicated to furthering our understanding of marine and environmental sciences. Located sixteen miles southeast of the city of Savannah on the north end of Skidaway Island, the Institute offers easy access to the barrier islands, estuaries, and continental shelf of the southeastern U.S. as well as the open ocean. The Institute conducts leading edge research on marine and coastal systems, trains tomorrow's marine scientists, serves as a gateway to marine environments and integrates University System marine programs. It is committed to excellence in research and education and to the communication of our understanding of marine systems. The goal of the Institute is to create a more knowledgeable citizen capable of appreciating coastal natural environments and the conditions required to sustain them while capitalizing on coastal economic opportunities. Overview of the Financial Statements and Financial Analysis SKIDAWAY INSTITUTE OF OCEANOGRAPHY is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the Institute as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the Skidaway Institute of Oceanography. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is Skidaway Institute of Oceanography Annual Financial Report FY 2004 1 restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $984,631.55 5,566,848.98 6,551,480.53 June 30, 2003 $1,395,342.78 6,581,098.95 7,976,441.73 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 922,466.81 430,920.40 1,353,387.21 1,641,157.71 563,594.05 2,204,751.76 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 5,203,658.15 (5,564.83) $5,198,093.32 6,137,228.00 (365,538.03) $5,771,689.97 The total assets of the institution decreased by ($1,424,961.20). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($1,014,249.97) of investment in plant, net of accumulated depreciation. This decrease was adjustments posted related to the implementation of GASB Statement No. 34 standards. Total liabilities for the year decreased by ($851,364.55), the primary cause for the decrease was in deferred revenue. New policies and procedures were implemented to increase control of the timing of grant funds. The combination of the decrease in total assets of ($1,424,961.20) and the decrease in total liabilities of ($851,364.55) yields a decrease in total net assets of ($573,596.65). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($933,569.85). Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other Skidaway Institute of Oceanography Annual Financial Report FY 2004 2 revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $6,437,253.64 June 30, 2003 $4,964,830.22 Operating Expenses Operating Loss 8,321,950.48 (1,884,696.84) 7,726,781.67 (2,761,951.45) Nonoperating Revenues and Expenses 1,073,724.83 2,759,593.62 Income (Loss) Before other revenues, expenses, gains or losses (810,972.01) (2,357.83) Other revenues, expenses, gains or losses 169,344.36 Increase in Net Assets (641,627.65) (2,357.83) Net Assets at beginning of year, as originally rep Prior Year Adjustments Net Assets at beginning of year, restated 5,771,689.97 68,031.00 5,839,720.97 5,438,540.92 335,506.88 5,774,047.80 Net Assets at End of Year $5,198,093.32 $5,771,689.97 State Appropriations have steadily decreased, forcing the Institute to develop other sources of revenue. Operating Revenues increased $1,472,423.42 due largely to increased funding from sources other than State Appropriations. The Loss Before Other Revenues increase was due to losses taken on the extinguishment of assets, also related to the GASB Statement No. 34 implementation. These were one time adjustments that do have a continued impact on operations. Skidaway Institute of Oceanography Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $0.00 6,005,420.26 60,072.93 45,087.90 326,672.55 6,437,253.64 1,876,352.00 4,657.14 (776,557.75) 1,104,451.39 169,344.36 169,344.36 $7,711,049.39 June 30, 2003 $0.00 3,867,009.25 135,832.00 46,871.39 915,117.58 4,964,830.22 2,171,255.00 624,692.71 2,795,947.71 0.00 $7,760,777.93 Skidaway Institute of Oceanography Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 ($10,576.72) 4,712,992.95 976,948.75 902,246.92 1,136,826.89 29,420.65 574,091.04 8,321,950.48 30,726.56 $8,352,677.04 June 30, 2003 $24,598.92 4,576,401.64 715,983.49 953,115.05 1,070,747.87 40,542.89 345,391.81 7,726,781.67 36,354.09 $7,763,135.76 The Salary and Fringe Benefits category decreased by ($88,325.18). The decrease is in response to the decrease in State Appropriations, leaving several vacant positions for fiscal year 2004. Utilities increased by $28,944.42 during the past year, due in part to increased operations related to the RV Savannah and aging infrastructure issues. Supplies and Other Services increased $543,246.71. The increase was due to three primary factors, increases in insurance premiums, repairs and maintenance costs associated with an aging infrastructure and vehicle fleet, and increased purchases of supplies and materials related to research grants. Under non-operating revenues (expenses) state appropriations decreased by approximately ($294,903.00). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for the Skidaway Institute of Oceanography. Statement of Cash Flows The final statement presented by the Skidaway Institute of Oceanography is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and Skidaway Institute of Oceanography Annual Financial Report FY 2004 5 related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 ,6 9 4 ,1 3 2 .6 7 ) 2 ,0 7 5 ,5 1 6 .6 1 (3 5 3 ,2 6 7 .9 9 ) 4 ,6 5 7 .1 4 3 2 ,7 7 3 .0 9 6 4 ,3 0 2 .3 2 $ 9 7 ,0 7 5 .4 1 June 30, 2003 ($ 1 ,8 0 7 ,0 3 3 .5 5 ) 2 ,1 8 4 ,5 9 3 .1 3 (3 8 7 ,7 8 9 .0 2 ) (1 0 ,2 2 9 .4 4 ) 7 4 ,5 3 1 .7 6 $ 6 4 ,3 0 2 .3 2 Capital Assets The Institute had no significant capital asset additions for facilities in fiscal year 2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Economic Outlook The Institute is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The Institute's overall financial position is strong. The Institute was able to generate a modest increase in revenue despite continued decreases in State Appropriations. The Institute anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the Institute's ability to react to unknown internal and external issues. _______________________ James G. Sanders, Director SKIDAWAY INSTITUTE OF OCEANOGRAPHY Skidaway Institute of Oceanography Annual Financial Report FY 2004 6 Statement of Net Assets SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $97,075.41 Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance 480,471.81 Receivables - State General Appropriations Allotment Receivables - Other 402,059.53 I n v e n to r ie s Other Assets 5,024.80 Total C urrent Assets 984,631.55 Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x pe nd a b le Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS 5,566,848.98 5,566,848.98 6,551,480.53 198,228.85 440,696.63 87,001.85 196,539.48 922,466.81 154,731.42 276,188.98 430,920.40 1,353,387.21 5,203,658.15 (5,564.83) $5,198,093.32 Skidaway Institute of Oceanography Annual Financial Report FY 2004 7 Statement of Revenues, Expenses and Changes in Net Assets SKIDAWAY INSTITUTE OF OC EANOGRAPHY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $0.00 5,095,593.41 548,413.46 361,413.39 60,072.93 39,502.75 5,585.15 326,672.55 6,437,253.64 1,136,829.84 2,463,242.29 876,983.20 175,898.65 272,379.31 2,679,688.30 716,928.89 8,321,950.48 (1,884,696.84) Skidaway Institute of Oceanography Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 1,876,352.00 4,657.14 (30,726.56) (776,557.75) 1,073,724.83 (810,972.01) 169,344.36 169,344.36 (641,627.65) 5,771,689.97 68,031.00 5,839,720.97 $5,198,093.32 Skidaway Institute of Oceanography Annual Financial Report FY 2004 9 Statement of Cash Flows SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal A ppropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Em ployees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $0.00 5,550,737.95 60,072.93 (4,047,316.43) (3,603,262.85) 39,502.75 5,585.15 300,547.83 (1,694,132.67) 1,876,352.00 199,164.61 2,075,516.61 169,344.36 (411,205.67) (80,680.12) (30,726.56) (353,267.99) 4,657.14 4,657.14 32,773.09 64,302.32 $97,075.41 Skidaway Institute of Oceanography Annual Financial Report FY 2004 10 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e nto r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($1,884,696.84) 716,928.89 423,110.07 20,374.25 (658.26) (924,291.35) (44,899.43) ($1,694,132.67) Skidaway Institute of Oceanography had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions Skidaway Institute of Oceanography Annual Financial Report FY 2004 11 SKIDAWAY INSTITUTE OF OCEANOGRAPHY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Skidaway Institute of Oceanography serves the state and national communities by providing oceanographic research that advances fundamental knowledge and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Skidaway Institute of Oceanography is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Skidaway Institute of Oceanography as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Skidaway Institute of Oceanography does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Skidaway Institute of Oceanography is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Skidaway Institute of Oceanography) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2004, Skidaway Institute of Oceanography does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the Institute was 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 Skidaway Institute of Oceanography Annual Financial Report FY 2004 12 by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute'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-Institute transactions have been eliminated. The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The Institute has no investments. Accounts Receivable Accounts receivable consists of amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Skidaway Institute of Oceanography Annual Financial Report FY 2004 13 Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Skidaway Institute of Oceanography when complete. There is currently no construction work in progress at Skidaway Institute of Oceanography. Deferred Revenues Deferred revenues include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. The Skidaway Institute of Oceanography had accrued liabilities for compensated absences in the amount of $396,170.33 as of June 30, 2003. For FY2004, $231,383.24 was earned in compensated absences and employees were paid $276,282.67, for a net decrease of $44,899.43. The ending balance as of June 30, 2004 in accrued liability for compensated absences was $351,270.90 Noncurrent Liabilities Noncurrent 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 noncurrent assets. Skidaway Institute of Oceanography Annual Financial Report FY 2004 14 Net Assets The Institute's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Skidaway Institute of Oceanography had no Expendable Restricted Net Assets at June 30, 2004. Restricted net assets expendable Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserv e for Inv entory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $31,084.55 (36,649.38) ($5,564.83) Skidaway Institute of Oceanography Annual Financial Report FY 2004 15 When an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Skidaway Institute of Oceanography, 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 Institute has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the Institute, 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 Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for sponsored and unsponsored scholarships. Skidaway Institute of Oceanography Annual Financial Report FY 2004 16 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Skidaway Institute of Oceanography) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Skidaway Institute of Oceanography), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Skidaway Institute of Oceanography Annual Financial Report FY 2004 17 Categorization of Deposits The Institute'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 Institute or by its agent in the Institute's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the Institute'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 Institute's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Ca r r y ing Amount Cash Deposits $97,075.41 Investment Portfolio Accounts Total Cash Deposits $97,075.41 Ba nk Ba la nc e s $100,000.00 $100,000.00 Risk Categories 1 2 $100,000.00 $0.00 3 $0.00 $100,000.00 $0.00 $0.00 Categorization of Investments The Institute's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the Institute or its agent in the Institute's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the Institute's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the Institute's name. Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the Institute did not own any specific, identifiable investment securities of the pool. At June 30, 2004, the Institute had no investments. Skidaway Institute of Oceanography Annual Financial Report FY 2004 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $0.00 480,471.81 402,059.53 882,531.34 $882,531.34 Note 4. Inventories The Institute had no inventories at June 30, 2004. Note 5. Notes/Loans Receivable The Institute had no notes or loans receivable at June 30, 2004. Skidaway Institute of Oceanography Annual Financial Report FY 2004 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $449,460.00 449,460.00 Additions $0.00 0.00 Reductions $0.00 0.00 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 1,870,288.00 5,071,942.88 500,151.00 4,065,143.94 388,281.88 170,748.16 12,066,555.86 1,276,777.68 1,830,268.43 184,927.51 2,430,277.13 59,498.64 153,167.52 5,934,916.91 6,131,638.95 $6,581,098.95 851,904.88 334.91 852,239.79 1,870,288.00 546,817.53 164,333.00 588,171.04 3,169,609.57 178,545.85 701,099.63 64,347.31 826,470.00 4,503.00 1,774,965.79 (922,726.00) ($922,726.00) 1,475,238.53 942,324.09 130,044.59 530,478.39 3,078,085.60 91,523.97 $91,523.97 Ending Balance 6/30/2004 $449,460.00 0.00 449,460.00 0.00 4,525,125.35 335,818.00 4,328,877.78 388,281.88 171,083.07 0.00 9,749,186.08 (19,915.00) 1,589,043.97 119,230.23 2,726,268.74 59,498.64 157,670.52 0.00 4,631,797.10 5,117,388.98 $5,566,848.98 Skidaway Institute of Oceanography Annual Financial Report FY 2004 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $0.00 440,696.63 $440,696.63 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $443,870.95 Additions $170.69 Reductions Ending Balance June 30, 2004 $80,850.81 $363,190.83 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 396,170.33 231,383.24 396,170.33 231,383.24 $840,041.28 $231,553.93 276,282.67 276,282.67 351,270.90 0.00 351,270.90 $357,133.48 $714,461.73 Current Portion $87,001.85 196,539.48 196,539.48 $283,541.33 Skidaway Institute of Oceanography Annual Financial Report FY 2004 21 Note 9. Lease Obligations Skidaway Institute of Oceanography is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 4 2006 5 2007 6 2008 7 2009 8 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $111,406.69 111,406.69 111,406.69 83,555.01 417,775.08 54,584.25 0.00 $363,190.83 $0.00 CAPITAL LEASES In 2001 Skidaway Institute of Oceanography entered into an installment purchase with Bank of America for shipboard equipment on the R/V Savannah. The Institute's lease agreement has remaining terms of more than one year and will expire in fiscal year 2008. The agreement is cancelable if the State of Georgia does not provide adequate funding. Skidaway Institute of Oceanography Annual Financial Report FY 2004 22 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Skidaway Institute of Oceanography participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Skidaway Institute of Oceanography who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Skidaway Institute of Oceanography makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $222,226.60 $245,897.98 $222,499.29 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible University system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Skidaway Institute of Oceanography makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal Skidaway Institute of Oceanography Annual Financial Report FY 2004 23 year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Skidaway Institute of Oceanography and the covered employees made the required contributions of $76,916.61 (10.03%) and $38,343.44 (5%), respectively. Georgia Defined Contribution Plan Plan Description Skidaway Institute of Oceanography 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. Contributions 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. There were no employees covered by this plan, therefore no contributions were made by employees during fiscal year 2004. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Skidaway Institute of Oceanography and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Skidaway Institute of Oceanography Annual Financial Report FY 2004 24 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Skidaway Institute of Oceanography, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Skidaway Institute of Oceanography expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Skidaway Institute of Oceanography (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Skidaway Institute of Oceanography Annual Financial Report FY 2004 25 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 25 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Skidaway Institute of Oceanography recognized as incurred $83,753.25 of expenditures, which was net of $34,113.84 of participant contributions. Skidaway Institute of Oceanography Annual Financial Report FY 2004 26 Note 14. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation ($5,877.28) 12,683.44 (17,382.88) $992,146.10 1,147,299.38 441,735.81 141,664.02 27,577.31 1,895,851.82 66,718.51 $0.00 $1,211.06 442,961.47 104,506.71 17,010.46 2,666.67 323,829.92 84,762.46 $0.00 $149,349.96 427,436.06 191,593.44 16,647.37 117,220.09 Total Expenses ($10,576.72) $4,712,992.95 $0.00 $976,948.75 $0.00 $902,246.92 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 444,530.35 126,216.56 576.80 234,361.48 330,609.70 532.00 $ 0.00 $ 0.00 1,015.03 247.24 $ 0.00 7,773.85 12,176.77 8,207.76 574,091.04 Total Expenses $ 1,136,826.89 $ 0.00 $ 29,420.65 $ 574,091.04 Total Expenses $ 1,136,829.84 2,463,242.29 876,983.20 0.00 175,898.65 0.00 272,379.31 2,679,688.30 716,928.89 $ 8,321,950.48 Skidaway Institute of Oceanography Annual Financial Report FY 2004 27 SOUTH GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2004 Ed Jackson President South Georgia College Douglas, Georgia Wanda E. Lloyd Vice President for Business Affairs SOUTH GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 South Georgia College Foundation Balance Sheet ..............................................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 South Georgia College Foundation Statement of Activities ...................................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 22 Note 4 Inventories............................................................................................................. 23 Note 5 Notes/Loans Receivable........................................................................................ 23 Note 6 Capital Assets........................................................................................................ 24 Note 7 Deferred Revenue.................................................................................................. 25 Note 8 Long-Term Liabilities ........................................................................................... 25 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 28 Note 12 Contingencies...................................................................................................... 29 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 SOUTH GEORGIA COLLEGE Management's Discussion and Analysis Introduction South Georgia College is one of the 34 institutions of the University System of Georgia. The College located in Douglas, Georgia, traces its roots to 1906 when the Eleventh District Agricultural and Mechanical School was established by an Act of the Georgia General Assembly. In 1927 the institution became the first state-supported junior college in Georgia and four years later emerged as one of the original units of Georgia's system of public higher education. Today, the College offers Associate of Arts and Associate of Science degree programs that prepare students for transfer in a multitude of baccalaureate program majors. The institution also offers Associate of Applied Science degrees and certificates designed to prepare individuals for careers in several areas of business, human services, and technology. Through its Associate of Science in Nursing degree program the College prepares individuals to become registered nurses and thereby meet regional health care needs. South Georgia College enthusiastically embraces new technology, innovative methods, and collaborative efforts to advance the mission of the University System of Georgia. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 58 1,431 63 1,361 63 1,325 Overview of the Financial Statements and Financial Analysis South Georgia College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of South Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. South Georgia College Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $712,679.81 12,772,098.26 213,212.67 13,697,990.74 June 30, 2003 $615,007.88 7,901,094.44 202,802.53 8,718,904.85 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 364,981.93 104,294.53 469,276.46 319,585.29 185,869.46 505,454.75 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 12,772,098.26 153,798.12 115,929.76 186,888.14 $13,228,714.28 7,901,094.44 153,798.12 119,824.21 38,733.33 $8,213,450.10 The total assets of the institution increased by $4,979,085.89. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,871,003.82 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($36,178.29). The primary causes for the decrease were the decreases in deferred revenue and deposits held in non-current liabilities. The combination of the increase in total assets of $4,979,085.89 and the decrease in total liabilities of ($36,178.29) yields an increase in total net assets of $5,015,264.18. The increase in total net South Georgia College Annual Financial Report FY 2004 2 assets is primarily in the category of invested in capital assets, net of debt in the amount of $4,871,003.82. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues June 30, 2004 $5,197,609.06 June 30, 2003 $5,038,150.50 Operating Expenses Operating Loss 11,193,615.09 (5,996,006.03) 11,536,352.69 (6,498,202.19) Nonoperating Revenues and Expenses 5,604,946.99 5,817,459.59 Income (Loss) Before other revenues, expenses, gains or losses (391,059.04) (680,742.60) Other revenues, expenses, gains or losses 4,779,155.73 0.00 Increase in Net Assets 4,388,096.69 (680,742.60) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 8,213,450.10 627,167.49 8,840,617.59 7,792,510.61 1,101,682.09 8,894,192.70 Net Assets at End of Year $13,228,714.28 $8,213,450.10 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: South Georgia College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $829,630.11 2,425,128.18 290,295.79 1,491,443.59 161,111.39 5,197,609.06 5,302,694.10 303,801.23 3,455.00 (5,003.34) 5,604,946.99 4,779,155.73 4,779,155.73 $15,581,711.78 June 30, 2003 $937,577.64 2,360,299.48 376,054.20 1,277,777.82 86,441.36 5,038,150.50 5,610,598.53 9,121.18 6,418.88 191,321.00 5,817,459.59 0.00 $10,855,610.09 South Georgia College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $1,534,159.88 647,739.22 890,302.25 1,677,397.39 1,798,099.28 741,122.04 1,360,398.62 497,553.27 9,146,771.95 0.00 $9,146,771.95 June 30, 2003 $3,654,418.87 625,185.03 929,783.31 1,804,322.64 1,861,457.82 853,064.10 1,205,471.45 602,649.47 11,536,352.69 0.00 $11,536,352.69 Total operating revenue increased by $159,458.56. The net decrease in tuition and fees of ($107,947.53) resulted from scholarships increasing by $171,991.87 while tuition revenue increased only $81,414.60. Operating revenues associated with the auxiliary enterprises of the College increased by $213,665.77. Sales and services of educational departments continue to decrease, this year the decrease was ($85,758.41). Continuing Education fees, which are primarily Elderhostel, were negatively affected by some of the College's Elderhostel area having been reallocated to another service area. The compensation and employee benefits category decreased by ($59,470.38). The decrease reflects reductions in staff necessitated by budget reductions. There were no salary increases in the 204 budget year as directed by the Board of Regents. Utilities increased by $68,364.04 during the past year. The increase was primarily associated with the increased natural gas and electricity costs that were experienced in fiscal year 2004. Under non-operating revenues (expenses) state appropriations decreased by ($307,904.43). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for South Georgia College. We are hopeful that the economy is now on an upward trend. South Georgia College Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the South Georgia College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 5 ,5 6 9 ,3 2 7 .3 6 ) 5 ,6 0 3 ,8 5 5 .0 7 (4 1 ,8 6 5 .1 0 ) (1 ,5 4 8 .3 4 ) (8 ,8 8 5 .7 3 ) 2 1 9 ,8 6 2 .0 9 $ 2 1 0 ,9 7 6 .3 6 June 30, 2003 ($ 6 ,0 0 4 ,3 9 9 .4 3 ) 5 ,7 8 5 ,9 2 8 .3 6 (1 0 2 ,2 8 6 .5 8 ) 6 ,4 1 8 .8 8 (3 1 4 ,3 3 8 .7 7 ) 5 3 4 ,2 0 0 .8 6 $ 2 1 9 ,8 6 2 .0 9 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2004. The renovation of the Health, Physical Education, and Recreation Building which included an indoor swimming pool and state-of-the-art fitness center was completed in 2004. South Georgia College also completed over $405,000 in major renovations with funds administered by the Georgia State Finance and Investment Commission (GSFIC). Projected funding by GSFIC for FY2005 will be approximately $500,000. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, South Georgia College has included the financial statements and notes for all required component units for FY2004. The South Georgia College Foundation had investments of approximately $2.5 M as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. South Georgia College Annual Financial Report FY 2004 6 Economic Outlook The College's overall financial position is strong. Even with sizable reductions in state appropriations, the College was able to continue operations and provide quality service. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Ed Jackson, President South Georgia College South Georgia College Annual Financial Report FY 2004 7 Statement of Net Assets SOUTH GEORGIA COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e n ts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x pe nd a b le Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS June 30, 2004 $57,178.24 68,412.13 390,868.36 159,803.39 36,417.69 712,679.81 153,798.12 59,414.55 12,772,098.26 12,985,310.93 13,697,990.74 76,218.64 5,160.00 9,135.58 94,251.68 180,216.03 364,981.93 104,294.53 104,294.53 469,276.46 12,772,098.26 153,798.12 115,929.76 186,888.14 $13,228,714.28 South Georgia College Annual Financial Report FY 2004 8 South Georgia College Foundation Balance Sheet South Georgia C ollege Foundation Balance Sheet (FASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $139,658.03 2,444,478.32 13,500.00 2,597,636.35 0.00 542,436.30 118,212.75 1,936,987.30 $2,597,636.35 South Georgia College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets SOUTH GEORGIA C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s: Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $2,251,085.06 1,404,084.61 17,370.34 2,410,274.31 14,853.87 290,295.79 436,419.62 622,298.23 222,732.82 194,600.79 15,392.13 161,111.39 5,197,609.06 2,046,850.14 2,894,190.08 1,521,115.72 38,493.04 762,179.04 662,872.33 2,687,295.98 580,618.76 11,193,615.09 (5,996,006.03) South Georgia College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O the r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O the r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 5,302,694.10 303,801.23 3,455.00 (5,003.34) 5,604,946.99 (391,059.04) 4,779,155.73 4,779,155.73 4,388,096.69 8,213,450.10 627,167.49 8,840,617.59 $13,228,714.28 South Georgia College Annual Financial Report FY 2004 11 South Georgia College Foundation Statement of Activities South Georgia College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $8,729.60 50,344.62 $162,210.66 147,857.82 2,021.33 150,053.00 (175,053.00) 359,006.37 (12,842.34) $93,445.93 25,000.00 118,445.93 $264,386.19 50,344.62 147,857.82 0.00 0.00 2,021.33 0.00 0.00 0.00 464,609.96 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 12,689.91 132,388.02 112,042.56 12,010.45 269,130.94 89,875.43 0.00 (12,842.34) 0.00 118,445.93 12,689.91 0.00 132,388.02 0.00 0.00 112,042.56 12,010.45 269,130.94 195,479.02 Net Assets Beginning Net Assets Ending Net Assets 452,560.87 $542,436.30 131,055.09 $118,212.75 1,818,541.37 $1,936,987.30 2,402,157.33 $2,597,636.35 South Georgia College Annual Financial Report FY 2004 12 Statement of Cash Flows SOUTH GEORGIA COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITA L A ND RELA TE D F INA NCING A CTIVIT IES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $2,170,746.85 2,401,354.27 290,295.79 (4,954,437.66) (4,941,113.33) (2,168,734.65) (7,195.00) 9,249.86 436,419.62 599,280.13 222,136.36 194,600.79 15,392.13 162,677.48 (5,569,327.36) 5,302,694.10 (2,640.26) 303,801.23 5,603,855.07 (41,865.10) (41,865.10) (5,003.34) 3,455.00 (1,548.34) (8,885.73) 219,862.09 $210,976.36 South Georgia College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Income (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other A ssets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($5,996,006.03) 580,618.76 (82,752.26) (17,035.84) (30,646.95) (1,146.00) (11,501.37) (9,828.89) (1,028.78) ($5,569,327.36) South G eorgia C ollege had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions South Georgia College Annual Financial Report FY 2004 14 SOUTH GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations South Georgia College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity South Georgia College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of South Georgia College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. South Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, South Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus South Georgia College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, South Georgia College is reporting the activity for the South Georgia College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and South Georgia College Annual Financial Report FY 2004 15 Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. South Georgia College Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Resale Inventories are valued at cost using the first-in, first-out ("FIFO") basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to South Georgia College when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $4,779,155.73 to South Georgia College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred South Georgia College Annual Financial Report FY 2004 17 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. South Georgia College had accrued liability for compensated absences in the amount of $285,539.34 as of 7-1-2003. For FY2004, $238,505.54 was earned in compensated absences and employees were paid $239,534.32, for a net decrease of $1,028.78. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $284,510.56. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. South Georgia College Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable June 30, 2004 $55,512.10 60,417.66 $115,929.76 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $82,422.26 104,465.88 $186,888.14 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes South Georgia 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. South Georgia College Annual Financial Report FY 2004 19 Classification of Revenues The College has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. South Georgia College Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus South Georgia 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus South Georgia College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. South Georgia College Annual Financial Report FY 2004 21 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $210,976.36 Bank Balances $210,976.36 Risk C ategories 1 2 $150,000.00 $60,976.36 3 $0.00 $210,976.36 $210,976.36 $150,000.00 $60,976.36 $0.00 South Georgia College had no investments as of June 30, 2004. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $0.00 68,412.13 390,868.36 459,280.49 $459,280.49 South Georgia College Annual Financial Report FY 2004 22 Note 4. Inventories Inventories consisted of the following at June 30, 2004. June 30, 2004 B ookstore Food Services Physical Plant O th e r T o ta l $159,803.39 $159,803.39 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through South Georgia College. These loans are extended to students in need of short-term assistance to pay tuition and fees. The loans are issued through the financial aid office with no interest to be accrued. A $25.00 administrative fee is assessed and the loans are generally for a three month repayment period. Certified letters are mailed to the loan recipient sporadically in an attempt to collect any unpaid loans. South Georgia College Annual Financial Report FY 2004 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $197,146.48 197,146.48 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $197,146.48 0.00 197,146.48 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 1,293,392.00 16,460,328.18 1,239,613.00 1,152,281.97 1,226,514.46 21,372,129.61 230,219.63 10,438,310.98 865,638.17 981,486.02 1,152,526.85 13,668,181.65 7,703,947.96 $7,901,094.44 4,427,090.06 57,680.00 317,833.38 28,278.42 4,830,881.86 70,390.03 8,153.00 78,543.03 1,293,392.00 20,887,418.24 1,297,293.00 1,399,725.32 0.00 1,246,639.88 0.00 26,124,468.44 75,447.86 24,322.31 41,481.95 141,252.12 4,689,629.74 $4,689,629.74 219,665.70 32,098.41 8,153.00 259,917.11 305,667.49 10,218,645.28 833,539.76 1,005,808.33 0.00 1,185,855.80 0.00 13,549,516.66 (181,374.08) 12,574,951.78 ($181,374.08) $12,772,098.26 South Georgia College Annual Financial Report FY 2004 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $0.00 5,160.00 $5,160.00 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 285,539.34 238,505.54 285,539.34 238,505.54 $285,539.34 $238,505.54 239,534.32 239,534.32 284,510.56 0.00 284,510.56 $239,534.32 $284,510.56 Current Portion $0.00 180,216.03 180,216.03 $180,216.03 South Georgia College Annual Financial Report FY 2004 25 Note 9. Lease Obligations South Georgia College is obligated under various operating leases for the use of equipment. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $0.00 $78,070.00 39,405.00 10,058.00 0.00 0.00 $0.00 $127,533.00 OPERATING LEASES South Georgia College's non cancelable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2007. Certain operating leases provide for renewal options for periods from one to five years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Non cancelable operating lease expenditures in 2004 were $85,834.09. South Georgia College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description South Georgia College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of South Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. South Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $324,941.52 $332,260.92 $306,062.37 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible University System employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy South Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the South Georgia College Annual Financial Report FY 2004 27 employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. South Georgia College and the covered employees made the required contributions of $95,948.11 (10.03%) and $47,830.84 (5%), respectively. Georgia Defined Contribution Plan Plan Description South Georgia 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $7,359.90 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. South Georgia College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The South Georgia College Annual Financial Report FY 2004 28 Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. South Georgia College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although South Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against South Georgia College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the South Georgia College Annual Financial Report FY 2004 29 policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 77 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, South Georgia College recognized as incurred $240,774.20 of expenditures, which was net of $107,680.56 of participant contributions. South Georgia College Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $7.00 419,671.03 606,413.21 10,406.92 26,280.85 459,215.86 12,165.01 $0.00 $0.00 $0.00 433,057.33 126,005.21 1,727.30 4,687.40 63,053.98 19,208.00 $0.00 579,482.01 155,031.65 12,805.80 9,414.92 129,231.28 4,336.59 $0.00 874,950.79 460,892.83 9,380.66 8,874.15 322,577.54 721.42 Total Expenses $1,534,159.88 $0.00 $0.00 $647,739.22 $890,302.25 $1,677,397.39 Natural Classification Plant Operations & Maintenance Functional Classification FY2004 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 532,081.77 168,867.54 (168,227.82) 3,086.01 607,732.77 650,584.00 3,975.01 $ 0.00 741,122.04 $ 0.00 54,947.15 3,905.28 168,227.82 1,086.35 21,057.00 5,882.24 1,062,633.32 42,659.46 $ 0.00 497,553.27 Total Expenses $ 1,798,099.28 $ 741,122.04 $ 1,360,398.62 $ 497,553.27 Total Expenses $ 7.00 2,894,190.08 1,521,115.72 0.00 38,493.04 762,179.04 662,872.33 2,687,295.98 580,618.76 $ 9,146,771.95 South Georgia College Annual Financial Report FY 2004 31 Note 15. Component Units South Georgia College Foundation (foundation) is a legally separate, tax-exempt component unit of South Georgia College (College). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of the foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the College, the foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the College's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $247,711 to the College for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the office of the Vice President for Business Affairs at South Georgia College. Investments for Component Units: South Georgia College Foundation holds endowment investments in the amount of $1.9 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Long-Term Investments for Component Units: South Georgia College Foundation had no long-term investments as of 6-30-04. South Georgia College Annual Financial Report FY 2004 32 SOUTHERN POLYTECHNIC STATE UNIVERSITY Financial Report For the Year Ended June 30, 2004 Southern Polytechnic State University Marietta, Georgia Dr. Lisa A. Rossbacher President Mr. Patrick B. McCord Vice President for Business and Finance SOUTHERN POLYTECHNIC STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Southern Polytechnic State University Foundation, Inc. Balance Sheet ......................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Southern Polytechnic State University Foundation, Inc. Statement of Activities ..........12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 28 Note 12 Contingencies...................................................................................................... 29 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 SOUTHERN POLYTECHNIC STATE UNIVERSITY Management's Discussion and Analysis Introduction Southern Polytechnic State University is one of the 34 institutions of the University System of Georgia. Located in Marietta, Georgia, the University was founded in 1948 as a two-year division of Georgia Institute of Technology. The University became accredited as a four-year college in 1970, and was one of the first colleges in the nation to offer the bachelor of Engineering Technology degree. In the summer of 1980, Southern Polytechnic State University officially became the 14th senior college and the 33rd independent unit of the University System. The campus currently encompasses approximately 193 acres and contains 32 buildings. Southern Polytechnic State University offers baccalaureate and masters degrees that contain a balance of technical, professional, and liberal arts courses with an emphasis on relevant, application-oriented teaching. The University's unique mission attracts a highly qualified faculty and a student body that has had the third highest SAT average amongst System institutions for several years. The University continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 181 3,770 178 3,684 174 3,556 Overview of the Financial Statements and Financial Analysis Southern Polytechnic State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Southern Polytechnic State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. Southern Polytechnic State University Annual Financial Report FY 2004 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the University. They are also able to determine how much the University owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the University. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the University's equity in property, plant and equipment owned by the University. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the University 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $6,094,723.93 41,555,765.68 3,558,766.37 51,209,255.98 June 30, 2003 $7,015,878.94 45,319,037.57 3,560,464.62 55,895,381.13 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 5,431,125.01 255,654.68 5,686,779.69 5,982,972.32 803,313.26 6,786,285.58 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 41,555,765.68 1,401,388.23 2,211,769.07 353,553.31 $45,522,476.29 45,319,037.57 1,454,709.20 764,868.67 1,570,480.11 $49,109,095.55 Total assets of the University decreased by ($4,686,125.15). A review of the Statement of Net Assets reveals the decrease was primarily due to a decrease of ($3,763,271.89) to investment in plant, net of accumulated depreciation. This consumption of assets follows the University's philosophy to use available resources for the purpose of acquiring and improving all areas of the University to better serve its mission of instruction, research and public service. Total liabilities for the year decreased by ($1,099,505.89). The primary cause for the decrease was in current liabilities; primarily a decrease in deferred revenue due to a slight variation in student payments of fall semester tuition and fees during the period immediately preceding June 30th for the two fiscal years being compared. In addition, University housing was privatized Southern Polytechnic State University Annual Financial Report FY 2004 2 during the current fiscal year and no deferred revenue for University housing was recorded for the Fiscal Year ending June 30, 2004. Non-current liabilities for the year decreased by ($547,658.58) due to the reclassification of compensated absences from non-current to current. This reclassification partially offset the decrease in current liabilities mentioned above. The combination of the decrease in total assets of ($4,686,125.15) and the decrease in total liabilities of ($1,099,505.89) yield a decrease in total net assets of ($3,586,619.26). The primary cause for this decrease in total net assets was due to the retirement of Norton and Howell Dormitories, net of debt in the amount of ($3,763,271.89). Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present both operating and non-operating revenues received by the University, operating and non-operating expenses paid by the University, and any other revenues, expenses, gains and losses received or spent by the University. Generally speaking, operating revenues are received for providing goods and services to various customers and constituencies of the University. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues and to carry out the mission of the University. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Legislature to the University without the Legislature directly receiving commensurate goods and services for those revenues. Southern Polytechnic State University Annual Financial Report FY 2004 3 Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $13,680,317.66 Operating Expenses Operating Loss 36,076,643.38 (22,396,325.72) Nonoperating Revenues and Expenses 20,019,462.09 Income (Loss) Before other revenues, expenses, gains or losses (2,376,863.63) Other revenues, expenses, gains or losses 21,105.00 Increase in Net Assets (2,355,758.63) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 49,109,095.55 (1,230,860.63) 47,878,234.92 Net Assets at End of Year $45,522,476.29 June 30, 2003 $14,611,749.33 37,817,801.15 (23,206,051.82) 20,100,987.53 (3,105,064.29) (3,105,064.29) 52,371,003.61 (156,843.77) 52,214,159.84 $49,109,095.55 The Statement of Revenues, Expenses, and Changes in Net Assets reflect 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: State appropriations continue to show annual decreases under non-operating revenue. Although the State of Georgia's economy showed positive signs of recovery during the fiscal year, rate of recovery was not as rapid as anticipated in the State's budget. The resultant shortfall in revenues subsequently led to statewide budge reductions. Southern Polytechnic State University's reduction was a proportional share of that received by the University System of Georgia. Another significant change in non-operating revenue was the reclassification of grants and contracts from operating to non-operating. This reclassification offsets the decrease in state appropriation mentioned above. A decrease in operating revenues is the net result of a decease due to the reclassification of grants and contracts mentioned above coupled with an increase in tuition revenues attributable to positive enrollment growth and an increase in tuition rates. Southern Polytechnic State University Annual Financial Report FY 2004 4 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2004 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O the r $8,927,136.38 757,782.54 913,389.86 2,624,646.68 457,362.20 Total Operating Revenue 13,680,317.66 Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue 18,781,814.00 1,839,418.45 63,132.53 (664,902.89) 20,019,462.09 C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants 17,605.00 3,500.00 21,105.00 Total Revenues $33,720,884.75 June 30, 2003 $7,666,514.75 2,767,474.03 1,190,558.69 2,935,362.92 51,838.94 14,611,749.33 19,735,153.00 96,714.53 269,120.00 20,100,987.53 0.00 $34,712,736.86 Southern Polytechnic State University Annual Financial Report FY 2004 5 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses June 30, 2004 $16,859,434.17 99,342.31 377,380.62 2,538,394.80 3,026,099.96 5,885,327.99 4,040,309.18 442,842.64 2,807,511.71 36,076,643.38 Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses 0.00 $36,076,643.38 June 30, 2003 $16,319,287.16 328,430.90 492,448.22 3,274,902.20 3,079,751.52 3,527,257.39 4,788,879.64 2,889,516.73 3,117,327.39 37,817,801.15 0.00 $37,817,801.15 The compensation and employee benefits category decreased by approximately ($421,978.43). This decrease reflects a reduction in the number of full time faculty employees with benefits. Utilities increased by approximately $26,068.27 during the past year. Higher utilities expenses reflect general rate increases for all natural gas customers during the winter periods for fiscal year 2004. Statement of Cash Flows The final statement presented by Southern Polytechnic State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the University during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the University. The second section reflects cash flows from non-capital financing activities. This section reflects cash received and spent for non-operating, non-investing and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with cash used for the acquisition and construction of capital and related items. The fourth section reflects cash flows from investing activities and shows purchases, proceeds and interest received from investing activities. The fifth section reconciles net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Southern Polytechnic State University Annual Financial Report FY 2004 6 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 2 0 ,4 6 5 ,9 5 2 .4 3 ) 2 0 ,3 9 8 ,3 2 5 .8 9 (6 2 6 ,7 2 1 .7 4 ) 5 0 6 ,1 2 1 .5 6 (1 8 8 ,2 2 6 .7 2 ) 1 ,1 9 7 ,9 9 4 .2 1 $ 1 ,0 0 9 ,7 6 7 .4 9 June 30, 2003 ($ 2 1 ,4 4 1 ,1 4 6 .9 5 ) 2 0 ,9 5 7 ,3 5 3 .3 5 6 5 9 ,4 5 9 .2 4 1 0 3 ,9 5 6 .3 7 2 7 9 ,6 2 2 .0 1 9 1 8 ,3 7 2 .2 0 $ 1 ,1 9 7 ,9 9 4 .2 1 Capital Assets Southern Polytechnic State University did not have any major capital projects during the fiscal year 2003-2004. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Southern Polytechnic State University has included the financial statements and notes for all required component units for fiscal year 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook Beyond those unknown variations having a global effect on virtually all types of business operations, the University is not aware of any currently known facts, decisions or conditions that are expected to have a significant effect on its financial position or results of operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like the last and will maintain a close watch over resources to ensure its ability to react to unknown internal and external issues. _______________________ Dr. Lisa A. Rossbacher, President Southern Polytechnic State University Southern Polytechnic State University Annual Financial Report FY 2004 7 Statement of Net Assets SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $1,009,767.49 Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance 1,100,261.82 Receivables - State General Appropriations Allotment Receivables - Other 3,051,655.77 I n v e nto r ie s Other Assets 933,038.85 Total C urrent Assets 6,094,723.93 Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term D ebt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for No ne x p e nd a b le Expendable C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 2,998,184.22 560,582.15 41,555,765.68 45,114,532.05 51,209,255.98 431,683.93 121,127.30 2,231,326.43 295,885.62 1,715,352.36 635,749.37 5,431,125.01 255,654.68 255,654.68 5,686,779.69 41,555,765.68 1,401,388.23 2,211,769.07 353,553.31 $45,522,476.29 Southern Polytechnic State University Annual Financial Report FY 2004 8 Southern Polytechnic State University Foundation, Inc. Balance Sheet S outhern Polytechnic S tate Univers ity Foundation, Inc. Balance S heet (FAS B) June 30, 2004 As s e ts Cash and Cash Equivalent s Not es and Mort gages Receivable Endowm ent Invest m ent s P ledges Receivable, net Invest m ent s Ot her Asset s Capit al Asset s, net T ot al Asset s Liabilitie s Account s P ayable and Accrued Liabilit ies Deposit s Long-T erm Debt Liabilit ies under Split -Int erest Agreem ent s T ot al Liabilit ies Net Assets Unrest rict ed T emporarily Rest rict ed P ermanent ly Rest rict ed T ot al Net Asset s $777,656.30 304,206.68 976,385.00 83,024.38 823,044.00 16,191,705.33 21,901,852.94 41,057,874.63 2,767,983.51 60,683.00 36,113,495.63 38,942,162.14 926,838.39 405,006.32 783,867.78 $2,115,712.49 Southern Polytechnic State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets SOUTHERN POLYTEC HNIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $10,396,141.13 1,282,098.54 186,906.21 203,015.40 122,335.39 432,431.75 913,389.86 679,778.99 86,261.66 734,629.74 197,969.82 208,356.16 617,633.11 100,017.20 457,362.20 13,680,317.66 9,167,178.01 11,594,988.23 5,308,329.42 (99,378.00) 192,005.62 626,181.64 1,373,021.38 5,706,598.56 2,207,718.52 36,076,643.38 (22,396,325.72) Southern Polytechnic State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 18,781,814.00 1,753,970.35 85,448.10 63,132.53 (664,902.89) 20,019,462.09 (2,376,863.63) 17,605.00 3,500.00 21,105.00 (2,355,758.63) 49,109,095.55 (1,230,860.63) 47,878,234.92 $45,522,476.29 Southern Polytechnic State University Annual Financial Report FY 2004 11 Southern Polytechnic State University Foundation, Inc. Statement of Activities Southern Polytechnic State University Foundation, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Fund Raising Foundation Rental Income - Residence Halls Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $532,920.51 25,932.54 $511,943.27 18,609.46 (155,829.54) 1,226,749.75 44,544.02 522,746.92 (522,746.92) 2,152,520.18 52,349.83 $34,827.24 $1,079,691.02 44,542.00 (111,285.52) 0.00 1,226,749.75 0.00 34,827.24 0.00 0.00 0.00 2,239,697.25 Expenses Instruction Research Institutional Support Academic Support Student Services - Residence Halls Student Financial Aid Other Liabilities Fundraising Total Expenses C hange in Net Assets 89,206.07 522,746.92 1,182,270.44 59,612.03 241,871.84 236,658.18 2,332,365.48 (179,845.30) 0.00 52,349.83 0.00 34,827.24 0.00 0.00 89,206.07 522,746.92 1,182,270.44 59,612.03 241,871.84 236,658.18 2,332,365.48 (92,668.23) Net Assets Beginning Net Assets Ending Net Assets 1,106,683.69 $926,838.39 352,656.49 $405,006.32 749,040.54 $783,867.78 2,208,380.72 $2,115,712.49 Southern Polytechnic State University Annual Financial Report FY 2004 12 Statement of Cash Flows SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF C ASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $8,927,136.38 757,782.54 915,964.61 (13,261,978.72) (20,450,977.83) (1,908,280.18) 181,685.72 (143,828.26) 1,591,573.74 82,261.66 1,013,163.05 191,479.52 229,462.26 674,497.64 103,629.48 630,475.96 (20,465,952.43) 18,781,814.00 (223,520.56) 1,840,032.45 20,398,325.89 3,500.00 597.55 (630,819.29) (626,721.74) 447,497.43 58,624.13 506,121.56 (188,226.72) 1,197,994.21 $1,009,767.49 Southern Polytechnic State University Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued June 30, 2004 RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities ($22,396,325.72) 2,207,718.52 1,235,402.65 0.00 (225,017.29) (203,801.89) (1,682,250.43) 532,072.88 66,248.85 ($20,465,952.43) Southern Polytechnic State University had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions Southern Polytechnic State University Annual Financial Report FY 2004 14 SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Southern Polytechnic State University serves the state and national communities by providing its students with academic instruction to advance fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Southern Polytechnic State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which compose the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Southern Polytechnic State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes, but is not limited to, the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Southern Polytechnic State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Southern Polytechnic State University is reporting the activity for the Southern Polytechnic State University Foundation, Inc. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Southern Polytechnic State University Annual Financial Report FY 2004 15 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Southern Polytechnic State University Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Southern Polytechnic State University when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Southern Polytechnic State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Southern Polytechnic State University Annual Financial Report FY 2004 17 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Southern Polytechnic State University had accrued liability for compensated absences in the amount of $825,155.20 as of 7-1-2003. For FY2004, $2,611,536.18 was earned in compensated absences and employees were paid $2,545,287.33, for a net increase of $66,248.85. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $891,404.05. 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Southern Polytechnic State University Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $1,129,966.89 603,896.43 142,208.44 335,697.31 $2,211,769.07 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $237,253.58 723,910.81 (607,611.08) $353,553.31 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Southern Polytechnic State University, 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. Southern Polytechnic State University Annual Financial Report FY 2004 19 Classification of Revenues The University has classified its revenues as either operating or non-operating 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 of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Southern Polytechnic State University Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Southern Polytechnic State University) 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Southern Polytechnic State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Southern Polytechnic State University Annual Financial Report FY 2004 21 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $562,270.06 Bank Balances $1,746,435.53 Risk C ategories 1 2 3 $100,000.00 $0.00 $1,646,435.53 $562,270.06 $1,746,435.53 $100,000.00 $0.00 $1,646,435.53 Southern Polytechnic State University Annual Financial Report FY 2004 22 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk C ategories 1 2 $3,837.00 $0.00 3 $0.00 C arrying Amount $3,837.00 T o ta ls $3,837.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $3,837.00 447,497.43 0.00 474,178.79 2,520,168.43 $3,445,681.65 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Southern Polytechnic State University Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctivities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $1,112,599.83 442,438.53 1,100,261.82 1,871,775.92 4,527,076.10 375,158.51 $4,151,917.59 Note 4. Inventories Southern Polytechnic had no inventories at June 30, 2004. Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. Southern Polytechnic State University had no allowance for uncollectible loans at June 30, 2004. Southern Polytechnic State University Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $753,396.56 753,396.56 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $753,396.56 0.00 753,396.56 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 1,623,504.00 60,290,444.47 567,531.00 7,661,221.46 5,111,491.31 30,500.00 75,284,692.24 289,911.70 301,662.33 813,218.71 1,404,792.74 6,941,784.40 424,001.36 530,532.87 7,896,318.63 1,623,504.00 53,638,571.77 567,531.00 7,538,882.43 0.00 5,394,177.15 30,500.00 68,793,166.35 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 676,460.00 19,441,745.57 509,653.71 6,156,226.13 3,923,430.80 11,535.21 30,719,051.42 44,565,640.82 $45,319,037.38 59,528.48 1,449,559.57 167,407.75 660,884.90 629,748.16 915.00 2,968,043.86 74,681.18 4,715,768.45 197,068.01 230,754.66 477,885.96 139.79 5,696,298.05 661,307.30 16,175,536.69 479,993.45 6,586,356.37 0.00 4,075,293.00 12,310.42 27,990,797.23 (1,563,251.12) 2,200,020.58 40,802,369.12 ($1,563,251.12) $2,200,020.58 $41,555,765.68 Southern Polytechnic State University Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $1,795,749.12 435,577.31 $2,231,326.43 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Current Portion $0.00 825,155.20 2,611,536.18 825,155.20 2,611,536.18 2,545,287.33 2,545,287.33 891,404.05 0.00 891,404.05 $825,155.20 $2,611,536.18 $2,545,287.33 $891,404.05 635,749.37 635,749.37 $635,749.37 Note 9. Lease Obligations CAPITAL LEASES Southern Polytechnic State University did not have Capital Leases during fiscal year 2004. OPERATING LEASES Southern Polytechnic State University did not have operating leases during fiscal year 2004. Southern Polytechnic State University Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Southern Polytechnic State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Southern Polytechnic State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Southern Polytechnic State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 1,116,496.27 $ 1,223,412.28 $ 1,734.039.25 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Southern Polytechnic State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal Southern Polytechnic State University Annual Financial Report FY 2004 27 year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Southern Polytechnic State University and the covered employees made the required contributions of $ 630,995.05 (10.03%) and $314,555.18 (5%), respectively. Georgia Defined Contribution Plan Plan Description Southern Polytechnic State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $ 80,635.15 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Southern Polytechnic State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. Southern Polytechnic State University Annual Financial Report FY 2004 28 The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Southern Polytechnic State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure that is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Southern Polytechnic State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Southern Polytechnic State University (an organizational unit of the Board of Regents of the University 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, 2004. Southern Polytechnic State University Annual Financial Report FY 2004 29 Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 155 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Southern Polytechnic State University recognized as incurred $687,966.95 of expenditures, which was net of $263,043.23 of participant contributions. Southern Polytechnic State University Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $9,156,843.61 2,842,072.43 2,541,819.06 62,615.10 5,487.00 103,302.82 1,704,772.14 442,522.01 $0.00 58,625.00 81.57 35,993.24 4,642.50 $0.00 290,310.88 67,329.82 11,456.94 4,489.08 3,793.90 $0.00 1,451,515.62 332,537.96 49,354.86 39,838.81 (1,354.75) 666,502.30 $10,334.40 1,716,744.74 397,698.29 22,225.41 18,276.52 848,719.51 12,101.09 $0.00 3,075,959.94 1,392,454.51 18,343.12 (2,183.05) 1,065,046.15 335,707.32 Total Expenses $16,859,434.17 $99,342.31 $377,380.62 $2,538,394.80 $3,026,099.96 $5,885,327.99 Natural C lassification Plant Operations & Maintenance Functional Classification F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 1,610,894.80 431,929.14 (388,028.81) 6,383.53 1,083,573.40 621,126.41 674,430.71 $ 0.00 442,842.64 $ 0.00 548,864.82 144,479.07 288,650.81 21,626.66 177,852.00 125,723.80 1,428,501.96 71,812.59 $ 0.00 Total Expenses $ 4,040,309.18 $ 442,842.64 $ 2,807,511.71 $ 0.00 Total Expenses $ 9,167,178.01 11,594,988.23 5,308,329.42 (99,378.00) 192,005.62 626,181.64 1,373,021.38 5,706,598.56 2,207,718.52 $ 36,076,643.38 Southern Polytechnic State University Annual Financial Report FY 2004 31 Note 15. Component Units Southern Polytechnic State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Southern Polytechnic State University. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The forty-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30 2004, the Foundation distributed $694,316.06 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 1100 South Marietta Pkwy., Marietta, Ga. 30060. SPSU Student Housing I, LLC and SPSU Management, LLC Southern Polytechnic State University Foundation, Inc established two LLC's to construct and manage student housing for use by the University. The net proceeds from student housing are for the exclusive use of the Foundation and the University. Buildings valued at 8.7 million plus current buildings under construction and the associated long term debt of 35.7 million are included in the financial statements of the Foundation. Investments for Component Units: Southern Polytechnic State University Foundation, Inc. holds endowment investments in the amount of $976,385.00. The corpus of the endowment is nonexpendable, but earnings on the investments may be expended as restricted by the donors. Southern Polytechnic State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 5% of the investments may be used for the purpose as restricted by the donors. Southern Polytechnic State University Annual Financial Report FY 2004 32 Long Term Liabilities for Component Units: Student Housing Bonds were issued by the Marietta Development Authority to finance student housing on University property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Southern Polytechnic State University. Interest rates vary between 2.5% and 5.25%. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Amounts due within One Year Student Housing $0.00 $35,690,000.00 $0.00 $35,690,000.00 $0.00 Total Long Term Debt $0.00 $35,690,000.00 $0.00 $35,690,000.00 $0.00 Debt Service Obligations for Component Units A nnual debt s ervice requirements to maturity for Student Hous ing revenue bonds payable are as follows : Year Ending June 30: 2005 2006 2007 2008 2009 2010 t hrough 2014 2015 t hrough 2019 2020 t hrough 2024 2025 t hrough 2029 2030 t hrough 2034 2035 t hrough 2039 2040 t hrough 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Bonds Payable Prin c ip a l Interes t Total $0.00 850,000.00 810,000.00 900,000.00 970,000.00 5,340,000.00 6,550,000.00 8,420,000.00 10,095,000.00 1,755,000.00 $1,279,421.00 1,644,970.00 1,623,720.00 1,599,420.00 1,576,020.00 7,388,055.00 6,179,975.00 4,301,769.00 1,935,500.00 87,750.00 $1,279,421.00 2,494,970.00 2,433,720.00 2,499,420.00 2,546,020.00 12,728,055.00 12,729,975.00 12,721,769.00 12,030,500.00 1,842,750.00 0.00 0.00 $35,690,000.00 $27,616,600.00 $63,306,600.00 Southern Polytechnic State University Annual Financial Report FY 2004 33 GEORGIA INSTITUTE OF TECHNOLOGY Financial Report For the Year Ended June 30, 2004 Georgia Institute of Technology Atlanta, Georgia G. Wayne Clough President Robert K. Thompson Senior Vice President for Administration and Finance GEORGIA INSTITUTE OF TECHNOLOGY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis .................................................................................... 1 Statement of Net Assets....................................................................................8 Georgia Institute of Technology Component Units' Balance Sheets .......................................... 9 Statement of Revenues, Expenses and Changes in Net Assets.................................................. 10 Georgia Tech Foundation Statement of Activities..................................................................... 12 Georgia Tech Research Corporation Statement of Activities.................................................... 13 Georgia Tech Facilities, Inc. Statement of Activities..................................................14 Georgia Tech Alumni Association Statement of Activities....................................................... 15 Statement of Cash Flows ........................................................................................................... 16 Note 1. Summary of Significant Accounting Policies ............................................................ 18 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments.................................. 25 Note 3. Accounts Receivable.................................................................................................. 28 Note 4. Inventories.................................................................................................................. 28 Note 5. Notes/Loans Receivable............................................................................................. 28 Note 6. Capital Assets............................................................................................................. 29 Note 7. Deferred Revenue....................................................................................................... 29 Note 8. Long-Term Liabilities ................................................................................................ 30 Note 9. Lease Obligations....................................................................................................... 30 Note 10. Retirement Plans ........................................................................................................ 33 Note 11 Risk Management....................................................................................................... 36 Note 12. Contingencies and Commitments .............................................................................. 37 Note 13. Post-Employment Benefits Other Than Pension Benefits ......................................... 38 Note 14. Natural Classifications With Functional Classifications............................................ 39 Note 15. Component Units ....................................................................................................... 40 GEORGIA INSTITUTE OF TECHNOLOGY Management's Discussion and Analysis Introduction The Georgia Institute of Technology, also known as Georgia Tech, is one of the nation's leading research universities, providing a focused, technologically based education to nearly 17,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked as one of the top ten public universities in the nation by U.S. News and World Report. It offers degrees through the Colleges of Architecture, Engineering, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has more than 50 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. Founded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research Institute that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21st century. Overview of the Financial Statements and Financial Analysis The Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2004, which began July 1, 2003 and ended June 30, 2004. 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. This discussion and analysis of the Institute's financial statements provides an overview of financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into four net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data with prior fiscal year results are presented in this year's Management's Discussion and Analysis. Statement of Net Assets Using the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past transactions and events. This statement identifies the assets available for current operations, debts owed and net assets available to continue operations in the future. The Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into two Georgia Institute of Technology Annual Financial Report FY 2004 1 categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the Institute 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, Unrestricted Net Assets, is available for any lawful purpose of the Institute. Following is a comparative, condensed version of the Institute's Statement of Net Assets as of June 30, 2003 and June 30, 2004: Statement of Net Assets, Condensed Assets: Current Assets Capital Assets, net Other Assets Total Assets Liabilities: Current Liabilities Noncurrent Liabilities Total Liabilities Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Unrestricted Total Net Assets June 30, 2004 $116,665,357.33 1,058,316,600.17 61,332,907.17 1,236,314,864.67 $76,196,750.09 274,148,389.81 350,345,139.90 788,370,449.64 43,493,399.60 20,338,273.26 33,767,602.27 $885,969,724.77 June 30, 2003 $124,563,867.96 780,675,509.51 59,027,705.56 964,267,083.03 $75,141,977.25 75,098,430.74 150,240,407.99 716,164,610.33 43,493,399.60 17,862,656.37 36,506,008.74 $814,026,675.04 The total assets of the Institute increased by $272 million, due primarily to the addition of the Technology Square complex, the Ford Environmental Science and Technology Building, and a new Campus Recreation Center. Further review of the Statement of Net Assets indicates that $33.8 million in unrestricted net assets and $20.3 million in restricted net assets are available for future operations. The total liabilities for the year increased by $200.1 million. The primary cause for the increase was the incurrence of $187.2 million in lease obligations associated with the acquisition of Technology Square and the Campus Recreation Center. The combination of the increase in total assets and the increase in total liabilities yields an increase in total net assets of $71.9 million. Georgia Institute of Technology Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received, both operating and non-operating, the expenses paid, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the Institute. Generally speaking, operating revenues are received for providing goods and services, and operating expenses are those incurred to acquire or produce the goods and services provided in return for the operating revenues. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Georgia Legislature without the Legislature directly receiving commensurate goods and services for those revenues. Following is a comparative, condensed version of the Institute's Statement of Revenues, Expenses and Changes in Net Assets as of June 30, 2003 and June 30, 2004: Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues Operating Expenses Operating Loss Nonoperating Revenues and Expenses Income (Loss) Before other revenues, expenses, gains or losses Other revenues, expenses, gains or losses Increase in Net Assets Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated Net Assets at End of Year June 30, 2004 $568,071,540.26 780,776,432.26 (212,704,892.00) 204,854,936.33 (7,849,955.67) 104,404,495.79 96,554,540.12 814,026,675.04 (24,611,490.39) 789,415,184.65 $885,969,724.77 June 30, 2003 $501,290,563.05 756,425,197.83 (255,134,634.78) 228,933,196.57 (26,201,438.21) (42,909,050.37) (69,110,488.58) 855,896,633.72 27,240,529.90 883,137,163.62 $814,026,675.04 Georgia Institute of Technology Annual Financial Report FY 2004 3 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year. Total revenues (operating, non-operating, and other) for the year ended June 30, 2004 were $889.1 million, up $199.7 million from the prior year total of $689.4 million. The increase in revenue can be attributed primarily to growth in Research Grants and Contracts and Capital Grants and Gifts. Revenue generated by Research Grants and Contracts increased by $47.5 million, including $37.2 million in Federal grants. Capital Grants and Gifts increased by $94.7 million, including gifts of the Ford Environmental Science and Technology Building valued at $57 million, the Biomedical Engineering Building valued at $23 million, and the Research Administration Building valued at $5 million. Sales, Services and Other Revenue also shows a significant increase over the previous year; however, this is due mainly to the $38.5 million transfer of the State Data Research Center to the Georgia Department of Education in fiscal year 2003. This transfer was an extraordinary item reported in last year's financial statements, and it significantly reduced prior year revenue. The graph below displays a comparative view of the sources of revenue for the Institute for the current and prior year: $600 $500 $400 $300 $200 $100 $0 $97.0 $82.3 Tuition and Fees Georgia Institute of Technology Revenue (dollars in millions) FY 2004 $889.1 $FY 2003 $689.4 $488.8 $346.0 Gifts, Grants, and Contracts $94.3 $41.9 $209.0 $219.2 Sales, Services, and Other State Appropriations Georgia Institute of Technology Annual Financial Report FY 2004 4 Total operating expenses for the year were $780.8 million, an increase of $24.4 million but still well under the revenue reported. The graph below illustrates that the majority of increased expenses occurred in Salaries and Benefits. Georgia Institute of Technology Operating Expenses by Object of Expenditure Classification (dollars in millions) $600 $500 $400 $300 $200 $100 $0 $502.0 $469.6 Salaries and Benefits FY 2004 $780.8 FY 2003 $756.4 $198.9 $212.6 $49.8 $44.0 Travel, Supplies, and Other Depreciation $16.9 $20.9 Utilities $13.2 $9.3 Scholarships and Fellowships The functional classification graph below shows continued emphasis on Instruction, Research, and Public Service compared to minimal growth in support functions. Note that non-operating expenses (primarily Interest Expense) of $11.8 million for FY 2004 and $2 million for FY 2003 are not reflected in the amounts shown. Georgia Institute of Technology Expenses by Functional Classification (dollars in millions) $600 $500 $542.0 $526.7 FY 2004 $780.8 FY 2003 $756.4 $400 $300 $200 $100 $0 Instruction, Research, and Public Service $84.8 $78.5 $49.7 $53.3 Student and Institutional Support Operations and Maintenance of Plant $46.0 $48.9 $13.2 $9.3 $45.1 $39.7 Auxiliary Scholarships Non-Auxiliary Enterprises and Fellowships Depreciation Georgia Institute of Technology Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Georgia Institute of Technology is the Statement of Cash Flows. This statement presents detailed information about the cash activity of the Institute during the year. The statement is divided into four parts. The first section deals with operating cash flows and shows the net cash used by the operating activities. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for non-operating, noninvesting, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed Cash Provided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Activities Investing Activities Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2004 ($167,109,092.92) 212,954,007.23 (65,124,366.91) 11,497,892.46 (7,781,560.14) 52,188,006.76 $44,406,446.62 June 30, 2003 ($218,932,673.63) 197,798,469.76 (48,706,088.24) 7,139,972.42 (62,700,319.69) 114,888,326.45 $52,188,006.76 Capital Assets The Institute is continuing an aggressive capital construction program. Major additions in the current year include the Ford Environmental Science and Technology Building, the Campus Recreation Center, and a collection of new buildings known as Technology Square. Included in the Technology Square complex are the Global Learning Center, the College of Management, the Georgia Tech Bookstore, the Economic Development Building, and a parking deck. The value of the Capital Asset additions in FY 2004 was over $ 305 million. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with Governmental Accounting Standards Board (GASB) Statement No. 39, Determining Whether Certain Organizations are Component Units an amendment of Statement 14, Georgia Tech is including selected financial statements and notes for all material component units for fiscal year 2004 in its audited financial statements. For the year ended June 30, 2004, Georgia Tech has identified the following component units for presentation: Georgia Tech Foundation, Inc.; Georgia Tech Athletic Association and its subsidiary Alexander-Tharpe Fund; Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research Corporation; Georgia Tech Facilities, Inc.; and Georgia Tech Alumni Association. Georgia Institute of Technology Annual Financial Report FY 2004 6 Financial information for the Georgia Tech Athletic Association, because it uses GASB standards, is reflected in a separate column next to the Institute on the Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets. Financial information for all other component units, which use Financial Accounting Standards Board (FASB) rules/standards, is reflected discretely on separate pages adjacent to the information provided for the Institute and Athletic Association. Additional details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The Institute's overall financial position is strong. However, reductions in state funding continue to have a negative impact. State appropriations in fiscal year 2004 were $208.9 million, down from $219.2 million in fiscal year 2003. Further reductions of approximately $2.2 million may go into effect in January 2005 if recently announced budget cuts for the University System are approved by the Legislature. To compensate, the Institute continues to look for ways to reduce costs and generate local revenue to maintain positive momentum and leadership. The Institute's research program continues to be a strong source of growth. Sponsored research revenue increased 14% in the current year to a total of $306 million. The success of the Institute's research program is mirrored by the success of its nationally ranked academic programs, which continue to attract outstanding students. Management at the Institute will remain watchful in the coming year and be prepared to react to changes in the state and national economy. ___________________ G. Wayne Clough President ____________________ Robert K. Thompson Senior Vice President Administration and Finance Georgia Institute of Technology Annual Financial Report FY 2004 7 Statement of Net Assets GEORGIA INSTITUTE OF TECHNOLOGY AND GEORGIA TECH ATHLETIC ASSOCIATION STATEMENT OF NET ASSETS (GASB) June 30, 2004 ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Inventories Other Assets Total Current Assets GEORGIA INSTITUTE OF TECHNOLOGY GEORGIA TECH ATHLETIC ASSOCIATION $44,388,141.94 35,000.00 0.00 26,479,003.30 0.00 41,207,987.27 490,847.82 4,064,377.00 116,665,357.33 $16,410,420.00 0.00 0.00 0.00 0.00 1,174,280.00 0.00 5,819,299.00 23,403,999.00 Noncurrent Assets Noncurrent Cash Investments Notes Receivable, net Capital Assets, net Other Noncurrent Assets Total Noncurrent Assets TOTAL ASSETS 18,304.68 54,048,810.84 7,265,791.65 1,058,316,600.17 0.00 1,119,649,507.34 1,236,314,864.67 .00 52,270,100.00 0.00 109,018,560.00 15,072,898.00 176,361,558.00 199,765,557.00 LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations Current Portion of Long-term Debt Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences Long-term Liabilities (net of premiums and discounts) Total Noncurrent Liabilities TOTAL LIABILITIES 6,356,155.57 17,427,501.71 25,795,926.19 1,203,358.85 5,179,269.04 4,536,602.20 15,697,936.53 76,196,750.09 3,829,152.00 5,309,930.00 745,783.00 0.00 0.00 1,713,481.00 468,764.00 12,067,110.00 10,479,615.70 263,668,774.11 274,148,389.81 350,345,139.90 0.00 110,823,022.00 110,823,022.00 122,890,132.00 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrestricted TOTAL NET ASSETS 788,370,449.64 1,443,218.00 43,493,399.60 20,338,273.26 33,767,602.27 $885,969,724.77 11,958,903.00 41,236,048.00 22,237,256.00 $76,875,425.00 Georgia Institute of Technology Annual Financial Report FY 2004 8 Georgia Institute of Technology Component Units' Balance Sheets Georgia Institute of Technology Component Units Balance Sheet (FASB) June 30, 2004 Georgia Tech Foundation Georgia Tech Research Corporation Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Assets Cash and Cash Equivalents Accounts, Notes, and Mortgages Receivable Endowment And Other Investments Pledges Receivable, net Investments in Real Estate Capital Assets, net Other Assets Total Assets $3,043,000.00 6,403,000.00 876,150,000.00 11,785,000.00 5,118,000.00 44,681,000.00 214,203,000.00 1,161,383,000.00 $31,590,389.00 24,431,450.00 1,456,300.00 3,048,471.00 27,914,611.00 88,441,221.00 $8,992.00 74,770.00 1,581,145.00 $337,000.00 1,118,000.00 112,490,000.00 10,370,000.00 571,264.00 61,551.00 2,297,722.00 1,438,000.00 71,778,000.00 197,531,000.00 Liabilities Accounts Payable and Accrued Liabilities Deferred Revenue . Long-Term Debt (net of premiums and discounts) Other Liabilities Total Liabilities 5,831,000.00 224,312,000.00 118,422,000.00 348,565,000.00 30,235,433.00 26,276,925.00 56,512,358.00 1,333,349.00 468,433.00 6,729,000.00 1,801,782.00 175,840,000.00 4,110,000.00 186,679,000.00 Net Assets Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets 287,177,000.00 247,592,000.00 278,049,000.00 $812,818,000.00 31,928,863.00 $31,928,863.00 495,940.00 (383,000.00) 11,235,000.00 $495,940.00 $10,852,000.00 Georgia Institute of Technology Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA INSTITUTE OF TECHNOLOGY AND GEORGIA TECH ATHLETIC ASSOCIATION STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS (GASB) for the Year Ended June 30, 2004 REVENUES GEORGIA INSTITUTE OF TECHNOLOGY GEORGIA TECH ATHLETIC ASSOCIATION Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations Grants and Contracts Federal State Other Sales and Services of Educational Departments Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (loss) $114,880,469.14 17,772,037.00 59,944.18 0.00 266,014,691.50 12,079,956.87 103,687,775.35 14,566,614.90 29,349,295.58 988,181.08 13,197,812.49 9,381,792.17 4,907,475.95 1,949,466.14 1,681,990.21 13,218,000.06 568,071,540.26 $0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 34,941,382.00 34,941,382.00 200,404,355.42 217,567,088.37 81,600,898.10 2,424,231.95 13,012,611.76 13,177,665.00 16,937,901.40 185,880,959.85 49,770,720.41 780,776,432.26 (212,704,892.00) 11,074,698.00 2,110,679.00 145,019.00 2,050,774.00 5,699,284.00 854,265.00 10,584,822.00 3,710,886.00 36,230,427.00 (1,289,045.00) Georgia Institute of Technology Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, continued NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Total Other Revenues NET ASSETS Increase in Net Assets Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Georgia Institute of Technology $208,960,360.00 Georgia Tech Athletic Association $0.00 0.00 0.00 0.00 2,609,886.52 4,426,586.54 (11,761,466.72) 619,569.99 204,854,936.33 (7,849,955.67) 0.00 0.00 0.00 447,473.00 8,554,175.00 (5,209,019.00) 0.00 3,792,629.00 2,503,584.00 $0.00 69,595,258.72 34,809,237.07 104,404,495.79 96,554,540.12 $0.00 0.00 0.00 0.00 2,503,584.00 814,026,675.04 (24,611,490.39) 789,415,184.65 $885,969,724.77 74,371,841.00 0.00 74,371,841.00 $76,875,425.00 Georgia Institute of Technology Annual Financial Report FY 2004 11 Georgia Tech Foundation Statement of Activities Georgia Tech Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $5,433,000.00 $23,937,000.00 $12,579,000.00 $41,949,000.00 4,755,000.00 3,750,000.00 67,000.00 8,572,000.00 66,722,000.00 48,229,000.00 50,000.00 115,001,000.00 14,430,000.00 12,382,000.00 101,000.00 1,618,000.00 14,531,000.00 138,000.00 14,138,000.00 56,936,000.00 (56,936,000.00) 0.00 160,658,000.00 20,699,000.00 12,834,000.00 194,191,000.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Program Services Other Expenses Total Expenses Change in Net Assets 10,410,000.00 3,908,000.00 66,227,000.00 21,379,000.00 101,924,000.00 58,734,000.00 0.00 20,699,000.00 10,410,000.00 3,908,000.00 66,227,000.00 21,379,000.00 0.00 101,924,000.00 12,834,000.00 92,267,000.00 Net Assets Beginning Net Assets Ending Net Assets 228,443,000.00 226,893,000.00 265,215,000.00 720,551,000.00 $287,177,000.00 $247,592,000.00 $278,049,000.00 $812,818,000.00 Georgia Institute of Technology Annual Financial Report FY 2004 12 Georgia Tech Research Corporation Statement of Activities Georgia Tech Research Corporation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain (Loss) on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $361,712.00 (307,088.00) $0.00 3,270,991.00 303,344,019.00 303,344,019.00 (303,344,019.00) 306,669,634.00 0.00 $0.00 $361,712.00 (307,088.00) 306,615,010.00 0.00 0.00 306,669,634.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Program Services Other Expenses Total Expenses Change in Net Assets 304,901,796.00 304,901,796.00 1,767,838.00 304,901,796.00 0.00 0.00 0.00 304,901,796.00 0.00 1,767,838.00 Net Assets Beginning Net Assets Ending Net Assets 30,161,025.00 $31,928,863.00 $0.00 30,161,025.00 $0.00 $31,928,863.00 Georgia Institute of Technology Annual Financial Report FY 2004 13 Georgia Tech Facilities, Inc. Statement of Activities Georgia Tech Facilities, Inc. Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Unrestricted Temporarily Permanently Restricted Restricted Total Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $26,000.00 $464,000.00 $0.00 $490,000.00 161,000.00 2,296,000.00 30,863,000.00 (30,863,000.00) 31,050,000.00 (28,103,000.00) 2,457,000.00 0.00 0.00 2,947,000.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Other Expenses Total Expenses Change in Net Assets 33,293,000.00 33,293,000.00 0.00 (2,243,000.00) (28,103,000.00) 0.00 33,293,000.00 33,293,000.00 0.00 (30,346,000.00) Net Assets Beginning Net Assets Ending Net Assets 1,860,000.00 39,338,000.00 ($383,000.00) $11,235,000.00 41,198,000.00 $0.00 $10,852,000.00 Georgia Institute of Technology Annual Financial Report FY 2004 14 Georgia Tech Alumni Association Statement of Activities Georgia Tech Alumni Association Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues Gifts Investment Income $403,573.00 $0.00 $0.00 $403,573.00 Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues 5,533,856.00 5,937,429.00 0.00 5,533,856.00 0.00 5,937,429.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Program Services Other Expenses Total Expenses Change in Net Assets 5,232,447.00 437,384.00 5,669,831.00 267,598.00 0.00 0.00 0.00 0.00 5,232,447.00 437,384.00 5,669,831.00 267,598.00 Net Assets Beginning Net Assets Ending Net Assets 228,342.00 $495,940.00 $0.00 $0.00 228,342.00 $495,940.00 Georgia Institute of Technology Annual Financial Report FY 2004 15 Statement of Cash Flows GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2004 $103,388,378.51 363,505,544.22 15,435,357.62 (298,561,373.69) (416,782,452.29) (13,177,665.00) (5,086,044.10) 5,022,059.43 27,658,519.01 1,070,613.74 13,394,089.14 9,417,016.68 4,909,730.20 1,949,466.14 1,786,989.70 18,960,677.77 (167,109,092.92) 208,960,360.00 1,377,146.47 2,616,500.76 212,954,007.23 3,625,611.08 91,523.16 (52,949,681.10) (4,130,353.33) (11,761,466.72) (65,124,366.91) 10,801,585.59 696,306.87 0.00 11,497,892.46 (7,781,560.14) 52,188,006.76 $44,406,446.62 Georgia Institute of Technology Annual Financial Report FY 2004 16 Statement of Cash Flows, Continued RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities ($212,704,892.00) 49,770,720.41 (8,953,882.56) 23,887.44 (226,457.89) 2,190,207.32 1,161,679.35 933,751.78 695,893.23 ($167,109,092.92) Georgia Institute of Technology had no Non-Cash investing, Non-Capital Financing, or Capital and Related Financing Transactions Georgia Institute of Technology Annual Financial Report FY 2004 17 GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations The Georgia Institute of Technology serves the state, national, and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation, and the world. Reporting Entity The Georgia Institute of Technology is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of the Georgia Institute of Technology as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus the Georgia Institute of Technology) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004 (FY2004). This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the Institute's report. For FY2004, Georgia Institute of Technology is reporting activity for the following: Georgia Tech Foundation, Inc. Georgia Tech Athletic Association and its subsidiary Alexander-Tharpe Fund Georgia Tech Facilities, Inc. Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research Corporation Georgia Tech Alumni Association See Note 15. Component Units, for more details. Georgia Institute of Technology Annual Financial Report FY 2004 18 Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the Institute was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Basis of Accounting For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute'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-Institute transactions have been eliminated. The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. Georgia Tech has elected to not apply FASB pronouncements issued after the applicable date. Restatement of Long Term Liabilities and Net Assets While improving internal controls for capital asset accounting and while preparing to implement GASB Statement Number 39 (Determining Whether Certain Organizations are Component Units), capital asset holdings of the Institute and its component units were reviewed to insure that they were correctly valued and not mutually claimed. During this review, three adjustments to Institute asset totals were identified that must be corrected by a restatement of beginning net assets, long term liabilities, and accumulated depreciation. (Note that adjustments to component unit asset totals were also identified and will be reported within the audited financial statements for these organizations for the year ended June 30, 2004.) For the Institute, the result is to decrease net capital assets by $4,236,490.49, and increase current and long-term liabilities by $20,375,000.00. Net assets decreased by $24,611,490.49 in total. Details are as follows: Reduction to Capital Assets In preparing to implement GASB Statement Number 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities) the Institute hired an appraisal firm to develop cost and accumulated depreciation totals for buildings and infrastructure. The information provided by the firm included certain structures that, while situated on Institute land, belong to the Georgia Tech Athletic Association, a component unit. As a result of this correction, the Institute's capital assets were decreased by $16,899,909.34, and accumulated depreciation was reduced by $3,871,011.37. Net assets were reduced by $13,028.897.97. Georgia Institute of Technology Annual Financial Report FY 2004 19 Correction of Building Additions and Liabilities - In preparing to implement GASB Statement Number 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities) the Institute hired an appraisal firm to develop cost and accumulated depreciation totals for buildings and infrastructure. The information provided by the firm included the Bioengineering and Biosciences Building, which was added to Institute records as a gift, but it should have been recorded as an acquisition via a capital lease. A restatement has been made to the June 30, 2004 financial report to properly report the liability. As a result of this action, net assets have been reduced by $20,375,000.00 and current and long-term liabilities have been increased by the same amount. Correction of Equipment and Capital Lease Additions - In preparing to implement GASB Statement Number 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities) the Institute implemented new accounting controls and procedures to report equipment procurements both as an expense (for budgetary reporting) and an asset (for GAAP financial reporting). The new controls and procedures, while adequate in design, were not completely implemented until the current fiscal year. After full implementation, including completion of monthly reconciliations, it was determined that a restatement of net assets and capital assets was needed. As a result of this action, net assets and capital assets have been increased by $8,792,407.48. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments between 90 days and 13 months. These would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The Institute accounts for its investments at fair market value in accordance with GASB Statement No. 31 (Accounting and Financial Reporting for Certain Investments and for External Investment Pools). Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statements of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Investments in the various investment pools maintained by the Institute consist in part, of U.S. Agency Securities and other mortgage-backed securities such as collateralized mortgage obligations and adjustable rate mortgages. These mortgage-backed securities are reported as U.S. Government Securities and Corporate Obligations in the note of custodial credit risk (See Note 2 on Categorization of Investments). Investments in the investment pools are transacted by an external firm under direction of an advisory agreement executed between the Institute and the management firm. As of June 30, 2004, the Institute had $267,055.83 invested in U.S. Agency Securities and other mortgage-backed securities. Georgia Institute of Technology Annual Financial Report FY 2004 20 Accounts Receivable Accounts receivable consist of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty, and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made on sponsored research grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. 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 life of the asset, generally 40 to 50 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the University System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, the payment of which the full faith, credit and taxing power of the State are pledged. Effective July 1, 2001, the GSFIC retains construction in progress on its books throughout the construction period then transfers the entire project to the Georgia Institute of Technology when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $61,300,448.09 and non-capital additions valued at $8,294,810.63 to the Georgia Institute of Technology. Deposits Deposits consist of funds placed with the Institute to reserve housing assignments in an Institute residence hall, Institute controlled funds held for the payment of employee benefits, and other various activities at the Institute. Georgia Institute of Technology Annual Financial Report FY 2004 21 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent fiscal year. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued Compensated Absences 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. The Georgia Institute of Technology had accrued liability for compensated absences in the amount of $25,481,659.00 as of July 1, 2003. In FY 2004, $16,393,829.76 was earned in compensated absences and employees were paid $15,697,936.53, resulting in a net increase of $695,893.23. The ending balance as of June 30, 2004 in accrued liability for compensated absences was $26,177,552.23. Non-current Liabilities Non-current liabilities include: Liabilities that will not be paid within the next fiscal year; Capital lease obligations with contractual maturities greater than one year, and; Other liabilities that, although payable within one year, are to be paid from funds that are classified as non-current assets. Net Assets The Institute's net assets are classified as follows: Invested in capital assets, net of related debt: Invested in capital assets, net of related debt represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. For the Institute, debt obligations include long-term lease obligations, the current portion of long-term lease obligations, and accrued contracts (retainage) payable. Debt obligations as used in this definition do not include debt related to activities of GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets represent resources for which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2004 Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Quasi-Endowments Total Restricted Expendable $2,680,242.38 6,478,233.06 3,307,969.69 7,871,828.13 $20,338,273.26 Georgia Institute of Technology Annual Financial Report FY 2004 22 Restricted net assets expendable Capital Projects: Restricted expendable net assets for capital projects represent resources for which the Institute is legally or contractually obligated to spend for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, sales and services of educational departments and auxiliary enterprises. These resources are used to fund the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management: R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets June 30, 2004 $13,346,746.30 19,094,986.08 490,847.82 835,022.07 $33,767,602.27 When an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense toward unrestricted resources, and then toward restricted resources. Income Taxes The Georgia Institute of Technology, 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 Revenue The Institute has classified its revenue as either operating or non-operating in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenue: Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenue: Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9 (Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting), and GASB No. 34, such as state appropriations and investment income. Georgia Institute of Technology Annual Financial Report FY 2004 23 Sponsored and Unsponsored Scholarships Student tuition and fee revenue, and certain other revenue from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships make up the difference between the stated charge for goods and services provided by the Institute, 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 Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for sponsored and unsponsored scholarships. Georgia Institute of Technology Annual Financial Report FY 2004 24 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Georgia Institute of Technology) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia Institute of Technology), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Georgia Institute of Technology Annual Financial Report FY 2004 25 Categorization of Deposits The Institute's cash deposits are categorized by risk as follows: Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair market value) held by the Institute or by its agent in the Institute's name. Category 2 - Amounts collateralized with securities (at fair market value) held by the pledging financial institution's trust department or agent in the Institute's name. Category 3 - Amounts collateralized with securities (at fair market value) held by the pledging financial institution, or by its trust department or agent but not in the Institute's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004: Cash Demand Deposits Investment Portfolio Accounts Total Cash Deposits Carrying Amount Bank Balances $9,539,749.48 18,304.68 $15,817,781.57 18,304.68 $9,558,054.16 $15,836,086.25 Risk Categories 1 2 3 $335,566.44 $0.00 18,304.68 $15,482,215.13 $353,871.12 $0.00 $15,482,215.13 Georgia Institute of Technology Annual Financial Report FY 2004 26 Categorization of Investments The Institute's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, with securities held by the Institute or its agent in the Institute's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the Institute's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the Institute's name. At June 30, 2004, the Institute's investments consisted of the following: Type of Investments Common Stock Corporate Bonds U.S. Government Securities and Corporate Obligations Risk Categories 1 2 3 $76,532.91 1,311.81 $1,071,057.16 2,951,146.08 9,779,051.00 $0.00 Carrying Amount $1,147,590.07 2,951,146.08 9,780,362.81 Totals Investments Not Subject to Categorizations: Board of Regents Short-Term Fund (Cash on SNA) Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Cash Investment Pools (Cash on SNA) Short-Term Investments Total Investments $77,844.72 $13,801,254.24 $0.00 $13,879,098.96 24,920,703.91 0.00 0.00 40,168,253.77 1,458.11 9,927,688.55 35,000.00 $88,932,203.30 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the Institute did not own any specific, identifiable investment securities of the pool. Georgia Institute of Technology Annual Financial Report FY 2004 27 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance State General Appropriations Allotment Other Less Allowance for Doubtful Accounts Net Accounts Receivable $386,665.32 845,163.54 26,479,003.30 41,645,349.09 $69,356,181.25 1,669,190.68 $67,686,990.57 Note 4. Inventories Inventories consisted of the following at June 30, 2004. June 30, 2004 Physical Plant Other Total $235,115.29 255,732.53 $490,847.82 Note 5. Notes/Loans Receivable Notes/Loans receivable, primarily consisting of student loans made through the Federal Perkins Loan Program (the Program), comprise substantially all of the loans receivable at June 30, 2004. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was $61,426.98. Georgia Institute of Technology Annual Financial Report FY 2004 28 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Restated Beginning Balances 7/1/2003 $29,996,371.64 26,278,763.59 $56,275,135.23 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated $37,211,206.29 626,907,045.24 13,893,087.72 281,373,262.01 67,186,386.11 69,969,004.39 3,398,775.00 $1,099,938,766.76 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation $6,884,852.31 148,367,187.46 5,949,142.26 166,267,915.88 3,608,685.29 48,697,099.77 $379,774,882.97 Total Capital Assets, Being Depreciated, Net $720,163,883.79 Capital Assets, net (Restated see Note 1) $776,439,019.02 Additions Reductions $12,941,263.33 59,418,629.74 $72,359,893.07 $0.00 21,344,305.84 $21,344,305.84 Ending Balance 6/30/2004 $42,937,634.97 64,353,087.49 $107,290,722.46 $5,197,780.68 240,761,137.04 308,200.40 31,110,782.74 138,668.77 5,224,034.00 $282,740,603.63 $2,322,573.74 17,366,189.00 443,800.58 16,110.00 $20,148,673.32 $42,408,986.97 865,345,608.54 14,201,288.12 295,117,855.75 66,881,254.30 75,176,928.39 3,398,775.00 $1,362,530,697.07 $839,979.60 16,296,593.34 286,037.10 25,643,120.22 2,988,282.51 4,024,721.00 $1,936,366.37 16,223,355.86 172,965.15 16,110.00 $50,078,733.77 $18,348,797.38 $7,724,831.91 162,727,414.43 6,235,179.36 175,687,680.24 6,424,002.65 52,705,710.77 0.00 $411,504,819.36 $232,661,869.86 $1,799,875.94 $951,025,877.71 $305,021,762.93 $23,144,181.78 $1,058,316,600.17 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other Deferred Revenue Totals June 30, 2004 $9,821,822.99 13,522,289.14 2,451,814.06 $25,795,926.19 Georgia Institute of Technology Annual Financial Report FY 2004 29 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 is as follows: Restated Beginning Ending Balance Balance July 1, 2003 Additions Reductions June 30, 2004 Current Portion Lease Obligations Compensated Absences $85,057,529.60 25,481,659.00 $187,278,200.00 16,393,829.76 $4,130,353.29 $268,205,376.31 15,697,936.53 26,177,552.23 $4,536,602.20 15,697,936.53 Total $110,539,188.60 $203,672,029.76 $19,828,289.82 $294,382,928.54 $20,234,538.73 Note 9. Lease Obligations Georgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Real Property Capital Leases Operating Leases $18,508,986.60 18,511,401.15 18,573,767.78 18,713,540.81 18,843,147.46 95,818,471.14 100,696,649.79 102,366,805.54 75,397,412.19 31,125,220.97 $5,541,209.65 Total minimum lease payments 498,555,403.43 $5,541,209.65 Less: Interest Less: Executory costs (if paid) 230,350,027.12 0.00 Principal Outstanding $268,205,376.31 Georgia Institute of Technology Annual Financial Report FY 2004 30 CAPITAL LEASES Capital leases are generally payable in installments (ranging from monthly to annually) and have terms expiring in various years between 2004 and 2032. Expenses for fiscal year 2004 were $15,891,820.05 of which $11,761,466.72 represented interest. Total principal paid on capital leases was $4,130,353.33 for the fiscal year ended June 30, 2004. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Land Buildings Equipment Totals $ 11,315,863.31 256,529,404.25 360,108.75 $268,205,376.31 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices are exercisable at the expiration of the lease terms. Georgia Institute of Technology had three capital leases with related parties in fiscal year 2004. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000.00 for the Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc, both discretely presented component units. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2004 the remaining long-term debt obligation (principal) under the lease was $19,945,000.00, and the amount due (principal and interest) in the next fiscal year is $1,426,153.76. In August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200.00 with the Georgia Tech Foundation, Inc. for a complex of buildings collectively named "Technology Square". Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 29year period that began August 2003 and expires July 2032. At June 30, 2004 the remaining longterm debt obligation (principal) under the lease was $139,900,440.00, and the amount due (principal and interest) in the next fiscal year is $9,838,142.60. In February 2001 Georgia Institute of Technology entered into a capital lease of $44,980,000.00 with the Georgia Tech Foundation, Inc. for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 30-year period that began May 2001 and expires November 2031. At June 30, 2004 the remaining long-term debt obligation (principal) under the lease was $44,220,000.00, and the amount due (principal and interest) in the next fiscal year is $3,065,317.52. Georgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $64,029,360.00 with The University Financing Foundation for the Technology Square Research Building. The lease term is for a 23-year period that began June 2003 and expires June 2026. At June 30, 2004 the remaining long-term debt obligation (principal) under the lease was $63,779,827.56 and the amount due (principal and interest) in the next fiscal year is $3,888,108.54. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease. Georgia Institute of Technology Annual Financial Report FY 2004 31 Georgia Institute of Technology also has various capital leases for equipment with an outstanding balance at June 30, 2004 totaling $360,108.75. OPERATING LEASES Georgia Institute of Technology's non-cancelable operating leases with remaining terms of more than one year expire in various fiscal years from 2005 through 2006. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases include real estate rentals, copiers and other small business equipment. Description of Related Party Leases In 1994, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $14,815.50. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $177,786.00 in fiscal year 2005. In 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $105,055.82. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,260,669.84 in fiscal year 2005. In 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $125,870.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,510,440.00 in fiscal year 2005. In 2000, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $15,462.71. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $185,552.52 in fiscal year 2005. In 2002, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $3,732.47. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $44,789.64 in fiscal year 2005. In 2003, Georgia Institute of Technology entered into a real property operating lease with Georgia Applied Technology Ventures, Inc. a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $65,920.00. The Georgia Institute of Technology Annual Financial Report FY 2004 32 agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Applied Technology Ventures, Inc. $791,040.00 in fiscal year 2005. In 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 1, Inc., and a subsidiary of Georgia Applied Technology Ventures, Inc. a related party, for office and lab space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees ranging from $58,027.08 to $83,886.44 per month (Some space is leased on a month to month basis.) The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc. a minimum of $696,324.96 in fiscal year 2005. In 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 2, Inc., a subsidiary of Georgia Applied Technology Ventures, Inc. a related party, for space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $21,664.46. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP2, Inc. $259,973.52 in fiscal year 2005. Non-cancellable operating lease expenditures in 2004 were $9,567,313.37 for real property. Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $16,699,191.29 $15,907,134.52 $14,821,929.46 Georgia Institute of Technology Annual Financial Report FY 2004 33 Employees' Retirement System of Georgia Plan Description Georgia Institute of Technology 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2004, for employees covered by ERS was $294,073.04. The Institute's total payroll for all employees was $417,971,443.79. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the Institute pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid to the employee. The Institute is also required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the Institute was 5.66% of gross salaries for Georgia Institute of Technology Annual Financial Report FY 2004 34 "old plan" members and 10.41% of gross salaries for "new plan" members. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. Total contributions to the plan made during fiscal year 2004 amounted to $34,319.12, of which $6,358.20 was made by the Institute and $27,960.92 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia Institute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The Institute and its covered employees made required contributions (including some minor adjustments) of $15,211,836.05 (10.03%) and $7,579,376.31 (5%), respectively in fiscal year 2004. Georgia Defined Contribution Plan Plan Description Georgia Institute of Technology 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 Georgia Institute of Technology Annual Financial Report FY 2004 35 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $786,931.88 which represents (with minor adjustments) 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Institute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are Georgia Institute of Technology Annual Financial Report FY 2004 36 not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a SelfInsurance Fund. Note 12. Contingencies and Commitments 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 expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University 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 (CAFR) for the fiscal year ended June 30, 2004. At the request of Institute management, in April 2004, Georgia Tech Facilities Inc. (Facilities), a component unit of Georgia Tech (see Note 15), adopted a Declaration of Official Intent to seek the issuance of tax-exempt obligations by the Development Authority of Fulton County for the purpose of financing the Main Campus Electrical Substation Project for the benefit of Georgia Tech. This resolution was intended to constitute a "declaration of official intent" within the meaning of Treasury Regulation Section 1.150-2. Facilities and Georgia Tech also entered into a Memorandum of Understanding (MOU). Under the MOU, Facilities agreed to manage the design and construction of the project as well as proceed with the financing subject to the Institute securing Board of Regents approval. If approved by the Board of Regents, the estimated minimum liability for the project would be $34 million. On May 17, 2004, the Board of Regents (BOR) and the Institute entered into a series of agreements with Facilities, the first of which was a 30-year ground lease from the BOR to Facilities for a parcel of land on which a new Molecular Science and Engineering (MSE) Building will be located. At the end of the 30-year period, any improvements located on the ground lease will revert to the BOR/Institute. The second agreement was a lease agreement between BOR/Institute and Facilities for the new MSE Building. The lease is for 30 years with annual options to renew. The lease amount will approximate $5 million annually. Given that the intent of the Institute is to lease the MSE building for the entire 30-year period, it will be treated as a capital lease once the building is completed and occupied, which is expected to occur in calendar year 2007. On June 24, 2003 the Board of Regents (BOR) and the Institute entered into a series of agreements with Facilities, the first of which was a 25 year ground lease from the BOR to Facilities for a parcel of land on which a new family apartment complex and parking deck will be located. At the end of the 25-year period, any improvements located on the ground lease will revert to the BOR/Institute. The second agreement, signed July 17, 2003, was a lease agreement between BOR/Institute and Facilities for the new complex and parking deck. The lease, upon occupancy, is for 25 years with annual options to renew. The annual lease amount will closely approximate the average annual debt service (principal and interest) on the structures but will not exceed $4.5 million. Given that the intent of the Institute is to lease the complex and deck for the entire 25-year period, it will be treated Georgia Institute of Technology Annual Financial Report FY 2004 37 as a capital lease once the buildings are completed and occupied, which is expected to occur in calendar year 2005. On July 17, 2003 the Board of Regents (BOR) and the Institute entered into a series of agreements with Facilities, the first of which was a 20-year facility lease from the BOR to Facilities for the use of the new Klaus parking facility. At the end of the 20-year period, any improvements located on the lease will revert to the BOR/Institute. The second agreement was a rental agreement between BOR/Institute and Facilities for the new parking facility. The rental agreement is for 20 years upon occupancy, with annual options to renew. The lease amount will closely approximate the average annual debt service (principal and interest) on the structure but will not exceed $850,000.00. Given that the intent of the Institute is to lease the complex and deck for the entire 20-year period, it will be treated as a capital lease once the building is completed and occupied, which is expected to occur in calendar year 2006. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-331, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 1,078 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Georgia Institute of Technology recognized as incurred $4,841,080.28 of expenditures, which was net of $1,861,878.86 of participant contributions. Georgia Institute of Technology Annual Financial Report FY 2004 38 Note 14. Natural Classifications with Functional Classifications The Institute's operating expenses for fiscal year 2004 by functional classification are shown below: Functional Classification FY2004 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Instruction Research Public Service Academic Support Student Services Institutional Support $79,219,454.27 44,618,121.17 24,511,620.08 1,313,574.39 2,028,971.39 $109,145,131.82 82,020,133.01 33,636,789.93 388,097.81 8,748,241.04 $7,017,717.12 9,477,004.84 3,611,332.85 402,753.05 1,149,135.96 $3,935,429.89 16,182,930.01 4,448,518.61 47,205.36 447,529.95 134,321.07 22,486,465.25 190,027.22 104,329,981.43 58,991.88 7,558,870.35 6,715,748.64 $38,686.14 8,814,866.73 1,753,051.39 58,350.12 218,481.05 $797,688.43 21,473,249.32 5,752,140.37 73,141.58 254,877.43 9,100,499.40 14,248.80 4,658,201.15 Total Expenses $174,312,527.62 $338,458,402.26 $29,275,806.05 $31,777,362.46 $19,983,934.83 $33,023,547.08 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2004 Scholarships & Fellowships Auxiliary Enterprises Non-Auxiliary Depreciation MCG only Patient Care Total Expenses $250,247.75 22,573,687.61 5,192,708.55 141,909.64 65,290.99 12,404,600.66 9,055,594.01 $0.00 13,177,665.00 $0.00 12,407,095.68 2,694,736.32 (800.00) 100,083.95 4,135,711.77 21,975,599.62 4,672,275.65 $0.00 45,098,444.76 $0.00 $200,404,355.42 217,567,088.37 81,600,898.10 2,424,231.95 13,012,611.76 13,177,665.00 16,937,901.40 185,880,959.85 49,770,720.41 $49,684,039.21 $13,177,665.00 $45,984,702.99 $45,098,444.76 $0.00 $780,776,432.26 Georgia Institute of Technology Annual Financial Report FY 2004 39 Note 15. Component Units Georgia Tech Foundation, Inc., (Foundation) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the Institute in support of its programs. The Foundation board of trustees is self-perpetuating and consists of forty-five (45) elected trustees, who are alumni of the Institute and five (5) ex-officio trustees. Although the Institute does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted for support of the Institute. Because the resources held by the Foundation are used by, or for the benefit of, the Institute, the Foundation is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The Foundation is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. The Foundation's financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in the Foundation's independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $50,536,092.41 to the Institute for restricted and unrestricted purposes. Note 9 of this financial report provides information on related party leases between the Foundation and the Institute. Complete financial statements for the Foundation can be requested at the following address: Georgia Tech Foundation, Inc. Controller's Office 760 Spring Street, N.W., Suite 400 Atlanta, GA 30308 Georgia Tech Athletic Association (Association) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). The Association administers the Institute's intercollegiate athletics program, including fund-raising to support scholarships. The 14-member association board of trustees is appointed predominantly by the President of the Georgia Institute of Technology, and consists of faculty, alumni, students, and friends of the Institute. Although the Institute does not control the timing or amount of receipts and disbursements, all of the Association's resources are restricted to support the intercollegiate athletic program for Georgia Tech. Because the resources are used for the benefit of the Institute, the Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The Association is a private nonprofit organization that reports under GASB standards, the same used by the Institute. The Association's financial information has been condensed, and expenses have been converted from functional to natural classification for presentation within the Institute's financial statements. The Association's fiscal year is July 1 through June 30. Georgia Institute of Technology Annual Financial Report FY 2004 40 During the year ended June 30, 2004, the Association distributed $4,314,549.78 to the Institute for scholarship support and $4,027,688 in other payments that were either expense reimbursements or support for Institute programs. The Institute distributed to the Association, $1,936,857.69 in (net) fees collected from students for support of the intercollegiate athletic program. Complete financial statements for the Association can be requested at the following address: Georgia Tech Athletic Association 150 Bobby Dodd Way, NW Atlanta, GA 30332-0455 Attention: Mollie Simmons Mayfield Assistant Director of Athletics Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research Corporation (referred to in the singular as GTRC in this document) are legally separate, tax-exempt affiliates of the Georgia Institute of Technology (Institute). GTRC functions as the prime contractor for most sponsored research conducted at Georgia Tech and subcontracts with the Institute for faculty and staff services. GTRC's 12-member board of trustees is self-perpetuating and consists of senior Institute administrators, alumni, and supporters of Georgia Tech. GTRC's income and resources are restricted to support research mission objectives of Georgia Tech. Because resources held by GTRC are restricted for use in support of the Institute, GTRC is considered a component unit of Georgia Tech and is discretely presented in the Institute's financial statements. GTRC is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. GTRC's financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in GTRC's independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). GTRC's fiscal year is July 1 through June 30. During the year ended June 30, 2004, GTRC distributed $297,210,831 to the Institute, primarily as reimbursement for research and other sponsored activities conducted on campus. The Institute distributed $3,640,724.81 to GTRC, primarily for related-party rental payments. Note 9 of this financial report provides information on related party leases. Complete financial statements for GTRC can be requested at the following address: Georgia Tech Research Corporation Director of Accounting and Reports 505 Tenth Street Atlanta, GA 30332-0415 Georgia Tech Facilities, Inc., (Facilities) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). Facilities constructs research and auxiliary buildings and other structures for use by the Institute and then leases the completed buildings/structures to the Institute. The eight-member Facilities board is appointed by the President of the Georgia Institute of Technology and consists of alumni and friends of Georgia Tech. Although the Institute does not control the timing or amount of receipts and disbursements for Facilities, its resources and income Georgia Institute of Technology Annual Financial Report FY 2004 41 are restricted to support the construction activities of Georgia Tech. Because the restricted resources held by Facilities can only be used by, or for the benefit of, the Institute, Facilities is considered a component unit of Georgia Tech and is discretely presented in the Institute's financial statements. Facilities is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. Facilities' financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in the Facilities' independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). Facilities' fiscal year is July 1 through June 30. Investments valued at $19.945 million, and bonds payable are included in Facilities' financial statements. The corresponding buildings and associated long-term debt are included in the Institute's report and will be eliminated for CAFR reporting. Note 9 of this financial report provides information on related party leases. Complete financial statements for Facilities can be obtained from the following address: Georgia Tech Facilities, Inc. Treasurer's Office Lyman Hall, Room 315 Atlanta, GA 30332-0257 Attention: Joel Hercik Georgia Tech Alumni Association (Alumni Association) is a legally separate, tax-exempt affiliate of the Georgia Institute of Technology (Institute). The Alumni Association acts primarily as a point of contact with the Institute's alumni, prospective students, and friends for outreach and development. The 43 member Alumni Association board of trustees is self-perpetuating and consists of alumni and friends of the Institute. Although the Institute does not control the timing or amount of receipts from the Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests are restricted to support the Alumni Association's mission of serving and promoting the alumni of the Institute. Because resources held by the Alumni Association are used by, or for the benefit of, the Institute, the Alumni Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The Alumni Association is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. The Alumni Association's financial information is formatted in a FASB functional model within this report, and although the totals have been condensed, they equal amounts reported in the Alumni Association's independent audit. FASB reports will be converted to the GASB presentation for the State CAFR (comprehensive annual financial report). The Alumni Association's fiscal year is July 1 through June 30. Georgia Institute of Technology Annual Financial Report FY 2004 42 During the year ended June 30, 2004, the Alumni Association paid $561,610.26 to the Institute primarily for reimbursement of employee insurance costs. The Institute funded $144,353.00 in Alumni Association costs in support of that unit's communication and outreach mission. The Alumni Association also received $3,599,884.00 in funding support from the Georgia Tech Foundation, Inc., another component unit of the Institute. Complete financial statements for the Alumni Association can be requested at the following address: Georgia Tech Alumni Association 190 North Avenue Atlanta, GA 30313 Attention: Controller . Investments for Component Units: The Georgia Tech Foundation, Inc. (GTF) holds investments totaling $881.3 million as of June 30, 2004, of which $271.4 million is the corpus of the endowment. Included in GTF's investments is $52.3 million in assets held and invested for the benefit of the Georgia Tech Athletic Association, Inc. (GTAA). Earnings on GTF's endowment are used to support programs and services of the Georgia Institute of Technology. Earnings on funds held for the benefit of GTAA are used to support the athletic and scholarship programs of that organization. Endowment corpus is nonexpendable, but the earnings on the investments may be spent in accordance with donor restrictions or in accordance with GTF's spending policy. GTF has established a spending policy in which up to 6% of the twelve quarter average market value of the endowment funds is allocated from the earnings for expenditure. In fiscal year 2004, the Foundation allocated 5.7% of that average. Georgia Tech Facilities, Inc. lists investments totaling $112.5 million on its balance sheet; however, this is composed primarily of investments in capital leases, with the Georgia Institute of Technology being the lessee on these agreements. Long Term Liabilities for Component Units: Georgia Tech Foundation, Inc. has three bond issues outstanding with balances totaling $226,060,000 (not including an unamortized bond discount of $1,748,000). These serial and term bonds include both tax exempt and taxable instruments. The proceeds from the bond issues were used to construct (for the Georgia Institute of Technology) a new Campus Recreation Center and Technology Square, a complex of buildings which includes a bookstore, retail space, a hotel, professional education center, economic development building, parking deck, and an academic building which houses the College of Management. Interest rates on the bonds range from 2.99% to 6.6%. Details of outstanding balances and current year activity for the three bond issues are shown in the statements which follow. Georgia Tech Facilities, Inc. has four bond issues outstanding with balances totaling $175,840.000. The proceeds from the bond issues were used to acquire or construct (for the benefit of the Georgia Institute of Technology) the Habersham Building, which houses the Institute's Ivan Allen College, Bioengineering and Biosciences Building, Family Housing Complex, Klaus parking deck, and the Molecular Science and Engineering Building. Interest rates on the bonds range from 2% to 5.25%. Georgia Institute of Technology Annual Financial Report FY 2004 43 Details of outstanding balances and current year activity for the four bond issues are shown in the statements, which follow. The Georgia Tech Athletic Association, Inc. has one bond issue outstanding with a balance of $110,155,000 and one unsecured note payable totaling $1,036,175. The combined balance for the two is $111,191,175. The bonds payable total does not include an unamortized discount of $1,000,908 and an unamortized "swaption" premium of $2,346,236. Proceeds from the bonds and note payable were used to finance the acquisition and/or construction of athletic related facilities. Interest rates on the bonds and note range from 4% to 5.5%. Detail of outstanding balances and current year activity for the long-term debt is shown in the statements, which follow. For the Fiscal Year Ended June 30, 2004: Long Term Liabilities Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Georgia Tech Foundation, Inc. Bonds Payable Series 2001A Series 2002A (Tax Exempt) Series 2002B (Taxable) Georgia Tech Facilities, Inc. Bonds Payable Series 1997A Series 1997B Series 2003 Series 2004 Georgia Tech Athletic Association, Inc. Bonds and Note Payable Series 2001 and Note Payable Beginning Balance July 1, 2003 $44,980,000.00 111,090,000.00 73,190,000.00 10,595,000.00 20,375,000.00 111,828,820.00 Additions Reductions Ending Amounts due Balance Within June 30, 2004 One Year $760,000.00 1,835,000.00 605,000.00 $44,220,000.00 109,255,000.00 72,585,000.00 $790,000.00 1,900,000.00 1,315,000.00 70,320,000.00 75,205,000.00 225,000.00 430,000.00 10,370,000.00 19,945,000.00 70,320,000.00 75,205,000.00 235,000.00 450,000.00 2,367,000.00 1,659,317.00 112,536,503.00 1,713,481.00 Total Long Term Debt $372,058,820.00 $147,892,000.00 $5,514,317.00 $514,436,503.00 $6,403,481.00 Georgia Institute of Technology Annual Financial Report FY 2004 44 Debt Service Obligations Annual debt service requirements to maturity for Georgia Tech Foundation Series 2001A, 2002A, and 2002B bonds payable are as follows: Bonds Payable Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2032 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-28 Principal Interest Total $4,005,000.00 4,180,000.00 4,385,000.00 4,605,000.00 4,825,000.00 28,135,000.00 37,250,000.00 46,015,000.00 54,845,000.00 37,815,000.00 $12,247,589.03 12,079,973.78 11,879,629.78 11,662,200.03 11,437,490.53 53,148,807.73 44,016,058.85 32,029,819.29 18,404,121.75 3,071,206.75 $16,252,589.03 16,259,973.78 16,264,629.78 16,267,200.03 16,262,490.53 81,283,807.73 81,266,058.85 78,044,819.29 73,249,121.75 40,886,206.75 $226,060,000.00 $209,976,897.52 $436,036,897.52 Annual debt service requirements to maturity for Georgia Tech Facilities, Inc. Series 1997A, 1997B, 2003, and 2004 bonds payable are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2036 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-32 Bonds Payable Principal Interest Total $685,000.00 2,150,000.00 2,550,000.00 3,920,000.00 4,040,000.00 22,800,000.00 28,945,000.00 37,450,000.00 42,380,000.00 21,660,000.00 9,260,000.00 $8,044,143.78 8,449,238.78 8,383,616.28 8,309,060.65 8,186,708.76 38,343,705.64 32,172,876.55 23,698,513.42 13,365,375.00 5,397,250.00 700,250.00 $8,729,143.78 10,599,238.78 10,933,616.28 12,229,060.65 12,226,708.76 61,143,705.64 61,117,876.55 61,148,513.42 55,745,375.00 27,057,250.00 9,960,250.00 $175,840,000.00 $155,050,738.86 $330,890,738.86 Georgia Institute of Technology Annual Financial Report FY 2004 45 Annual debt service requirements to maturity for the Georgia Tech Athletic Association series 2001 bonds payable and unsecured note payable are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bonds and Note Payable Principal Interest Total $1,713,481.00 1,779,482.00 1,855,480.00 1,951,979.00 2,052,978.00 11,832,869.00 15,463,334.00 20,018,285.00 26,198,287.00 28,325,000.00 $5,620,572.00 5,554,895.00 5,475,095.00 5,380,006.00 5,279,962.00 24,823,881.00 21,193,902.00 16,630,655.00 10,785,493.00 3,032,334.00 $7,334,053.00 7,334,377.00 7,330,575.00 7,331,985.00 7,332,940.00 36,656,750.00 36,657,236.00 36,648,940.00 36,983,780.00 31,357,334.00 $111,191,175.00 $103,776,795.00 $214,967,970.00 Georgia Institute of Technology Annual Financial Report FY 2004 46 THE UNIVERSITY OF GEORGIA Financial Report For the Year Ended June 30, 2004 The University of Georgia Athens, Georgia Michael F. Adams President Henry M. Huckaby Senior Vice President For Finance & Administration THE UNIVERSITY OF GEORGIA ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 The University of Georgia Foundation Balance Sheet .........................................10 Statement of Revenues, Expenses and Changes in Net Assets.......................................... 11 The University of Georgia Foundation Statement of Activities ..............................13 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 22 Note 3 Accounts Receivable............................................................................................. 25 Note 4 Inventories............................................................................................................. 25 Note 5 Notes/Loans Receivable........................................................................................ 25 Note 6 Capital Assets........................................................................................................ 26 Note 7 Deferred Revenue.................................................................................................. 27 Note 8 Long-Term Liabilities ........................................................................................... 28 Note 9 Lease Obligations.................................................................................................. 29 Note 10 Retirement Plans ................................................................................................. 30 Note 11 Risk Management................................................................................................ 33 Note 12 Contingencies...................................................................................................... 34 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 34 Note 14 Natural Classifications With Functional Classifications..................................... 35 Note 15 Component Units .........................................................................36 THE UNIVERSITY OF GEORGIA Management's Discussion and Analysis Introduction The University of Georgia was incorporated by an act of the General Assembly on January 27, 1785. Georgia became the first state to charter a state-supported university. The University of Georgia, a land-grant and sea-grant university with state-wide commitments and responsibilities, is the state's flagship institution of higher education. It is also the state's oldest, most comprehensive, and most diversified institution of higher education. Its motto, "to teach, to serve, and to inquire into the nature of things," reflects the University's integral and unique role in the conservation and enhancement of the state's and nation's intellectual, cultural, and environmental heritage. As a comprehensive land-grant and sea-grant institution, the University of Georgia offers baccalaureate, master's, doctoral and professional degrees in the arts, humanities, social sciences, biological sciences, physical sciences, agricultural and environmental sciences, business, environmental design, family and consumer sciences, forest resources, journalism and mass communication, education, law, pharmacy, social work, and veterinary medicine. The student population continues to grow, increasing by almost 1,600 students over a three-year period, while the number of faculty has slightly decreased. Faculty Students FY2004 FY2003 FY2002 1,754 1,790 1,801 33,878 32,941 32,317 Overview of the Financial Statements and Financial Analysis The University of Georgia is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. University of Georgia Annual Financial Report FY 2004 1 Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of The University of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2004 $128,834,307.45 909,409,680.55 127,647,313.94 1,165,891,301.94 June 30, 2003 $156,211,420.13 773,889,413.66 88,703,354.39 1,018,804,188.18 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 100,758,850.47 73,675,768.50 174,434,618.97 119,150,600.58 36,599,784.82 155,750,385.40 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P roject s Unrest rict ed Total Ne t Ass e ts 835,031,719.29 34,618,934.64 58,322,061.00 214,010.66 63,269,957.38 $991,456,682.97 748,020,617.50 32,567,675.70 32,746,275.48 920.93 49,718,313.17 $863,053,802.78 University of Georgia Annual Financial Report FY 2004 2 The total assets of the institution increased by $147,087,113.76. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $135,520,266.89 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $18,684,233.57. The primary cause for the increase was in non-current liabilities, primarily $37,911,197.25 in capital payables, which contributed to the increase in invested in capital assets, net of debt. The combination of the increase in total assets of $147,087,113.76 and the increase in total liabilities of $18,684,233.57 yields an increase in total net assets of $128,402,880.19. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $87,011,101.79. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. University of Georgia Annual Financial Report FY 2004 3 Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operat ing Revenues $516,740,861.37 Operat ing Expenses Operat ing Loss 938,833,653.52 (422,092,792.15) Nonoperat ing Revenues and Expenses 436,242,889.30 Income (Loss) Before ot her revenues, expenses, gains or losses 14,150,097.15 Ot her revenues, expenses, gains or losses 114,252,783.04 Increase in Net Asset s 128,402,880.19 Net Asset s at beginning of year, as originally report ed P rior Year Adjust ment s Net Asset s at beginning of year, rest at ed 863,053,802.78 0.00 863,053,802.78 Net Asset s at End of Year $991,456,682.97 June 30, 2003 $470,867,187.56 932,878,916.14 (462,011,728.58) 444,541,364.60 (17,470,363.98) 51,209,122.05 33,738,758.07 770,500,234.13 58,814,810.58 829,315,044.71 $863,053,802.78 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: University of Georgia Annual Financial Report FY 2004 4 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operat ing Revenue T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s Sales and Services of Educat ional Depart ment s A ux ilia r y Ot h er T ot al Operat ing Revenue June 30, 2004 $158,061,164.07 10,242,489.28 223,268,311.92 11,924,414.11 89,502,873.67 23,741,608.32 516,740,861.37 Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues 396,939,319.13 22,345,981.87 5,546,070.51 3,441,694.21 11,669,019.05 439,942,084.77 72,682,973.34 41,569,809.70 114,252,783.04 $1,070,935,729.18 June 30, 2003 $136,583,384.62 11,179,824.24 211,326,674.58 11,529,211.23 81,325,866.62 18,922,226.27 470,867,187.56 412,856,623.55 19,552,541.87 7,111,340.11 4,108,468.80 2,338,686.31 445,967,660.64 1,180,083.95 50,029,038.10 51,209,122.05 $968,043,970.25 University of Georgia Annual Financial Report FY 2004 5 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operat ions and Maintenance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses P atient Care (MCG only) T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2004 $192,386,856.49 261,361,809.09 132,218,608.90 86,567,257.55 25,905,469.68 69,500,257.02 73,464,538.81 19,298,310.93 78,130,545.05 938,833,653.52 3,699,195.47 $942,532,848.99 June 30, 2003 $189,508,229.27 254,581,254.04 140,658,248.39 84,231,992.93 23,936,608.34 72,894,324.31 66,069,922.68 23,424,695.67 77,573,640.51 932,878,916.14 1,426,296.04 $934,305,212.18 Tuition and fees increased by $21 million from fiscal year 2003 to fiscal year 2004, a result of a 6% increase in general tuition, increased out-of-state fees, and small increases in mandatory fees applied to an increased student enrollment. Contracts and grants revenues increased from approximately $211 million in fiscal year 2003 to approximately $223 million in fiscal year 2004, continuing a trend of increased research activity at the University. Auxiliary revenues increased by $8.2 million (approximately 10%), mostly attributable to increased revenues from increased participation in Food Services meal plan options. Auxiliary Bookstore revenues decreased by $3.8 million due to the management of the University Bookstore being transferred to a private vendor during December 2003. Under non-operating revenues (expenses) state appropriations decreased by approximately ($15,917,304.42). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for The University of Georgia. The University's state appropriations decreased from $413 million to $397 million, indicative of a series of budget reductions related to lagging state revenues. Fiscal year 2004 non-operating grants and contracts reflect $2.8 million increase over fiscal year 2003 due to more nonexchange sponsored activities. State capital gifts shows a significant increase, from $1.2 million in fiscal year 2003 to $72.7 million in fiscal year 2004, which $57.2 million was from GSFIC funded Student Learning Center and MRR funds for major capital projects. Finally, the Other Capital Grants and Gifts category for fiscal year 2004 reflects $41.4 million of which $37.2 million were funds expended by the University of Georgia Athletic Association on athletic facilities owned by the University. The compensation and employee benefits category decreased by approximately ($2,627,228.71). The decrease reflects a reduction of staff and related benefit costs due to budget constraints. University of Georgia Annual Financial Report FY 2004 6 Utilities decreased by approximately ($527,972.64) during the past year. The decrease was primarily associated with increased efficiencies in utilities and the cost savings from reducing heating and air during the holidays. Statement of Cash Flows The final statement presented by The University of Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 3 4 1 ,9 1 3 ,3 1 4 .6 4 ) 4 3 2 ,7 1 8 ,0 0 8 .0 5 (6 2 ,7 5 0 ,2 6 0 .5 2 ) (5 8 ,3 8 9 ,4 2 4 .8 1 ) (3 0 ,3 3 4 ,9 9 1 .9 2 ) 9 6 ,5 3 0 ,5 8 5 .5 1 $ 6 6 ,1 9 5 ,5 9 3 .5 9 June 30, 2003 ($ 3 9 7 ,3 5 8 ,1 1 5 .9 9 ) 4 3 9 ,2 3 7 ,2 5 1 .0 8 (7 9 ,0 5 1 ,3 1 9 .0 0 ) 6 9 ,7 4 3 ,9 0 2 .9 4 3 2 ,5 7 1 ,7 1 9 .0 3 6 3 ,9 5 8 ,8 6 6 .4 8 $ 9 6 ,5 3 0 ,5 8 5 .5 1 Capital Assets The University added several significant facilities in fiscal year 2004, including the Student Learning Center and the Complex Carbohydrate Research Center. The Myers Hall dormitory reopened after a $17.1 million dollar major renovation. Several projects funded by the University of Georgia Athletic Association include a major improvement/expansion to the Indoor Tennis Facility; improvements to the Soccer/Softball Complex; and expansion to the North Stands at Sanford Stadium. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. University of Georgia Annual Financial Report FY 2004 7 Component Units In compliance with GASB Statement No. 39, The University of Georgia has included the financial statements and notes for all required component units for FY2004. The University of Georgia Foundation had investments of $421.8 million and long-term debt of $194 million (Bonds Payable) as of June 30, 2004. The University of Georgia Research Foundation had investments $13.6 M. The University of Georgia Athletic Association, Inc. had cash equivalents of $46.7 M and long-term debt of $84.5 million. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The University of Georgia ended FY 2004 in the midst of a sluggish economic recovery which continues to depress state revenue growth. As a result, state appropriations for FY 2005 in support of the resident instruction, research and public service missions of the University continued to fall further below the high watermark of FY 2002 to a point approximately the same as appropriated in FY 1999. At the outset of FY 2004, the University had significant vacant faculty lines due to the need to reduce expenditures. On the positive side, because of internal redirection of funds and a modest 5% increase in tuition, authorization was given to fill 70 of those vacant faculty lines. This action will significantly contribute to the instruction mission of UGA. Furthermore, the faculty and staff continued to do an outstanding job of securing external funding for research and sponsored programs. This category of funding rose by over $33 million. However, the cumulative effect of budget cuts will continue to negatively impact University operations. Hiring for vacant positions will continue to be limited to mission critical positions and the replacement of equipment will be further postponed. Michael F. Adams President The University of Georgia University of Georgia Annual Financial Report FY 2004 8 Statement of Net Assets THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2004 ASSETS C urrent Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Inventories Other Assets Total Current Assets Noncurrent Assets Noncurrent C ash Investments Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIABILITIES C urrent Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS University of Georgia June 30, 2004 $66,073,080.09 17,542,686.24 39,125,766.25 3,156,341.35 2,936,433.52 128,834,307.45 122,513.50 117,324,705.36 10,200,095.08 909,409,680.55 1,037,056,994.49 1,165,891,301.94 20,326,782.63 997,900.00 44,091,777.39 1,013,443.57 11,671,035.10 1,620,313.93 21,037,597.85 100,758,850.47 13,598,771.20 60,076,997.30 73,675,768.50 174,434,618.97 835,031,719.29 34,618,934.64 58,322,061.00 214,010.66 63,269,957.38 $991,456,682.97 University of Georgia Research Foundation June 30, 2004 $1,565,608.00 16,497,333.00 29,523,297.00 47,586,238.00 22,579,629.00 653,241.00 23,232,870.00 70,819,108.00 21,288,140.00 11,857,346.00 19,225,453.00 52,370,939.00 0.00 52,370,939.00 653,241.00 17,794,928.00 $18,448,169.00 University of Georgia Athletic Association June 30, 2004 $46,657,588.00 4,538,465.00 177,286.00 51,373,339.00 148,521,976.00 148,521,976.00 199,895,315.00 9,780,303.00 17,688,873.00 1,352,976.00 2,237,031.00 31,059,183.00 83,149,638.00 83,149,638.00 114,208,821.00 71,098,910.00 11,982,912.00 2,604,672.00 $85,686,494.00 University of Georgia Annual Financial Report FY 2004 9 The University of Georgia Foundation Balance Sheet The Univ ersity of Georgia Foundation Balance Sheet (FASB) June 30, 2004 Univ ersity of Georgia F o und a tio n A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Other A ssets Total A ssets $4,914,050.00 160,872.00 421,797,629.00 26,402,004.00 19,498,544.00 172,529,619.00 48,835,175.00 694,137,893.00 Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities 8,699,097.00 10,869,511.00 210,017,319.00 12,889,212.00 242,475,139.00 Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets 7,514,340.00 202,946,373.00 241,202,041.00 $451,662,754.00 University of Georgia Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets THE UNIVERSITY OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2004 REVENUES Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations Grants and Contracts Federal State Other Sales and Services of Educational Departments Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (loss) University of Georgia June 30, 2004 University of Georgia Research Foundation June 30, 2004 $211,122,877.84 53,003,562.40 58,151.37 10,242,489.28 128,841,929.30 44,713,971.68 49,712,410.94 11,924,414.11 27,463,347.08 8,634,434.15 23,410,134.70 12,705,696.82 14,152,647.49 3,136,613.43 23,741,608.32 516,740,861.37 $0.00 121,470,080.00 9,601,824.00 131,071,904.00 124,678,584.90 379,781,968.60 125,984,790.98 10,930,775.66 25,319,696.19 25,428,707.45 189,958,707.61 56,750,422.13 938,833,653.52 (422,092,792.15) 131,714,914.00 131,714,914.00 (643,010.00) University of Georgia Athletic Association June 30, 2004 $0.00 54,706,045.00 54,706,045.00 41,434,208.00 4,349,859.00 45,784,067.00 8,921,978.00 University of Georgia Annual Financial Report FY 2004 11 Statement of Revenues, Expenses and Changes in Net Assets, Continued University of Georgia June 30, 2004 University of Georgia Research Foundation June 30, 2004 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 396,939,319.13 176,801.00 22,169,180.87 5,546,070.51 3,441,694.21 (3,699,195.47) 11,669,019.05 436,242,889.30 14,150,097.15 114,277.85 72,682,973.34 41,455,531.85 114,252,783.04 128,402,880.19 863,053,802.78 863,053,802.78 $991,456,682.97 693,110.00 1,015,009.00 1,708,119.00 1,065,109.00 0.00 1,065,109.00 17,383,060.00 17,383,060.00 $18,448,169.00 University of Georgia Athletic Association June 30, 2004 1,260,561.00 870,139.00 (1,406,510.00) 704,856.00 1,429,046.00 10,351,024.00 0.00 10,351,024.00 75,335,470.00 75,335,470.00 $85,686,494.00 University of Georgia Annual Financial Report FY 2004 12 The University of Georgia Foundation Statement of Activities The University of Georgia Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Unrestricted Restricted Permanently Restricted Revenues Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $1,612,531.00 86,146.00 $12,337,716.00 4,096,840.00 $19,857,359.00 85,298.00 326,777.00 55,229,187.00 7,463,939.00 3,037,765.00 2,547,795.00 1,929,566.00 23,097,749.00 (23,401,254.00) 303,505.00 35,624,907.00 50,810,284.00 22,175,728.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses Change in Net Assets 2,745,582.00 357,370.00 18,935,502.00 2,211,412.00 4,708,997.00 4,831,402.00 33,790,265.00 1,834,642.00 0.00 50,810,284.00 0.00 22,175,728.00 Net Assets Beginning Net Assets Ending Net Assets 5,679,698.00 $7,514,340.00 152,136,089.00 $202,946,373.00 219,026,313.00 $241,202,041.00 Total $33,807,606.00 4,268,284.00 55,555,964.00 0.00 7,463,939.00 7,515,126.00 0.00 0.00 0.00 108,610,919.00 2,745,582.00 357,370.00 18,935,502.00 2,211,412.00 0.00 4,708,997.00 4,831,402.00 33,790,265.00 74,820,654.00 376,842,100.00 $451,662,754.00 University of Georgia Annual Financial Report FY 2004 13 Statement of Cash Flows THE UNIVERSITY OF GEORGIA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $151,662,033.44 12,525,997.30 258,604,101.16 9,428,198.74 (353,909,728.72) (507,111,614.29) (25,319,696.19) (4,101,975.63) 4,740,881.42 28,442,587.17 13,121,103.75 23,423,230.22 13,353,682.56 15,117,606.78 . 3,010,970.95 15,099,306.70 (341,913,314.64) 396,939,319.13 5,578,454.81 30,200,234.11 432,718,008.05 21,433,506.04 55,918.68 (78,892,241.58) (1,648,248.19) (3,699,195.47) (62,750,260.52) 114,887,095.94 2,729,190.38 (176,005,711.13) (58,389,424.81) (30,334,991.92) 96,530,585.51 $66,195,593.59 University of Georgia Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Incom e (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by O perating Activities ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS Fixed assets acquired by incurring capital lease obligations C hange in interest receivable affecting interest received G ift of capital assets reducing proceeds of capital grants and gifts June 30, 2004 ($422,092,792.15) 56,750,422.13 610,182.94 5,277,988.79 (830,748.00) 2,023,471.23 (20,998,585.86) 38,933,124.71 (1,586,378.43) ($341,913,314.64) $39,155,000.00 $305,821.68 $57,292,385.27 University of Georgia Annual Financial Report FY 2004 15 THE UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations The University of Georgia serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity The University of Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of The University of Georgia as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, The University of Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus The University of Georgia) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, The University of Georgia is reporting the activity for The University of Georgia Foundation, The University of Georgia Research Foundation, and The University of Georgia Athletic Association, Inc. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 University of Georgia Annual Financial Report FY 2004 16 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. University of Georgia Annual Financial Report FY 2004 17 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the average cost basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to The University of Georgia when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $42,795,488.13 to The University of Georgia. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. University of Georgia Annual Financial Report FY 2004 18 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. The University of Georgia had accrued liability for compensated absences in the amount of $36,222,747.48 as of 7-1-2003. For FY2004, $23,591,864.62 was earned in compensated absences and employees were paid $25,178,243.05, for a net decrease of $1,586,378.43. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $34,636,369.05. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. University of Georgia Annual Financial Report FY 2004 19 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctivities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $34,266,020.97 10,197,995.09 8,672,482.38 5,185,562.56 $58,322,061.00 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $6,447,250.12 31,321,967.15 1,487,000.00 24,013,740.11 $63,269,957.38 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University of Georgia, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: University of Georgia Annual Financial Report FY 2004 20 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. University of Georgia Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus The University 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 any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus The University of Georgia), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. University of Georgia Annual Financial Report FY 2004 22 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits Carrying Amount $3,139,961.96 10,621,374.56 Bank Balances $10,163,955.37 10,621,374.56 $13,761,336.52 $20,785,329.93 Risk Categories 1 2 3 $107,000.00 $9,291,557.71 $764,697.66 10,621,374.56 $107,000.00 $19,912,932.27 $764,697.66 University of Georgia Annual Financial Report FY 2004 23 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: 1 Type of Investm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations $838,596.17 205,500.00 38,241,846.46 Risk C ategories 2 $7,884,474.94 6,269,890.85 92,548,702.00 3 $0.00 C arrying Amount $8,723,071.11 6,475,390.85 130,790,548.46 T o ta ls $39,285,942.63 $106,703,067.79 Inv estm ents Not S ubject to C ategorizations: B oard of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Inv estm ent Portfolio A ccounts Mutual Funds Real Estate B uilding Inv estm ent S tate Inv estm ent Pool S hort-Term Inv estm ents Total Inv estm ents $0.00 $145,989,010.42 4,738,317.33 10,621,374.56 240,469.38 6,500,000.00 1,669,790.74 $169,758,962.43 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. University of Georgia Annual Financial Report FY 2004 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receivable $1,434,963.63 2,068,368.56 17,542,686.24 36,412,178.62 57,458,197.05 789,744.56 $56,668,452.49 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $0.00 629,922.57 973,131.67 1,553,287.11 $3,156,341.35 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was approximately $676,538.26. University of Georgia Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $16,503,497.32 23,357,480.87 39,860,978.19 Additions Reductions $1,832,136.44 26,210,381.92 28,042,518.36 $0.00 22,796,105.85 22,796,105.85 Ending Balance 6/30/2004 $18,335,633.76 26,771,756.94 45,107,390.70 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 32,621,533.86 738,208,786.42 108,372,023.86 285,982,474.73 3,201,234.44 167,532,182.89 8,311,881.93 1,344,230,118.13 4,120,261.50 124,961,303.31 25,792,186.43 18,076,874.41 960,834.95 12,633,755.06 1,763,327.79 188,308,543.45 16,939.50 13,460,204.03 35,622.72 273,087.00 13,785,853.25 36,741,795.36 863,153,150.23 134,164,210.29 290,599,145.11 4,126,446.67 179,892,850.95 10,075,209.72 1,518,752,808.33 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 10,831,498.01 252,800,737.69 21,450,508.99 204,687,572.40 766,664.57 119,664,701.00 610,201,682.66 1,057,165.58 20,383,529.93 2,888,622.24 22,610,395.44 1,118,523.11 8,957,209.00 13,353.97 12,451,495.55 28,672.96 273,087.00 57,015,445.30 12,766,609.48 Total Capital Assets, Being Depreciated, Net 734,028,435.47 131,293,098.15 1,019,243.77 Capital Assets, net $773,889,413.66 $159,335,616.51 $23,815,349.62 11,888,663.59 273,170,913.65 24,339,131.23 214,846,472.29 1,856,514.72 128,348,823.00 0.00 654,450,518.48 864,302,289.85 $909,409,680.55 University of Georgia Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $16,867,448.96 9,792,664.87 17,431,663.56 $44,091,777.39 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 $23,229,645.94 $40,115,913.48 $1,648,248.19 $61,697,311.23 Current Portion $1,620,313.93 Other Liabilities Compensated Absences Other Long Term Liabilities Total 36,222,747.48 36,222,747.48 23,591,864.62 25,178,243.05 23,591,864.62 25,178,243.05 34,636,369.05 0.00 34,636,369.05 21,037,597.85 21,037,597.85 Total Long Term Obligations $59,452,393.42 $63,707,778.10 $26,826,491.24 $96,333,680.28 $22,657,911.78 University of Georgia Annual Financial Report FY 2004 27 Note 9. Lease Obligations The University of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal O utstanding Real Property C apital Leases O perating Leases $6,179,061.13 5,925,285.24 5,765,145.01 5,658,127.72 5,593,301.45 25,832,086.83 24,621,301.00 24,621,301.00 24,621,301.00 18,155,522.60 $2,845,486.66 17,869.80 17,869.80 4,467.45 146,972,432.98 80,596,245.75 4,678,876.00 $61,697,311.23 $2,885,693.71 CAPITAL LEASES The University of Georgia is obligated under various operating leases for the uses of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. The University of Georgia occupies four real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2011, 2032, 2033, and 2034. The equipment capital leases expire between 2005 and 2009. Expenditures for fiscal year 2004 were $5,214,701.25, of which $3,705,519.93 represented interest and $1,509,181.32 represented principal paid on capital leases. Interest rates range from 2.25 percent to 8.36 percent. The carrying values of assets held under capital lease, including the current liability portion, at June 30, 2004 were $61,697,311.23 (buildings $61,576,744.50 and equipment $120,566.73). All four of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In June of 2001, the University of Georgia entered into a capital lease with the UGAREF whereby the University leases a University of Georgia Annual Financial Report FY 2004 28 building for a 10-year period that began June 1, 2001 and expires June 30, 2011. In August of 2001, the University of Georgia entered into a second capital lease with the UGAREF, whereby the University leases the Carlton Street Parking Deck for a 30-year period that began September 30, 2001 and expires August 31, 2031. In November of 2002, the University of Georgia entered into the third capital lease with the UGAREF whereby the University leases the East Village Parking Deck for a 30-year period that began on November 1, 2002 and expires July 31, 2032. In September of 2003, The University of Georgia entered into the fourth capital leases with The University of Georgia Real Estate foundation, whereby, the University leases the Complex Carbohydrate Research Center for a 30-year period that began on September 25, 2003 and expires September 30, 2033. The outstanding liability at June 30, 2004 on these capital leases is $60,040,275.86. OPERATING LEASES The University of Georgia is Lessee under a number of one-year operating leases, which generally provide for four (4) renewal option periods. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Properties are leased for a variety of functions, from farm acreage to office space to parking lots. Non-cancelable operating lease expenditures in 2004 were $2,477,327.34 for real property. University of Georgia Annual Financial Report FY 2004 29 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description The University of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of The University of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $29,085,698.09 $29,871,955.92 $29,156,597.85 Employees' Retirement System of Georgia Plan Description The University of Georgia 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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 University of Georgia Annual Financial Report FY 2004 30 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $528,087.31. The University's total payroll for all employees was $504,460,553.50. Under the old plan, member contributions consist of 1.5% for the employee portion and 5.66% plus 5% minus $7.00 for the employer portion. Under the new plan, member contributions consist of 1.5% for the employee portion and 10.41% for the employer portion. Employer contributions are also made on amounts paid for accumulated leave to retiring employees on the old plan if they meet specific requirements Total contributions to the plan made during fiscal year 2004 amounted to $63,171.74, of which $55,250.57 was made by the University and $7,921.17 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47- University of Georgia Annual Financial Report FY 2004 31 21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy The University of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The University of Georgia and the covered employees made the required contributions of $10,545,444.34 (10.03%) and $5,256,469.62 (5%), respectively. Georgia Defined Contribution Plan Plan Description The University of Georgia 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. Contributions 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. University of Georgia Annual Financial Report FY 2004 32 Total contributions made by employees during fiscal year 2004 amounted to $1,343,368.89 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. The University of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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 University of Georgia, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. University of Georgia Annual Financial Report FY 2004 33 Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although The University of Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against The University of Georgia (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 3,413 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, The University of Georgia recognized as incurred $13,486,289.49 of expenditures, which was net of $5,426,626.76 of participant contributions. University of Georgia Annual Financial Report FY 2004 34 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $74,066,380.91 56,793,311.35 25,142,605.21 2,352,135.51 3,044,789.65 1,420,589.29 15,980,740.18 13,586,304.39 $47,619,743.00 100,358,748.16 30,655,936.07 4,779,426.62 1,115,844.93 1,358,299.32 59,694,305.53 15,779,505.46 $1,559,950.68 73,013,355.55 22,458,526.43 2,698,089.22 43,890.00 1,176,137.82 27,548,324.58 3,720,334.62 $969,617.81 43,941,532.14 10,533,067.53 527,747.45 2,515.00 610,076.13 17,388,700.62 12,594,000.87 $415,134.40 11,532,687.52 2,767,621.69 132,366.19 1,321,500.00 199,579.14 8,855,498.42 681,082.32 $0.00 37,021,333.06 19,769,633.80 285,966.47 200.00 462,702.33 8,315,674.71 3,644,746.65 Total Expenses $192,386,856.49 $261,361,809.09 $132,218,608.90 $86,567,257.55 $25,905,469.68 $69,500,257.02 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships & Fellowships Auxiliary Unallocated Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 27,216,949.69 7,939,159.12 29,795.82 15,550,167.94 20,551,338.62 2,177,127.62 $ 0.00 19,298,310.93 $ 47,758.10 29,904,051.13 6,718,241.13 125,248.38 492,645.68 4,651,155.48 31,624,124.95 4,567,320.20 $ 0.00 Total Expenses $ 73,464,538.81 $ 19,298,310.93 $ 78,130,545.05 $ 0.00 Total Expenses $ 124,678,584.90 379,781,968.60 125,984,790.98 0.00 10,930,775.66 25,319,696.19 25,428,707.45 189,958,707.61 56,750,422.13 $ 938,833,653.52 University of Georgia Annual Financial Report FY 2004 35 Note 15. Component Units The University of Georgia Foundation The University of Georgia Foundation (the "Foundation") is a legally separate, tax-exempt component unit of The University of Georgia. The Foundation was chartered in 1937 to receive and administer contributions for the support of the academic programs of the University of Georgia (the "University"). The 55-member Board of Trustees has fiduciary responsibility for managing the Foundation's assets. The Foundation Executive Committee is composed of the chairman, vice-chairman, secretary, treasurer, the chairman from each of the other standing trustee committees and two at-large members. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Foundation distributed $12,382,773 to the University for scholarships and donor-restricted support. Facilities valued at $85 million and the associated long-term debt are included in the financial statements of the Foundation. The corresponding capital leases and associated long-term debt are included in the University's report and will be eliminated for CAFR reporting. Complete financial statements for the Foundation can be obtained from the Foundation office at 394 South Milledge Avenue, Athens, GA 30602. University of Georgia Annual Financial Report FY 2004 36 Long Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Beginning Balance July 1, 2003 Additions Reductions Ending Balance June 30, 2004 Principal due within One Year $25,620,000 bond issue: Par value of bonds outstanding $ Cost of bond issuance, net of accumulated amortization of $27,593 and $17,487 Total $25,620,000 bonds payable 25,125,000 $ (285,704) 24,839,296 $ (515,000) $ 24,610,000 $ 10,106 (275,598) (504,894) 24,334,402 $39,155,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $12,135 and $2,923 Cost of bond issuance, net of accumulated amortization of $91,289 and $21,675 Total $39,155,000 bonds payable 39,155,000 147,362 (1,115,123) 38,187,239 (9,212) 69,614 60,402 39,155,000 138,150 (1,045,509) 38,247,641 740,000 740,000 $99,860,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $146,083 and $38,005 Cost of bond issuance, net of accumulated amortization of $214,632 and $55,747 Total $99,860,000 bonds payable 99,860,000 1,916,546 (2,817,849) 98,958,697 (108,078) 158,885 50,807 99,860,000 1,808,468 (2,658,964) 99,009,504 $8,215,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $7,341 and $0 Cost of bond issuance, net of accumulated amortization of $17,955 and $0 Total $8,215,000 bonds payable 8,215,000 (107,509) (259,306) 7,848,185 (8,403) (8,403) (90,000) 7,341 17,955 (64,704) 8,125,000 (100,168) (249,754) 7,775,078 230,000 230,000 $25,970,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $1,274 Cost of bond issuance, net of accumulated amortization of $9,244 Total $25,970,000 bonds payable 25,970,000 (166,793) (1,184,485) 24,618,722 1,274 9,244 10,518 25,970,000 (165,519) (1,175,241) 24,629,240 Total bonds payable $ 169,833,417 $ 24,610,319 $ (447,871) $ 193,995,865 $ 970,000 $73,100,000 revolving credit agreement $1,900,000 credit agreement $300,000 credit agreement 11,953,536 1,636,000 43,634 200,000 11,997,170 1,636,000 200,000 T otal revolving credit agreements $1,800,000 note payable $880,000 note payable $ 13,589,536 $ 243,634 $ $ 13,833,170 $ 1,446,250 856,237 (89,000) (25,203) 1,357,250 831,034 89,000 26,732 Total notes payable $ 2,302,487 $ $ (114,203) $ 2,188,284 $ 115,732 T otal Long Term Debt $ 185,725,440 $ 24,853,953 $ (562,074) $ 210,017,319 $ 1,085,732 University of Georgia Annual Financial Report FY 2004 37 Debt Obligations $25,620,000 Bond Issue--In 2001, the Development Authority of the Unified Government of Athens - Clarke County, Georgia (the "Development Authority") issued Revenue Bonds (UGA Real Estate Foundation, Inc. Project), Series 2001 (the "2001 Bonds") and entered into an agreement (the "2001 Loan Agreement") to loan $25,620,000 to the Real Estate Foundation. The 2001 Bonds are secured by a letter of credit issued on behalf of the Real Estate Foundation in favor of the Development Authority under the Real Estate Foundation's $73.1 million credit agreement discussed below. The Foundation has guaranteed the obligations, including the letter of credit, under the Real Estate Foundation's $73.1 million revolving credit agreement. During 2002, the Real Estate Foundation used the proceeds of this loan to fund purchases and improvements of certain properties. Borrowings under the 2001 Loan Agreement bear interest payable monthly at a formula rate adjusted each week (1.08% and 1% at June 30, 2004 and 2003, respectively). The loan matures in 2031, subject to certain early repayment provisions. During the years ended June 30, 2004 and 2003, principal payments of $515,000 and $495,000, respectively, were made. At June 30, 2004, the Real Estate Foundation had an outstanding interest rate swap agreement effectively changing the interest rate exposure on 2001 Loan Agreement from variable to a 1.75% fixed rate until February 1, 2005. The fair value of the termination cost of the interest rate swap as of June 30, 2004 and 2003 was $48,489 and $209,254, respectively, and was recorded as an accrued liability in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $160,765 and a loss of $209,254 for the years ended June 30, 2004 and 2003, respectively, as an adjustment to interest expense related to this swap. $39,155,000 Bond Issue--In 2002, the Development Authority issued Educational Facilities Revenue Bonds (UGAREF CCRC Building, LLC Project), Series 2002 (the "CCRC Bonds") and entered into an agreement (the "CCRC Loan Agreement") to loan $39,155,000 to UGAREF CCRC Building, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "CCRC Entity"). Payment of principal and interest under the CCRC Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facility and by the CCRC Entity's interest in certain rents and leases derived from the facility. During the years ended June 30, 2004 and 2003, the CCRC Entity used the proceeds of this loan to fund construction of the facility. Borrowings under the CCRC Loan Agreement bear interest payable semiannually on December 15 and June 15 at fixed rates ranging from 2.5% to 5% depending on the term. Principal payments are due on December 15 starting in 2004 and continuing through 2032. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal Interest Total $740,000 760,000 780,000 800,000 825,000 4,545,000 5,570,000 7,085,000 9,025,000 9,025,000 $1,747,014 1,728,264 1,709,014 1,688,264 1,664,889 7,891,118 6,872,146 5,356,316 3,403,519 928,419 $2,487,014 2,488,264 2,489,014 2,488,264 2,489,889 12,436,118 12,442,146 12,441,316 12,428,519 9,953,419 0 0 $39,155,000 $32,988,961 $72,143,961 $99,860,000 Bond Issue--In 2002, the Housing Authority of the City of Athens, Georgia issued Student Housing Lease Revenue Bonds (UGAREF East Campus Housing, LLC Project), Series 2002 (the "Housing Bonds") and University of Georgia Annual Financial Report FY 2004 38 entered into an agreement (the "Housing Loan Agreement") to loan $99,860,000 to UGAREF East Campus Housing, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Housing Entity"). Payment of principal and interest under the Housing Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facilities and by the Housing Entity's interest in certain rents and leases derived from the facility. During the years ended June 30, 2004 and 2003, the Housing Entity used the proceeds of this loan to fund construction of certain real estate projects. Borrowings under the Housing Loan Agreement bear interest payable semiannually on December 1 and June 1 at fixed rates ranging from 3% to 5.25% depending on the term. Principal payments are due on December 1 starting in 2005 and continuing through 2033. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $99,860,000 Bond Issue Principal Interest Total $0 1,825,000 1,875,000 1,935,000 2,000,000 11,110,000 13,550,000 17,715,000 22,510,000 27,340,000 $4,791,550 4,764,175 4,708,675 4,651,525 4,590,000 21,703,300 18,945,806 14,899,681 9,758,000 3,451,250 $4,791,550 6,589,175 6,583,675 6,586,525 6,590,000 32,813,300 32,495,806 32,614,681 32,268,000 30,791,250 0 0 $99,860,000 $92,263,963 $192,123,963 University of Georgia Annual Financial Report FY 2004 39 $8,215,000 Bond Issue--In 2003, the Oconee County Industrial Development Authority issued Revenue Bonds (UGAREF Gainesville Campus, LLC Project), Series 2003 (the "Gainesville Campus Bonds") and entered into an agreement (the "Gainesville Campus Loan Agreement") to loan $8,215,000 to UGAREF Gainesville Campus, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Gainesville Campus Entity"). Payment of principal and interest under the Gainesville Campus Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facility and by the Gainesville Campus Entity's interest in certain rents and leases derived from the facility. During the year ended June 30, 2003, the Gainesville Campus Entity used the proceeds of this loan to fund the purchase of a facility and land. Borrowings under the Gainesville Campus Loan Agreement bear interest payable semiannually on December 15 and June 15 at fixed rates ranging from 2.2% to 4.375% depending on the term. Principal payments are due on December 15 starting in 2003 and continuing through 2027. During the year ended June 30, 2004, a principal payment of $90,000 was made. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $8,215,000 Bond Issue Principal Interest Total $230,000 240,000 250,000 250,000 260,000 1,380,000 1,620,000 1,975,000 1,920,000 $293,529 288,241 282,729 277,104 271,431 1,248,046 997,113 635,728 172,375 $523,529 528,241 532,729 527,104 531,431 2,628,046 2,617,113 2,610,728 2,092,375 0 0 0 $8,125,000 $4,466,296 $12,591,296 University of Georgia Annual Financial Report FY 2004 40 $25,970,000 Bond Issue--In 2004, the Development Authority issued $25,545,000 of Educational Facilities Revenue Bonds (UGAREF Coverdell Building, LLC Project), Series 2004A, and $425,000 of Educational Facilities Taxable Revenue Bonds (UGAREF Coverdell Building, LLC Project), Series 2004B (collectively, the "Coverdell Bonds"). The Development Authority entered into an agreement (the "Coverdell Loan Agreement") to loan $25,970,000 to UGAREF Coverdell Building, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Coverdell Entity"). Payment of principal and interest under the Coverdell Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facility and by the Coverdell Entity's interest in certain rents and leases derived from the facility. During the year ended June 30, 2004, the Coverdell Entity used the proceeds of this loan to fund construction of the facility. Borrowings under the Coverdell Loan Agreement bear interest payable semiannually on December 15 and June 15 at fixed rates ranging from 2.5% to 5% depending on the term. Principal payments are due on December 15 starting in 2006 and continuing through 2034. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $25,970,000 Bond Issue Principal Interest Total $0 0 460,000 500,000 510,000 2,810,000 3,430,000 4,300,000 5,435,000 6,920,000 1,605,000 $1,295,161 1,165,645 1,159,003 1,146,110 1,133,485 5,409,525 4,789,699 3,926,248 2,785,731 1,298,938 40,125 $1,295,161 1,165,645 1,619,003 1,646,110 1,643,485 8,219,525 8,219,699 8,226,248 8,220,731 8,218,938 1,645,125 0 $25,970,000 $24,149,669 $50,119,669 $73,100,000 Revolving Credit Agreement--during the year ended June 30, 2002, the Real Estate Foundation established a $50 million revolving credit agreement with a bank which was later increased to a limit of $75 million. The agreement expires November 30, 2005. In connection with establishing a separate $1.9 million credit agreement discussed below, the credit limit on the revolving credit agreement is effectively reduced to $73.1 million. The revolving credit agreement provides for direct borrowings or letters of credit at the Real Estate Foundation's option. Credit available under the revolving credit agreement is reduced by outstanding borrowings and outstanding letters of credit. At June 30, 2004, amounts outstanding or issued under this agreement included borrowings of $11,997,170 and a letter of credit and bank credit reserves of $25,485,347, resulting in $35,617,483 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's 30-day London Interbank Offered Rate ("LIBOR") rate plus 32 basis points (or .325%). At June 30, 2004 and 2003, the rates applicable to the borrowings were 1.45% and 1.65%, respectively. The Foundation has guaranteed the obligations of the Real Estate Foundation under this revolving credit agreement. $1,900,000 Credit Agreement--during the year ended June 30, 2003, the Real Estate Foundation established a $1.9 million credit agreement with a bank which expires July 29, 2007. The credit agreement provides for direct borrowings for the purchase and improvement of a property in Cortona, Italy. At June 30, 2004, amounts outstanding under this agreement were $1,636,000 with $264,000 available as borrowing capacity. Borrowings under the credit agreement bear interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). At June 30, 2004 and 2003, the rates applicable to the borrowings were 1.81% and 1.57%, respectively. The Foundation has guaranteed the obligations of the Real Estate Foundation under this credit agreement. University of Georgia Annual Financial Report FY 2004 41 $300,000 Credit Agreement--during the year ended June 30, 2003, the Foundation established a $0.3 million credit agreement with a bank which expires June 30, 2009. The credit agreement provides for direct borrowings for the purchase and improvement of a property in Costa Rica. At June 30, 2004, amounts outstanding under this agreement were $200,000 with $100,000 available as borrowing capacity. Borrowings under the credit agreement bear interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). Interest is payable monthly until June 1, 2005. Thereafter, principal and interest will be due on a monthly basis, using a 19-year amortization until expiration. At June 30, 2004, the rate applicable to the borrowings was 1.61%. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $300,000 Credit Agreement Principal Interest Total $0 10,526 10,526 10,526 168,422 variable variable variable variable variable $0 10,526 10,526 10,526 168,422 0 0 0 0 0 0 0 $200,000 variable $200,000 University of Georgia Annual Financial Report FY 2004 42 $11,000,000 Credit Agreement--during the year ended June 30, 1994, the Foundation established an $11 million revolving credit agreement with a bank that expired on June 30, 2003. The outstanding balance was paid in full during 2003. The University of Georgia Research Foundation, Inc. ("Research Foundation") had agreed to pay the interest costs on borrowings related to this agreement. During the year ended June 30, 2003, the Research Foundation paid interest of $4,724. $1,800,000 Note Payable--during the year ended June 30, 2000, the Foundation signed a $1.8 million promissory note agreement with a bank, which expires on December 31, 2019. At June 30, 2004, $1,357,250 was outstanding under this agreement. Interest is charged at a fixed rate of 7.13%. Principal payments in the amount of $22,250 are payable quarterly. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $1,800,000 Note Payable Principal Interest Total $89,000 89,000 89,000 89,000 89,000 445,000 445,000 22,250 $94,842 88,571 82,187 75,804 69,420 251,349 91,763 399 $183,842 177,571 171,187 164,804 158,420 696,349 536,763 22,649 0 0 0 0 $1,357,250 $754,335 $2,111,585 University of Georgia Annual Financial Report FY 2004 43 $880,000 Note Payable--during the year ended June 30, 2002; the Foundation borrowed $880,000 from a bank, which expires on May 1, 2007. At June 30, 2004, $831,034 was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 0.45% or 1.56% and 1.77% at June 30, 2004 and 2003, respectively. Principal and interest are payable monthly. At June 30, 2004, the Foundation had an outstanding interest rate swap agreement effectively changing the interest rate exposure on the $880,000 note payable from variable to a 5.9% fixed rate over the term of the note payable. The fair value of the termination cost of the interest rate swap as of June 30, 2004 and 2003 was $39,855 and $114,329, respectively, and was recorded as an accrued liability in accordance with SFAS No. 133. The Foundation recorded a gain of $74,474 and a loss of $114,329 for the years ended June 30, 2004 and 2003, respectively, as an adjustment to interest expense related to this swap. Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 $880,000 Note Payable Principal Interest Total $26,732 28,352 775,950 variable variable variable $26,732 28,352 775,950 0 0 0 0 0 0 0 0 0 $831,034 variable $831,034 University of Georgia Annual Financial Report FY 2004 44 The University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation, Inc. (the "Research Foundation") is a legally separate, tax-exempt component unit of The University of Georgia (the "University"). The Research Foundation serves to enhance the research mission of the University by securing sponsored research funding and by providing funding of special research initiatives. All University intellectual property developed through these research programs are managed by the Research Foundation. The eighteen-member board of directors consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Research Foundation itself. Although the University does not control the timing or amount of receipts from the Research Foundation, all sponsored research awards are subcontracted to the University and other resources and related income are restricted to benefit the research mission of the University. Consequently, the Research Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Research Foundation is considered a special-purpose government entity engaged only in business-type activities and is required to follow all applicable GASB pronouncements. The Research Foundation's fiscal year is July 1 through June 30. During fiscal year 2004, the Research Foundation transferred approximately $120 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. Approximately, $9 million is Research Foundation assets are invested with the University of Georgia Foundation, a component unit of the University. These and other transactions will be eliminated for CAFR reporting. Complete financial statements for the Research Foundation can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602. The University of Georgia Athletic Association, Inc. The University of Georgia Athletic Association, Inc. (the "Association") is a legally separate, tax-exempt component unit of The University of Georgia (the "University"). The Association was organized in 1928 as a not-for-profit corporation to promote intercollegiate athletic sports representing the University. The twenty-member board of the directors consists of faculty, staff, students, and alumni of the University. Although the university does not control the timing or amount of receipts from the Association, the majority of resources or income thereon that the Association holds and invests are restricted to the athletic activities of the University. Because these restricted resources held by the Association can only be used by, or for the benefit of, the University and their management role is significant to the accomplishment of the University's mission, the Association is considered a component unit of the University and is discretely presented in the University's financial statements. For financial reporting purposes, the Association is considered a special purpose government agency engaged only in business type activities, as defined by GASB Statement 34. The Association's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the Association made payments to the University for services such as food services, parking services, health services, tuition, gas, electricity, security, and golf course maintenance. These payments totaled $2,908,945.24 and were recognized as University of Georgia Annual Financial Report FY 2004 45 expenses of the Association. Capital assets net of accumulated depreciation of $148.5 M are included in the financial statements of the Association. These capital assets, excluding moveable equipment, are included in the University's report and will be eliminated for CAFR reporting. Complete financial statements for the Association can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602. Long Term Liabilities 2004 2003 Note payable to bank in 20 semi-annual principal payments of $340,000 plus interest beginning January 1, 1995. Interest is paid at a fixed rate of 5.98%. The Association has assigned all proceeds expected to be received from certain sky suites as collateral for the loan. 340,000 1,020,000 Note payable to bank in 40 semi-annual principal payments of $320,000 plus interest beginning January 1, 2001. Interest is payable at interest rate ranging from 5.30% to 8.50%, adjusted monthly, based on an adjusted thirty-day LIBOR rate of LIBOR plus 0.50% (5.30% at June 30, 2004). 10,560,000 11,200,000 Note payable to the University of Georgia over 20 years in annual payments of $477,917 at a fixed rate of 6.186% beginning in 1996. Note payable to vendor over 10 years in annual payments of $94,518 through 2008. The implicit interest rate is 8.5% and the note is secured by a first priority purchase money security interest on equipment with a net book value of $1,011,626. Revenue bonds payable Total Debt 3,224,540 3,486,777 378,074 70,000,000 84,502,614 472,592 34,000,000 50,179,369 Changes in long-term liabilities for Athletic Association for the fiscal year ended June 30, 2004 are shown below: Athletic Association Long-term debt Total Long Term Debt Beginning Balance July 1, 2003 Additions 50,179,369.00 $50,179,369.00 36,000,000.00 $36,000,000.00 Reductions Ending Balance June 30, 2004 Amounts due within One Year 1,676,755.00 $1,676,755.00 84,502,614.00 1,352,976.00 $84,502,614.00 $1,352,976.00 University of Georgia Annual Financial Report FY 2004 46 Debt Serv ice Obligations The annual de bt se rv ice re quire m e nts at June 30, 2004 are as follows: Year Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2044 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Principal $1,352,976.00 1,030,201.00 1,048,490.00 1,067,912.00 994,016.00 4,849,019.00 3,200,000.00 960,000.00 70,000,000.00 I n te r e s t $1,511,293.00 1,459,620.00 1,406,939.00 1,353,128.00 1,298,115.00 5,617,851.00 4,495,422.00 3,875,958.00 3,850,000.00 1,690,333.00 T o ta l $2,864,269.00 2,489,821.00 2,455,429.00 2,421,040.00 2,292,131.00 10,466,870.00 7,695,422.00 4,835,958.00 3,850,000.00 71,690,333.00 0.00 0.00 $84,502,614.00 $26,558,659.00 $111,061,273.00 D ue to the fact that the re venue bonds have a variable rate , the inte re st used abov e for the revenue bonds was based on the interest rate in effect as of June 30, 2004. University of Georgia Annual Financial Report FY 2004 47 UNIVERSITY SYSTEM OFFICE Financial Report For the Year Ended June 30, 2004 University System Office Board of Regents of the University System of Georgia Atlanta, Georgia Dr. Thomas C. Meredith Chancellor William R. Bowes Vice Chancellor for Fiscal Affairs/Treasurer Debra J. Lasher Executive Director for Business & Financial Affairs UNIVERSITY SYSTEM OFFICE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets ................................ 9 Statement of Cash Flows ................................................................................................... 11 Note 1 Summary of Significant Accounting Policies ...................................................... 13 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 19 Note 3 Accounts Receivable............................................................................................. 22 Note 4 Inventories............................................................................................................. 22 Note 5 Notes/Loans Receivable........................................................................................ 22 Note 6 Capital Assets........................................................................................................ 23 Note 7 Deferred Revenue.................................................................................................. 24 Note 8 Long-Term Liabilities ........................................................................................... 24 Note 9 Lease Obligations.................................................................................................. 25 Note 10 Retirement Plans ................................................................................................. 26 Note 11 Risk Management................................................................................................ 29 Note 12 Contingencies...................................................................................................... 30 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 14 Natural Classifications With Functional Classifications..................................... 31 UNIVERSITY SYSTEM OFFICE Management's Discussion and Analysis Introduction The University System Office of Georgia's Board of Regents was created in 1931 as part of a reorganization of Georgia's state government. With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today the Board of Regents is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Board elects a chancellor who serves as its chief executive officer and the chief administrative officer of the University System. The Board oversees 34 institutions: four research institutions, two regional universities, 13 state universities, two state colleges, and 13 two-year colleges. In addition, one marine research facility is governed by the Board. These institutions enroll more than 247,000 students and employ more than 9,800 faculty and 27,700 employees to provide teaching and related services to students and the communities in which they are located. Overview of the Financial Statements and Financial Analysis The University System Office is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University System Office's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University System Office as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System Office. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's University System Office Annual Financial Report FY 2004 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $78,621,220.30 15,399,922.51 3,612,043.20 97,633,186.01 June 30, 2003 $74,446,419.95 14,867,673.92 7,853,749.28 97,167,843.15 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 31,192,407.63 3,083,535.59 34,275,943.22 22,719,093.65 2,670,577.03 25,389,670.68 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 11,633,094.78 3,612,043.20 42,708,961.77 5,403,143.04 $63,357,242.79 12,157,270.22 10,401,422.84 1,123,409.10 48,096,070.31 $71,778,172.47 The total assets of the University System Office increased by $465,342.86. The primary reason for the increase in total assets was the $1,063,762.29 added to investments. This is the amount of the University System investment pool shown on the face of the University System of Georgia Annual Financial Report. See Note 2 for further information regarding the investment pool. The non-corpus amount of endowments was re-classified from Other Assets to Current Assets to agree with the classification used by the State of Georgia Department of Audits on the state's Consolidated Annual Financial Report, (CAFR), resulting in a change of ($4,241,706.08) between those lines. The total liabilities for the year increased by $8,886,272.54. The primary cause for the increase was in current liabilities, related to the increase to the Incurred But Not Reported amount for Health Insurance claims for the University System health insurance fund. The combination of the increase in total assets of $465,342.86 and the increase in total liabilities of $8,886,272.54 yields a decrease in total net assets of ($8,420,929.68). University System Office Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 June 30, 2003 Operating Revenues Operating Expenses Operating Loss Nonoperating Revenues and Expenses Income (Loss) Before other revenues, expenses, gains or losses Other revenues, expenses, gains or losses Increase in Net Assets Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated Net Assets at End of Year $250,151,889.76 395,305,216.86 (145,153,327.10) 136,958,009.83 (8,195,317.27) (8,195,317.27) 71,778,172.47 (225,612.41) 71,552,560.06 $63,357,242.79 $239,157,104.08 405,949,601.64 (166,792,497.56) 153,290,688.13 (13,501,809.43) (13,501,809.43) 80,675,219.08 4,604,762.82 85,279,981.90 $71,778,172.47 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the Net Assets at End of Year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: The increase of Operating Revenue was due to an increase in health insurance premiums for the University System of Georgia employees and a refund of $4.9 million from Blue Cross Blue Shield to the health insurance reserve fund. Health Insurance premiums increased by the following percentages for Family Plans: Blue Choice 17%, Kaiser 5.44%, Indemnity 5.56%, PPO 9.4%. University System Office Annual Financial Report FY 2004 3 Continued budget reductions resulted in a decrease of ($16,231,221.28) in State Appropriations. FY 2001 monies being managed at the University System Office for the funding of the Governor's Cancer Center of Excellence were re-classified from an asset in FY 03 to a liability (Agency Fund) in FY 04 resulting in a prior period adjustment on the statement of ($225,612.41). This reclassification was necessary due to the fact that the monies be appropriately classified as Agency Funds (funds held for others) and be removed from the available Net Assets of the University System Office. Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal A ppropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 ($45,351.26) 4,945,283.64 54,585.70 245,197,371.68 250,151,889.76 $0.00 7,490,761.14 148,753.31 231,517,589.63 239,157,104.08 136,231,950.72 483,241.34 387,006.55 137,102,198.61 152,463,172.00 1,013,910.34 287,431.81 (473,826.02) 153,290,688.13 0.00 $387,254,088.37 0.00 $392,447,792.21 University System Office Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 June 30, 2004 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses $3,950,107.07 135,114.48 91,927,868.66 11,050,493.13 241,098.14 284,514,605.78 568,121.00 2,917,808.60 395,305,216.86 Nonoperating Expenses Interest Expense (C apital Assets) 144,188.78 Total Expenses $395,449,405.64 June 30, 2003 $1,383,822.06 87,983.55 99,798,308.44 12,885,574.79 245,642.00 283,470,104.85 3,339,850.87 599,209.00 4,139,106.08 405,949,601.64 $405,949,601.64 Total expenses decreased by approximately ($10,500,196.00). Reductions in revenue result in less money to expend. The reduction of state appropriations system-wide, due to a continued sluggish economy, continues to be a challenge for all institutions of the University System of Georgia and thus, for the University System Office. Statement of Cash Flows The final statement presented by the University System Office is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. University System Office Annual Financial Report FY 2004 5 Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 1 3 1 ,1 5 3 ,5 0 2 .7 4 ) 1 3 6 ,8 9 2 ,1 2 4 .1 4 (6 ,4 4 0 ,1 1 5 .3 2 ) (2 7 ,6 4 1 ,9 0 6 .9 5 ) (2 8 ,3 4 3 ,4 0 0 .8 7 ) 7 2 ,4 5 3 ,4 7 7 .3 4 $ 4 4 ,1 1 0 ,0 7 6 .4 7 June 30, 2003 ($ 1 6 7 ,8 2 7 ,8 1 2 .3 3 ) 1 5 3 ,3 6 4 ,4 5 2 .0 8 (2 ,6 9 6 ,2 1 9 .9 5 ) 8 5 ,8 0 7 .7 2 (1 7 ,0 7 3 ,7 7 2 .4 8 ) 8 9 ,5 2 7 ,2 4 9 .8 2 $ 7 2 ,4 5 3 ,4 7 7 .3 4 Capital Assets The University System Office had no significant capital asset additions for FY 04. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Health Insurance The University System Office is the fiscal agent for health insurance for all the institutions in the University System of Georgia. The financial information for all related health insurance transactions is included on the face of the statements in the Annual Financial Report, including the liability for claims Incurred But Not Reported, as referenced earlier in the section regarding the Statement of Revenues, Expenses, and Changes in Net Assets. The summary information regarding revenues, expenditures and the related liability for fiscal year 2004 is listed below. (Investments are shown at Market Value). Beginning Net Assets July 1, 2003 $ 55,590,452 Plus Revenues FY 2004 Less Expenditures FY 2004 229,776,154 221,470,710 Ending Net Assets June 30, 2004 $ 63,895,896 Cash in Bank Investments Accts Receivable Deferred Revenue $35,700,759 28,171,865 271,932 248,660 Less Incurred But Not Reported Claims ($26,506,140) University System Office Annual Financial Report FY 2004 6 Component Units University System Office does not have any units that qualify as component units for the purposes of GASB 39 reporting. Economic Outlook Despite continuing reductions in state appropriations in FY 2004 resulting from the state's slow recovery from the recent economic downturn, the University System Office has implemented measures to ensure the financial integrity of current operations and has not created new programs or expanded existing ones. The FY 2005 budget added new reductions to resources, which are being addressed through downsizing of operations and expenditure restrictions. Beyond unknown factors that may affect virtually all types of business operations, the University System Office is unaware of any currently known facts, decisions, or conditions that may be expected to have a significant effect on the office's current financial position or results of operations. The loss of net assets attributable mainly to the increase in the Incurred But Not Reported, (IBNR), amount for health insurance claims has been addressed through measures designed to ensure that adequate reserves are available to meet that liability and to protect against any unanticipated increases in medical claims costs. Constant monitoring of the resources and mission critical functions and activities continue in order to maintain the office's ability to react and respond effectively to unknown internal and external factors. _______________________ William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office University System Office Annual Financial Report FY 2004 7 Statement of Net Assets UNIVERSITY SYSTEM OFFICE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e n to r ie s Other Assets Total C urrent Assets June 30, 2004 $44,110,076.47 33,291,252.81 692,727.93 526,425.09 738.00 78,621,220.30 Noncurrent Assets Noncurrent C ash I nv e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 3,612,043.20 15,399,922.51 19,011,965.71 97,633,186.01 53,773.89 248,659.95 26,506,139.92 1,433,326.37 1,508,057.88 1,442,449.62 31,192,407.63 824,765.74 2,258,769.85 3,083,535.59 34,275,943.22 11,633,094.78 3,612,043.20 42,708,961.77 5,403,143.04 $63,357,242.79 University System Office Annual Financial Report FY 2004 8 Statement of Revenues, Expenses and Changes in Net Assets UNIVERSITY SYSTEM OFFIC E STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 RE VE NU E S June 30, 2004 Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartm ents Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses $0.00 45,351.26 4,692,783.64 252,500.00 54,585.70 245,197,371.68 250,151,889.76 13,500.00 20,152,343.52 4,897,161.43 426,239.69 968,125.75 25,867,648.61 336,346,360.98 6,633,836.88 395,305,216.86 University System Office Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 136,231,950.72 1,653.24 263,265.47 218,322.63 387,006.55 (144,188.78) 136,958,009.83 (8,195,317.27) 0.00 (8,195,317.27) 71,778,172.47 (225,612.41) 71,552,560.06 $63,357,242.79 University System Office Annual Financial Report FY 2004 10 Statement of Cash Flows UNIVERSITY SYSTEM OFFIC E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Paym ents to Suppliers Paym ents to Employees Paym ents for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (paym ents) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CAPITAL F INANCING ACTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITA L AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVEST ING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investm ents Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 ($45,351.26) 5,790,500.05 54,585.70 (361,666,167.77) (20,162,248.45) (968,125.75) 245,843,304.74 (131,153,502.74) 136,381,949.72 27,422.81 482,751.61 136,892,124.14 (4,623,111.05) (1,672,815.49) (144,188.78) (6,440,115.32) 51,979.77 16,485.85 (27,710,372.57) (27,641,906.95) (28,343,400.87) 72,453,477.34 $44,110,076.47 University System Office Annual Financial Report FY 2004 11 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustments to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I n v e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($145,153,327.10) 6,659,187.57 755,636.92 1,296.00 (397,626.15) 248,659.95 6,682,080.62 50,589.45 ($131,153,502.74) The University System Office had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions as of 6-30-04. University System Office Annual Financial Report FY 2004 12 UNIVERSITY SYSTEM OFFFICE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations The Board of Regents of the University System of Georgia, an organizational unit of the State of Georgia, was created by the "Reorganization Act of 1931". With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today the Board of Regents is composed of 18 members, five of whom are appointed from the state-atlarge, and one from each of the 13 congressional districts. The Chancellor is appointed by the Board of Regents as chief executive officer and serves at the pleasure of the Board. The Board oversees 34 institutions (four research institutions, two regional universities, 13 state universities, two state colleges, and 13 two-year colleges), Skidaway Institute of Oceanography and an administrative central office, (The University System Office). These institutions enroll more than 247,000 students and employ more than 9,800 faculty and 27,700 employees to provide teaching and related services to students and the communities in which they are located. Reporting Entity The University System Office is the administrative central office for the thirty-four (34) State supported member institutions of higher education in Georgia and one marine research institute which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of the University System Office as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University System Office does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the University System Office is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus the University System Office) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. University System Office Annual Financial Report FY 2004 13 For FY2004, the University System Office does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University System Office was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University System Office's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Basis of Accounting For financial reporting purposes, the University System Office is considered a special-purpose government engaged only in business-type activities. Accordingly, the University System Office'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-system office transactions have been eliminated. The University System Office has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System Office has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University System Office accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, University System Office Annual Financial Report FY 2004 14 expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University System Office's grant and contracts, and registrations and licensing fees for the services of the Office of Informational and Instructional Technology. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories The University System Office had no inventories as of June 30, 2004. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University System Office'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to the University System Office when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions (8,195,317.27) to the University System Office. Deposits The University System Office had no deposits as of June 30, 2004. University System Office Annual Financial Report FY 2004 15 Deferred Revenues Deferred revenues include amounts received from Valdosta State University as payment of partial July 2004 health insurance premiums. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. The University System Office had accrued liability for compensated absences in the amount of $2,216,625.91 as of 7-1-2003. For FY 2004, $1,735,509.52 was earned in compensated absences and employees were paid $1,684,920.07 for a net increase of $50,589.45. The ending balance as of 6-30-2004 in accrued liability for compensated absences is $2,267,215.36. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University System Office's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University System Office's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System Office may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University System Office is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Fund Balances for the University System of Georgia Health Insurance Reserves are booked as Restricted Expendable. This is in agreement with the classification used by the State of Georgia Department of Audits for these funds. University System Office Annual Financial Report FY 2004 16 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable June 30, 2004 $42,708,961.77 $42,708,961.77 Restricted net assets expendable Capital Projects: This represents resources for which the University System Office is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University System Office, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserv e for Inv entory O ther Unrestricted Total Unrestricted Net A ssets $0.00 6,626,389.41 (1,223,246.37) $5,403,143.04 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System Office's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University System Office, 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 University System Office has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: University System Office Annual Financial Report FY 2004 17 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships The University System Office had no Sponsored and Unsponsored Scholarships as of June 30, 2004. University System Office Annual Financial Report FY 2004 18 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus the University System Office) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus the University System Office), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. University System Office Annual Financial Report FY 2004 19 Categorization of Deposits The University System Office'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 University System Office or by its agent in the University System Office's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University System Office'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 University System Office's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Carrying Amount Cash Deposits Investment Portfolio Accounts $44,110,076.47 Bank Balances $39,442,219.18 Total Cash Deposits $44,110,076.47 $39,442,219.18 Risk Categories 1 2 3 $0.00 $0.00 $44,110,076.47 $0.00 $0.00 $44,110,076.47 University System Office Annual Financial Report FY 2004 20 Categorization of Investments The University System Office's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University System Office or its agent in the University System Office's name. Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University System Office's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University System Office's name. At June 30, 2004, the University System Office's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate B onds S ecurities and C orporate O bligations Risk Ca te gorie s 1 2 $0.00 $0.00 3 $0.00 Ca rry ing Amount $0.00 0.00 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund - Porter Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 1,500,000.00 2,112,043.20 32,227,490.52 $35,839,533.72 The University System Office serves as fiscal agent for various units of the University System of Georgia and cooperative organizations. The University System Office pools the monies of these organizations with the University System Office's monies for investment purposes. The University System Office cannot allocate pool investments between the internal (University System) and external (cooperative organizations) investment pool portions. The investment pool is not registered with the SEC as an investment company. The fair value of the investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. For fiscal University System Office Annual Financial Report FY 2004 21 year ending June 30, 2004, the external investment pool total was $154,814,580.81. Of this amount $127,431,490.70 was reported on the individual annual financial statements of the institutions, $26,319,327.82 was reported for cooperative organizations, and $1,063,762.29 is reported on the face of the University System Office's Annual Financial Report Statement of Net Assets as Current Investments and Deposits held for others. Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University System Office did not own any specific, identifiable investment securities of the pool. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $0.00 692,727.93 566,141.68 1,258,869.61 39,716.59 $1,219,153.02 Note 4. Inventories The University System Office had no inventories at June 30, 2004. Note 5. Notes/Loans Receivable The University System Office had no Notes/Loans Receivable as of June 30, 2004. University System Office Annual Financial Report FY 2004 22 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $2,411,877.00 2,411,877.00 Additions $0.00 0.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $2,411,877.00 0.00 2,411,877.00 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 728,406.53 26,587,222.58 3,297,070.00 10,000.00 30,622,699.11 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 17,576,076.16 590,826.03 18,166,902.19 Total Capital Assets, Being Depreciated, Net 12,455,796.92 Capital Assets, net $14,867,673.92 4,740,111.05 6,089,141.69 10,829,252.74 1,938,605.77 3,297,070.00 5,235,675.77 0.00 728,406.53 0.00 29,388,727.86 6,089,141.69 0.00 10,000.00 36,216,276.08 18,210.16 4,677,307.89 1,947,939.85 6,643,457.90 1,821.02 989,482.47 590,826.03 1,582,129.52 0.00 16,389.14 0.00 21,263,901.58 1,947,939.85 0.00 0.00 23,228,230.57 4,185,794.84 3,653,546.25 12,988,045.51 $4,185,794.84 $3,653,546.25 $15,399,922.51 University System Office Annual Financial Report FY 2004 23 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. These are monies received from Valdosta State University before June 30, 2004 for health insurance premiums for July 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $0.00 248,659.95 $248,659.95 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 Additions Reductions Adjustments Ending Balance June 30, 2004 $2,710,403.70 $1,681,671.58 $1,380,103.95 $754,856.40 $3,766,827.73 Other Liabilities Compensated Absences Other Long Term Liabilities Total 2,216,625.91 1,735,509.52 1,684,920.07 2,216,625.91 1,735,509.52 1,684,920.07 0.00 0.00 2,267,215.36 0.00 2,267,215.36 Total Long Term Obligations $4,927,029.61 $3,417,181.10 $3,065,024.02 $754,856.40 $6,034,043.09 University System Office Annual Financial Report FY 2004 24 Note 9. Lease Obligations The University System Office is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal O utstanding Real Property C apital Leases O perating Leases $1,619,482.41 1,619,482.41 703,751.97 $0.00 3,942,716.79 175,889.06 $3,766,827.73 $0.00 CAPITAL LEASES The University System Office has four capital leases payable in monthly installments with terms expiring in 2007. Expenditures for fiscal year 2004 were $1.8 M of which $144,188.78 represented interest. Total principal paid on capital leases was $1.6 M for the fiscal year ended June 30, 2004. Interest rates range from 3.37 percent to 3.71 percent. Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. The University System Office entered into two new Capital Lease Obligations in FY 04. In February 2004 these lease obligations were completed for the purchase of numerous items of equipment. Both obligations, Number 190 and Number 208, were entered into with SunTrust Bank. Obligation Number 190 has an interest rate of 3.37% and an original principal amount of $1,555,624.29 maturing in FY 2007. Obligation Number 208 has an interest rate of 3.7% and an original principal amount of $126,047.32 maturing in FY 2007. University System Office Annual Financial Report FY 2004 25 OPERATING LEASES The University System Office has entered into an agreement to lease real property, which is classified as an operating lease (lease on assets not recorded on the balance sheet). This lease is for the office location for the Office of Informational and Instructional Technology and contains provisions that, at the expiration date of the original term of the lease, the University System Office has the option of renewing the lease on a year-to-year basis. Future minimum lease payments for the operating lease as of June 30, 2004 are $436,740.00. Amounts are included only for the cancelable lease for which an option to renew for the subsequent fiscal year has been exercised. During FY 2005 the lease will be only for approximately three to four months depending on the exact date of completion and move to the new OIIT building in Athens. Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description The University System Office participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of the University System Office who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University System Office makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $1,576,593.23 $1,527,821.36 $1,303,575.67 Employees' Retirement System of Georgia Plan Description The University System Office participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of University System Office Annual Financial Report FY 2004 26 Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University System Office's payroll for the year ended June 30, 2004, for employees covered by ERS was $401,803.13. The University System Office's total payroll for all employees was $20,152,343.52. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University System Office 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 University System Office also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University System Office amount to 10.41% (5.66% under old plan) of covered payroll and University System Office Annual Financial Report FY 2004 27 included the amounts contributed on behalf of the employees 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 2004 amounted to $57,251.21, of which $51,224.08 was made by the University System Office and $6,027.13 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy The University System Office makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The University System Office and the covered employees made the required contributions of $236,450.75 (10.03%) and $117,871.33 (5%), respectively. Georgia Defined Contribution Plan Plan Description The University System Office 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. University System Office Annual Financial Report FY 2004 28 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $9,679.93, which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. The University System Office and participating employees and retirees pay premiums for either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also System employees. 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 University System Office, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of University System Office Annual Financial Report FY 2004 29 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University System Office expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against the University System Office (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 62 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, the University System Office recognized as incurred $238,022.33 of expenditures, which was net of $110,018.21 of participant contributions. University System Office Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The University System Office's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 356,335.33 69,074.04 3,158.39 22,700.00 4,109.56 3,448,471.65 46,258.10 $0.00 17,000.04 3,889.68 7,841.51 106,383.25 $ 0.00 1,722,748.55 382,276.08 42,773.99 19,311,399.81 70,385,414.43 83,255.80 $ 13,500.00 1,242,705.88 284,985.80 $ 0.00 203,799.07 36,156.07 $0.00 16,609,754.65 4,120,779.76 41,513.43 27,255.68 8,793,745.16 646,787.18 6,375.27 2,398.45 (7,630.72) 324,577.10 377,304.75 6,522,485.11 253,619,977.21 2,939,727.20 Total Expenses $ 3,950,107.07 $ 135,114.48 $ 91,927,868.66 $ 11,050,493.13 $241,098.14 $284,514,605.78 Natural C lassification Plant Operations & Maintenance Functional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 $ 0.00 $ 0.00 $ 0.00 568,121.00 2,917,808.60 Total Expenses $ 0.00 $ 568,121.00 $ 0.00 $ 2,917,808.60 Total Expenses $ 13,500.00 20,152,343.52 4,897,161.43 0.00 426,239.69 968,125.75 25,867,648.61 336,346,360.98 6,633,836.88 $ 395,305,216.86 University System Office Annual Financial Report FY 2004 31 VALDOSTA STATE UNIVERSITY Valdosta, Georgia Financial Report For the Year Ended June 30, 2004 Dr. Ronald M. Zaccari President Mr. James L. Black Interim Vice President for Business and Finance VALDOSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Valdosta State University Foundation Balance Sheet ...........................................9 Statement of Revenues, Expenses, and Changes in Net Assets ...............................10 Valdosta State University Foundation Statement of Activities ...............................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 27 Note 10 Retirement Plans ................................................................................................. 29 Note 11 Risk Management................................................................................................ 30 Note 12 Contingencies...................................................................................................... 31 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 14 Natural Classifications With Functional Classifications..................................... 33 Note 15 Component Units ........................................................................ 34 VALDOSTA STATE UNIVERSITY Management's Discussion and Analysis Introduction Valdosta State University is one of the 34 institutions of the University System of Georgia. The University, located in Valdosta, Georgia, was founded in 1906 and is one of only two regional universities within the University system. The University offers nationally accredited programs in Art, Business, Music, Nursing, Sports Medicine, Speech and Language Pathology, School Psychology and Teacher Education. Valdosta State University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of approximately 10,000 students each year. The institution suffered enrollment losses after implementing the System Initiative to move Remedial Instruction to the System's 2-year colleges. However, the University feels that this trend has reversed as shown by the comparison numbers that follow. Faculty Students (Fall Headcount) FY2004 FY2003 FY2002 423 10,457 417 9,915 427 9,238 Overview of the Financial Statements and Financial Analysis Valdosta State University is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Valdosta State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Valdosta State University Annual Financial Report FY 2004 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $12,624,852.56 95,232,347.17 6,151,928.49 114,009,128.22 June 30, 2003 $11,712,145.58 84,254,921.18 5,898,523.24 101,865,590.00 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 6,338,699.84 1,108,004.10 7,446,703.94 5,043,229.14 1,767,678.56 6,810,907.70 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 94,476,558.68 3,068,823.44 3,332,536.07 5,684,506.09 $106,562,424.28 83,496,014.83 2,716,732.86 4,904,047.96 3,937,886.65 $95,054,682.30 The total assets of the institution increased by $12,143,538.22. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $10,977,425.99 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $635,796.24. The primary cause for the increase was in contract payables. The combination of the increase in total assets of $12,143,538.22 and the increase in total liabilities of $635,796.24 yields an increase in total net assets of $11,507,741.98. The increase in total net assets is primarily in the category of invested in capital assets, net of debt, in the amount of $10,980,543.85. Valdosta State University Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $54,598,064.54 June 30, 2003 $49,781,824.70 Operating Expenses Operating Loss 101,133,358.78 (46,535,294.24) 99,603,767.53 (49,821,942.83) Nonoperating Revenues and Expenses 44,783,898.01 47,279,268.35 Income (Loss) Before other revenues, expenses, gains or losses (1,751,396.23) (2,542,674.48) Other revenues, expenses, gains or losses 13,280,908.07 2,802,971.75 Increase in Net Assets 11,529,511.84 260,297.27 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 95,054,682.30 (21,769.86) 95,032,912.44 91,603,179.54 3,191,205.49 94,794,385.03 Net Assets at End of Year $106,562,424.28 $95,054,682.30 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase 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: Valdosta State University Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartm ents A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 June 30, 2003 $22,310,624.81 11,166,385.54 249,277.37 19,994,541.46 877,235.36 54,598,064.54 $19,173,706.64 10,601,080.91 218,843.37 18,899,731.64 888,462.14 49,781,824.70 44,077,402.72 412,540.56 92,157.36 548,127.72 27,481.46 45,157,709.82 47,328,114.81 705,798.77 50,851.88 387,251.79 (795,444.41) 47,676,572.84 12,659,288.07 621,620.00 13,280,908.07 $113,036,682.43 2,770,341.75 32,630.00 2,802,971.75 $100,261,369.29 Valdosta State University Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $40,925,070.44 118,951.04 1,511,705.34 6,752,007.81 6,095,662.43 13,427,573.61 9,429,957.22 3,754,851.36 19,117,579.53 101,133,358.78 373,811.81 $101,507,170.59 June 30, 2003 $41,062,530.86 1,113,229.95 7,184,899.93 5,480,767.52 12,884,991.02 9,593,886.06 3,505,326.35 18,778,135.84 99,603,767.53 397,304.49 $100,001,072.02 Tuition revenues accounted for the largest increase in revenues for the year of $3,355,687.26. This was the result of an increase in enrollment as well as a tuition increase of approximately 10%. Auxiliary Revenues experienced a moderate increase of $1,094,809.82 during the year which is also attributable to rising enrollment. However, Athletics did have a small increase in its fees per student which impacted the increase as well. Finally, Grants and Contracts Revenue also increased $565,304.63, which is largely attributable to the acquisition of the Transition to Teaching grant that is a multi-year grant totaling $1,000,000. The compensation and employee benefits category decreased by approximately ($486,090.65). The decrease reflects the attrition concept implemented across the campus in response to state funding reductions. Utilities increased by approximately $12,255.97 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2004. Under non-operating revenues (expenses) state appropriations decreased by approximately ($3,250,712.09). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Valdosta State University. We are hopeful that the economy is now on an upward trend. Valdosta State University Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Valdosta State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 0 ,6 5 7 ,0 8 9 .7 1 ) 4 4 ,3 8 4 ,2 8 0 .7 2 (3 ,1 3 0 ,0 1 2 .4 1 ) 2 4 4 ,5 0 1 .1 0 8 4 1 ,6 7 9 .7 0 2 ,1 4 3 ,2 2 6 .2 8 $ 2 ,9 8 4 ,9 0 5 .9 8 June 30, 2003 ($ 4 7 ,1 7 3 ,9 6 5 .6 7 ) 4 9 ,0 8 2 ,3 0 0 .7 1 (3 ,1 3 9 ,9 7 5 .5 5 ) 5 9 7 ,4 5 5 .9 2 (6 3 4 ,1 8 4 .5 9 ) 2 ,7 7 7 ,4 1 0 .8 7 $ 2 ,1 4 3 ,2 2 6 .2 8 Capital Assets The University had two significant capital asset additions for facilities in fiscal year 2004. The Odum Library Addition, which was funded by Georgia State Finance and Investment Commission (GSFIC) at $12,652,804.62 was completed and placed into service during FY 2004. Further, the University accepted a gift of land from the VSU Foundation valued at $617,500.00 which is intended for future residence halls. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Valdosta State University has included the financial statements and notes for all required component units for FY2004. The Valdosta State University Foundation had Net Assets totaling $18,172,758 as of December 31, 2003, including Valdosta State University Annual Financial Report FY 2004 6 $12,861,450 in Investment assets and $3,984,536 in Long Term debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with continuing State funding reductions, the University was able to avoid a large decrease in Net Assets. The University anticipates the current fiscal year will be much like last and maintains a close watch over resources to preserve the University's ability to react to unknown internal and external issues. _______________________ Dr. Ronald M. Zaccari, President Valdosta State University Valdosta State University Annual Financial Report FY 2004 7 Statement of Net Assets VALDOSTA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Inventories Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash Investments Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Expendable C apital Projects Unrestricted TOTAL NET ASSETS June 30, 2004 $2,960,123.55 5,272,621.14 974,939.10 2,120,145.60 938,976.81 358,046.36 12,624,852.56 24,782.43 5,980,764.57 146,381.49 95,232,347.17 101,384,275.66 114,009,128.22 2,168,864.05 491,570.56 403,299.26 789,092.74 473,991.55 579,178.08 1,432,703.60 6,338,699.84 1,076,635.70 31,368.40 1,108,004.10 7,446,703.94 94,476,558.68 3,068,823.44 3,332,536.07 5,684,506.09 $106,562,424.28 Valdosta State University Annual Financial Report FY 2004 8 Valdosta State University Foundation Balance Sheet Valdosta State Univ ersity Foundation Balance Sheet (FASB) Decem ber 31, 2003 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Investm ents Pledges Receivable, net O ther A ssets C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $2,889,630.00 373,467.00 12,861,450.00 281,052.00 218,455.00 6,566,737.00 23,190,791.00 755,986.00 3,984,536.00 277,511.00 5,018,033.00 3,097,642.00 1,421,338.00 13,653,778.00 $18,172,758.00 Valdosta State University Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets VALDOSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Income (loss) $26,511,931.80 4,165,894.01 35,412.98 9,662,699.89 1,128,458.55 375,227.10 249,277.37 4,378,418.86 5,158,415.25 4,797,868.51 934,284.15 1,445,772.66 2,805,932.65 473,849.38 877,235.36 54,598,064.54 27,881,568.61 24,184,249.40 14,688,954.22 168,582.98 737,260.87 4,670,885.98 3,333,339.66 20,533,033.29 4,935,483.77 101,133,358.78 (46,535,294.24) Valdosta State University Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued June 30, 2004 NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O the r G ifts Investment Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O the r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year 44,077,402.72 227,463.11 150,700.19 34,377.26 92,157.36 548,127.72 (373,811.81) 27,481.46 44,783,898.01 (1,751,396.23) 12,659,288.07 621,620.00 13,280,908.07 11,529,511.84 95,054,682.30 (21,769.86) 95,032,912.44 $106,562,424.28 Valdosta State University Annual Financial Report FY 2004 11 Valdosta State University Foundation Statement of Activities Valdosta State University Foundation Statement of Activities (FASB) For the Year Ended December 31, 2003 Temporarily Unrestricted Restricted Permanently Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $344,685.00 36,313.00 230,905.00 775,154.00 1,523,805.00 2,910,862.00 $791,243.00 234,472.00 68,618.00 45,100.00 727,468.00 (1,523,805.00) 343,096.00 $1,236,983.00 134,676.00 1,876,701.00 3,248,360.00 $2,372,911.00 405,461.00 2,176,224.00 0.00 820,254.00 727,468.00 0.00 0.00 0.00 0.00 6,502,318.00 Expenses/Losses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 433,781.00 19.00 1,403,784.00 8,849.00 170,618.00 208,702.00 2,225,753.00 685,109.00 0.00 343,096.00 0.00 3,248,360.00 433,781.00 19.00 1,403,784.00 8,849.00 170,618.00 208,702.00 0.00 2,225,753.00 4,276,565.00 Net Assets Beginning Net Assets Ending Net Assets 2,412,533.00 $3,097,642.00 1,078,242.00 $1,421,338.00 10,405,418.00 $13,653,778.00 13,896,193.00 $18,172,758.00 Valdosta State University Annual Financial Report FY 2004 12 Statement of Cash Flows VALDOSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING A CTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investm ents Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $26,577,530.63 11,102,287.49 249,277.37 (39,528,421.81) (52,011,364.89) (8,836,779.99) 22,592.53 4,712,781.31 5,173,121.30 4,801,520.84 934,791.57 1,446,603.96 2,635,896.16 471,719.62 1,591,354.20 (40,657,089.71) 44,077,402.72 (205,482.52) 512,360.52 44,384,280.72 (2,677,304.62) (78,895.98) (373,811.81) (3,130,012.41) 244,501.10 244,501.10 841,679.70 2,143,226.28 $2,984,905.98 Valdosta State University Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($46,535,294.24) 4,935,483.77 (427.36) 132,504.77 12,498.10 603,698.47 (440,130.09) 678,619.72 (44,042.85) ($40,657,089.71) Valdosta State University had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions Valdosta State University Annual Financial Report FY 2004 14 VALDOSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Valdosta State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Valdosta State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Valdosta State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Valdosta State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Valdosta State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Valdosta State University) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, Valdosta State University is reporting the activity for the Valdosta State University Foundation. See Note 15. Component Units, for Valdosta State University Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Valdosta State University Annual Financial Report FY 2004 15 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Valdosta State University Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at cost on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Non-current Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as non-current assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Valdosta State University when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $12,659,288.07 to Valdosta State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Valdosta State University Annual Financial Report FY 2004 17 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Valdosta State University had accrued liability for compensated absences in the amount of $2,553,382.15 as of 7-1-2003. For FY2004, $1,896,527.62 was earned in compensated absences and employees were paid $1,940,570.47, for a net decrease of $44,042.85. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $2,509,339.30. 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Valdosta State University Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $2,902,108.17 60,947.56 369,480.34 $3,332,536.07 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $0.00 (153,951.22) 488,357.20 5,350,100.11 $5,684,506.09 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Valdosta State University, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Valdosta State University Annual Financial Report FY 2004 19 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Non-operating revenues: Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. Valdosta State University Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Valdosta State University) 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 50-1759: 1. Bonds, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Valdosta State University), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Valdosta State University Annual Financial Report FY 2004 21 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 C ash Deposits Investment Portfolio Accounts Total C ash Deposits C arrying Amount $2,801,443.83 Bank Balances $5,385,246.62 Risk C ategories 1 2 3 $100,000.00 $0.00 $5,285,246.62 $2,801,443.83 $5,385,246.62 $100,000.00 $0.00 $5,285,246.62 Valdosta State University Annual Financial Report FY 2004 22 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Type of Investments C ommon Stock C orporate Bonds Securities and C orporate Obligations Risk C ategories 1 2 $0.00 $0.00 3 $0.00 C arrying Amount $0.00 0.00 0.00 Totals $0.00 Investments Not Subject to C ategorizations: Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pool Short-Term Investments Total Investments $0.00 $0.00 $0.00 183,462.15 5,980,764.57 5,272,621.14 $11,436,847.86 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. Valdosta State University Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance State General Appropriations Allotment Other Less Allowance for Doubtful Accounts Net Accounts Receivable $173,360.69 479,354.91 974,939.10 1,498,239.24 3,125,893.94 30,809.24 $3,095,084.70 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $841,843.99 29,251.64 67,881.18 $938,976.81 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through Institutional Loan Funds and the Federal Perkins Loan Program (the Program). Institutional loans comprise $106,873.87 of the loans receivable at June 30, 2004. Each loan funds' characteristics are determined by the terms of the donor agreement. The University has not provided an allowance for uncollectible institutional loans in the financial statements, but writes off such loans if all collection efforts have been exhausted and the loan is under $3,000. The Federal Perkins Loan Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has not provided an allowance for uncollectible Perkins loans in the financial statements and is in the process of closing out all Perkins Loan Programs. Valdosta State University Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $1,679,485.21 973,115.84 2,652,601.05 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 312,900.00 97,020,503.22 4,598,091.00 14,061,345.92 2,112,129.12 16,771,086.19 134,876,055.45 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 29,219,298.45 2,236,351.17 9,072,356.91 437,818.33 12,307,910.46 53,273,735.32 Total Capital Assets, Being Depreciated, Net 81,602,320.13 Capital Assets, net $84,254,921.18 Additions $617,500.00 1,607,499.84 2,224,999.84 Reductions $0.00 1,128,420.52 1,128,420.52 Ending Balance 6/30/2004 $2,296,985.21 1,452,195.16 3,749,180.37 13,859,766.06 614,581.10 658,837.28 15,133,184.44 312,900.00 811,784.67 28,060.20 1,152,744.87 0.00 110,880,269.28 4,598,091.00 13,864,142.35 2,112,129.12 17,401,863.27 0.00 148,856,495.02 2,619,714.44 229,126.99 1,113,870.64 53,800.72 918,971.00 4,935,483.79 807,830.69 28,060.20 835,890.89 0.00 31,839,012.89 2,465,478.16 9,378,396.86 491,619.05 13,198,821.26 0.00 57,373,328.22 10,197,700.65 316,853.98 91,483,166.80 $12,422,700.49 $1,445,274.50 $95,232,347.17 In June 2004, the Valdosta State University Foundation gifted $617,500 in land to the University. Since the Foundation's fiscal year end is December 31, 2003, this capital asset is reflected in both entities' Statement of Net Assets as presented herein. Also, two property sales are in closing at present and the University has recorded the following capital assets that are also reflected as capital assets in the Foundation's Statement of Net Assets: 114 Georgia Avenue 218 Georgia Avenue Land Building Land Building $ 20,922.00 $135,991.14 $ 37,609.00 $174,204.86 Valdosta State University Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $39,186.74 364,112.52 $403,299.26 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations Beginning Balance July 1, 2003 $430,847.26 Additions $0.00 Reductions Ending Balance June 30, 2004 $78,895.98 $351,951.28 Current Portion $320,582.88 2,553,382.15 284,996.06 2,838,378.21 1,896,527.62 1,896,527.62 1,940,570.47 26,400.86 1,966,971.33 2,509,339.30 258,595.20 2,767,934.50 1,432,703.60 258,595.20 1,691,298.80 $3,269,225.47 $1,896,527.62 $2,045,867.31 $3,119,885.78 $2,011,881.68 Valdosta State University Annual Financial Report FY 2004 26 Note 9. Lease Obligations Valdosta State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for non-cancelable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $84,171.48 63,339.69 34,529.02 37,450.67 40,619.54 91,840.88 $594,000.00 492,000.00 369,000.00 228,600.00 180,600.00 180,600.00 351,951.28 0.00 $351,951.28 $2,044,800.00 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2010. Expenditures for fiscal year 2004 were $108,071.28 of which $29,175.30 represented interest. Total principal paid on capital leases was $78,895.98 for the fiscal year ended June 30, 2004. Interest rates range from 4.59 percent to 8.15 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: Land Equipment Buildings Totals $ 182,141.73 5,700.03 1,924,287.36 $ 2,112,129.12 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Valdosta State University Annual Financial Report FY 2004 27 With the exception of the equipment lease of $5,700.03 and associated debt of $2,681.46, all other capital leases and associated debt at June 30, 2004, relates to leases with the VSU Foundation. Additional information provided in Footnote 8. The University at its option may terminate the leases. OPERATING LEASES Valdosta State University's non-cancelable operating leases having remaining terms of more than one year expire in various fiscal years from 2005 through 2010. Other operating leases provide for annual renewal options for a period not to exceed nine years. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are Buildings that do not meet capitalization requirements, copiers, and other small business equipment. Operating lease expenditures in 2004 were $594,000.00. Valdosta State University Annual Financial Report FY 2004 28 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Valdosta State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Valdosta State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Valdosta State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $2,870,027.54 $2,968,322.25 $2,912,449.91 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Valdosta State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in Valdosta State University Annual Financial Report FY 2004 29 accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Valdosta State University and the covered employees made the required contributions of $1,611,626.43 (10.03%) and $803,460.21 (5%), respectively. Georgia Defined Contribution Plan Plan Description Valdosta State University 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $83,506.20 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Valdosta State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self- Valdosta State University Annual Financial Report FY 2004 30 insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Valdosta State University, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Valdosta State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Valdosta State University (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and Valdosta State University Annual Financial Report FY 2004 31 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 325 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Valdosta State University recognized as incurred $1,275,079.38 of expenditures, which was net of $428,077.30 of participant contributions. Valdosta State University Annual Financial Report FY 2004 32 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below. Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $27,623,464.49 2,511,120.01 7,494,931.76 52,034.12 221,631.16 124,145.46 434,886.44 2,162,390.54 300,466.46 $30,194.52 38,366.45 9,157.58 6,470.15 33,966.94 795.40 $192,221.10 682,401.36 194,179.50 11,401.06 83,869.55 3,377.00 201,192.44 143,063.33 $21,826.00 3,381,330.57 851,730.30 13,146.87 198,836.77 29,841.07 1,027,172.03 1,228,124.20 $0.00 3,090,952.82 823,493.56 19,303.17 80,559.36 67,350.80 1,967,995.00 46,007.72 $2,050.00 5,633,090.15 2,584,779.11 37,989.07 64,897.27 164,542.20 4,514,687.21 425,538.60 Total Expenses $40,925,070.44 $118,951.04 $1,511,705.34 $6,752,007.81 $6,095,662.43 $13,427,573.61 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 3,309,706.12 1,205,334.79 (982,887.43) 3,933.53 2,364,128.04 1,166,330.80 2,363,411.37 $ 0.00 3,754,851.36 $ 11,812.50 5,537,281.92 1,525,347.62 1,017,596.12 77,063.08 788,512.16 272,591.11 9,459,298.33 428,076.69 $ 0.00 Total Expenses $ 9,429,957.22 $ 3,754,851.36 $ 19,117,579.53 $ 0.00 Total Expenses $ 27,881,568.61 24,184,249.40 14,688,954.22 168,582.98 737,260.87 4,670,885.98 3,333,339.66 20,533,033.29 4,935,483.77 $ 101,133,358.78 Valdosta State University Annual Financial Report FY 2004 33 Note 15. Component Units Valdosta State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the university in support of its programs. The 25-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests are restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the University's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The Foundation's fiscal year is January 1 through December 31. During the year ended December 31, 2003, the Foundation distributed $1,506,097 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 102 Georgia Avenue, Valdosta, GA 31602. Investments for Component Units: Valdosta State University Foundation holds endowment investments in the amount of $12,861,450. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by donors. Valdosta State University Foundation, in conjunction with donors, has established a spending plan whereby 4.5% of the previous year's December 31 portfolio value may be expended. Long Term Liabilities for Component Units: Valdosta State University Foundation issued Bonds to finance the acquisition of facilities for Valdosta State University. The bonds mature serially and are collateralized by real estate. The interest rates for the 95 and 98 bonds are 4.8% and 5.0% respectively. The Foundation also incurred a Note Payable to a local financial institution to assist with updating University Athletic facilities. For consolidated reporting purposes, the following details must be considered. The Foundation has reported this transaction as a receivable from the University and as a long-term liability of $268,892.41. Since the University retains ownership of the facility, the University has recorded a capital asset and long-term liability. The Foundation entry should be eliminated for consolidated reporting. Valdosta State University Annual Financial Report FY 2004 34 Changes in long-term liabilities for the Foundation for the fiscal year ended December 31, 2003 are shown below: Revenue Bonds Payable 95 Bond 98 Bond Note Payable Total Long TermDebt January 1, 2003 Additions Reductions December 31, 2003 One Year $2,106,241.00 3,148,582.00 $327,145.00 $5,581,968.00 $0.00 $266,405.00 543,245.00 49,062.00 $0.00 $858,712.00 $1,839,836.00 2,605,337.00 278,083.00 $266,404.00 343,390.00 278,083.00 $4,723,256.00 $887,877.00 Debt Service Obligations for Component Units Annual debt service requirements to maturity for component unit's revenue bonds and note payable are as follows: Bonds and Note Payable Year Ending December 31: 2004 2005 2006 2007 2008 2009 t hrough 2013 Year 1 2 3 4 5 6-10 Prin c ip a l $703,951.00 456,818.00 479,666.00 503,658.00 528,849.00 1,311,594.00 Interes t Total $183,926.00 152,976.00 130,128.00 106,137.00 80,945.00 84,608.00 $887,877.00 609,794.00 609,794.00 609,795.00 609,794.00 1,396,202.00 $3,984,536.00 $738,720.00 $4,723,256.00 Valdosta State University Annual Financial Report FY 2004 35 WAYCROSS COLLEGE Financial Report For the Year Ended June 30, 2004 Barbara P. Losty President Waycross College Waycross, Georgia William E. Deason Vice President for Business Affairs WAYCROSS COLLEGE ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Waycross College Foundation Balance Sheet .....................................................9 Statement of Revenues, Expenses and Changes in Net Assets ...............................10 Waycross College Foundation Statement of Activities ..........................................12 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ...................................................... 15 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 21 Note 3 Accounts Receivable............................................................................................. 24 Note 4 Inventories............................................................................................................. 24 Note 5 Notes/Loans Receivable........................................................................................ 24 Note 6 Capital Assets........................................................................................................ 25 Note 7 Deferred Revenue.................................................................................................. 26 Note 8 Long-Term Liabilities ........................................................................................... 26 Note 9 Lease Obligations.................................................................................................. 26 Note 10 Retirement Plans ................................................................................................. 27 Note 11 Risk Management................................................................................................ 28 Note 12 Contingencies...................................................................................................... 29 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 14 Natural Classifications With Functional Classifications..................................... 31 Note 15 Component Units ........................................................................ 32 WAYCROSS COLLEGE Management's Discussion and Analysis Introduction Waycross College is one of the 34 institutions of the University System of Georgia. The College, located in Waycross, Georgia, was founded in 1976 and has become known for its high academic standards in its liberal arts transfer programs. The College offers associate degrees in a wide variety of subjects and a limited number of certificate programs. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,300 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty Students FY2004 FY2003 FY2002 21 2,570 21 2,332 21 2,180 Overview of the Financial Statements and Financial Analysis Waycross College is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Waycross College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major Waycross College Annual Financial Report FY 2004 1 categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $928,952.52 8,998,826.53 261,007.80 10,188,786.85 June 30, 2003 $858,695.93 9,345,652.58 246,417.25 10,450,765.76 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities 245,288.59 149,253.47 394,542.06 311,879.81 153,351.67 465,231.48 Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 8,998,826.53 130,240.03 100,434.36 564,743.87 $9,794,244.79 9,345,652.58 130,240.03 92,305.89 417,335.78 $9,985,534.28 The total assets of the institution decreased by ($261,978.91). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($346,826.05) of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($70,689.42). The primary cause for the decrease was in current liabilities, primarily ($41,225.41) in deferred revenue and ($15,375.78) in compensated absences. The combination of the decrease in total assets of ($261,978.91) and the decrease in total liabilities of ($70,689.42) yields a decrease in total net assets of ($191,289.49). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($346,826.05). Waycross College Annual Financial Report FY 2004 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2004 Operating Revenues $2,498,404.98 June 30, 2003 $2,269,397.63 Operating Expenses Operating Loss 6,341,506.35 (3,843,101.37) 6,683,924.95 (4,414,527.32) Nonoperating Revenues and Expenses 3,491,974.70 3,626,458.42 Income (Loss) B efore other revenues, expenses, gains or losses (351,126.67) (788,068.90) Other revenues, expenses, gains or losses 159,895.18 Increase in Net Assets (191,231.49) (788,068.90) Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 9,985,534.28 (58.00) 9,985,476.28 10,323,231.38 450,371.80 10,773,603.18 Net Assets at End of Year $9,794,244.79 $9,985,534.28 The Statement of Revenues, Expenses, and Changes in Net Assets reflects some positives although there was 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: Waycross College Annual Financial Report FY 2004 3 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal A ppropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O th e r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investm ent Income O th e r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $721,408.28 1,237,366.44 36,921.43 481,476.67 21,232.16 2,498,404.98 3,452,921.51 7,166.05 32,002.39 (115.25) 3,491,974.70 159,895.18 159,895.18 $6,150,274.86 June 30, 2003 $635,522.12 1,174,424.01 21,971.85 423,932.63 13,547.02 2,269,397.63 3,606,126.44 4,723.97 16,823.89 (1,215.88) 3,626,458.42 0.00 $5,895,856.05 Waycross College Annual Financial Report FY 2004 4 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital Assets) Total Expenses June 30, 2004 $1,640,953.07 848,712.30 681,287.75 1,041,492.16 679,738.14 576,884.02 445,865.46 426,573.45 6,341,506.35 0.00 $6,341,506.35 June 30, 2003 $1,638,566.48 802,309.36 687,686.96 1,136,495.73 797,194.04 647,144.50 406,630.03 567,897.85 6,683,924.95 0.00 $6,683,924.95 Total operating revenue increases of $ 229,007.35 are primarily due to a $193,222.03 increase in student tuition and fees; a $62,942.43 increase in grants and contracts; and a $57,544.04 increase in auxiliary enterprise revenue. Total operating expense decreased by ($342,418.60). Salaries and benefits cost decreased by ($179,420.12), scholarships decreased by ($70,260.48), utilities by ($4,103.34), supplies and other services by ($72,392.85), and depreciation by ($27,110.51). Travel cost increased by $10,284.70. These decreases are due primarily to budget reductions. The compensation and employee benefits category decreased by approximately ($179,420.12). The decrease reflects reductions in staff and associated benefits as well as a credit received from the University System Insurance Reserve. . Utilities decreased by approximately ($4,103.34) during the past year. The decrease was primarily associated with conservation measures. Under non-operating revenues (expenses) state appropriations decreased by approximately ($153,204.93). The reduction of state appropriations system-wide, due to a sluggish economy, has created a challenge for all institutions of the University System of Georgia and, thus, for Waycross College. We are hopeful that the economy is now on an upward trend. Waycross College Annual Financial Report FY 2004 5 Statement of Cash Flows The final statement presented by the Waycross College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 3 ,2 3 1 ,5 3 8 .4 6 ) 3 ,4 7 4 ,1 9 6 .9 9 (4 2 ,7 5 1 .8 6 ) 9 ,7 0 4 .3 9 2 0 9 ,6 1 1 .0 6 5 1 2 ,5 1 6 .8 6 $ 7 2 2 ,1 2 7 .9 2 June 30, 2003 ($ 3 ,8 2 8 ,4 4 2 .6 5 ) 3 ,5 9 9 ,9 2 3 .3 1 (2 6 ,4 3 7 .3 6 ) (2 2 9 ,2 0 0 .0 4 ) (4 8 4 ,1 5 6 .7 4 ) 9 9 6 ,6 7 3 .6 0 $ 5 1 2 ,5 1 6 .8 6 Capital Assets Waycross College completed renovations to the Biology Lab in FY2004. The renovation of the Chemistry Lab had begun by year-end but was not completed. The $133,086.68 for these projects was funded by MRR funds which were administered by the Georgia State Finance and Investment Commission (GSFIC). Projected funding by GSFIC for FY2005 will be approximately $ 215,000. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, Waycross College has included the financial statements and notes for all required component units for FY2004. The Waycross College Foundation had endowment investments of $1.1 M as of June 30, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. Waycross College Annual Financial Report FY 2004 6 Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. Through a combination of increases in operating revenue, reductions in operating expenses that included reductions in full time staff positions, the College was able to manage another year of reductions in state funding. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. _______________________ Barbara P. Losty, President Waycross College Waycross College Annual Financial Report FY 2004 7 Statement of Net Assets WAYCROSS COLLEGE STATEMENT OF NET ASSETS June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other I n v e nto r ie s Other Assets Total C urrent Assets Noncurrent Assets Noncurrent C ash I n v e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects U n r e s tr ic te d TOTAL NET ASSETS June 30, 2004 $722,127.92 120,787.44 86,037.16 928,952.52 261,007.80 8,998,826.53 9,259,834.33 10,188,786.85 38,980.37 160,261.98 3,619.38 6,964.21 35,462.65 245,288.59 149,253.47 149,253.47 394,542.06 8,998,826.53 130,240.03 100,434.36 564,743.87 $9,794,244.79 Waycross College Annual Financial Report FY 2004 8 Waycross College Foundation Balance Sheet Waycross C ollege Foundation Balance Sheet (F ASB) June 30, 2004 A s s e ts C ash and C ash Equivalents Investm ents C om m on S tock Prepaid Expenses O ther A ssets Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $112,489.00 83,589.00 10,676.00 973.00 279.00 1,113,327.00 1,321,333.00 5,982.00 5,982.00 114,354.00 87,670.00 1,113,327.00 $1,315,351.00 Waycross College Annual Financial Report FY 2004 9 Statement of Revenues, Expenses and Changes in Net Assets WAYC ROSS C OLLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la r ie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $1,277,071.92 556,747.98 (1,084.34) 1,117,945.30 54,623.40 64,797.74 36,921.43 411,249.09 40,084.95 30,142.63 21,232.16 2,498,404.98 1,043,233.96 1,921,422.28 837,180.71 584.00 38,228.51 576,884.02 189,361.61 1,185,311.42 549,299.84 6,341,506.35 (3,843,101.37) Waycross College Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 3,452,921.51 7,166.05 32,002.39 (115.25) 3,491,974.70 (351,126.67) 159,895.18 159,895.18 (191,231.49) 9,985,534.28 (58.00) 9,985,476.28 $9,794,244.79 Waycross College Annual Financial Report FY 2004 11 Waycross College Foundation Statement of Activities Waycross College Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended June 30, 2004 Temporarily Permanently Unrestricted Restricted Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $37,946.00 1,278.00 1,576.00 $16,586.00 22,106.00 $110,117.00 756.00 57,115.00 54,885.00 33,191.00 128,876.00 (54,885.00) (33,191.00) (49,384.00) 167,988.00 $164,649.00 24,140.00 58,691.00 0.00 0.00 0.00 0.00 0.00 0.00 247,480.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 800.00 8,186.00 9,664.00 54,885.00 524.00 74,059.00 54,817.00 0.00 (49,384.00) 0.00 167,988.00 800.00 0.00 8,186.00 0.00 9,664.00 54,885.00 524.00 74,059.00 173,421.00 Net Assets Beginning Net Assets Ending Net Assets 59,537.00 $114,354.00 137,054.00 $87,670.00 945,339.00 $1,113,327.00 1,141,930.00 $1,315,351.00 Waycross College Annual Financial Report FY 2004 12 Statement of Cash Flows WAYC ROSS COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartm ents Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Em ployees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON-CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL AND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $1,243,606.27 1,352,080.80 37,753.13 (2,276,033.38) (2,966,040.13) (1,133,632.00) 420,655.30 40,178.56 29,989.18 19,903.81 (3,231,538.46) 3,452,921.51 14,109.43 7,166.05 3,474,196.99 133,086.68 (175,838.54) (42,751.86) (7,849.59) 17,553.98 9,704.39 209,611.06 512,516.86 $722,127.92 Waycross College Annual Financial Report FY 2004 13 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C om pensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($3,843,101.37) 549,299.84 120,953.67 2,539.81 944.96 (11,930.81) (31,080.54) 309.96 (19,473.98) ($3,231,538.46) ** NON-C ASH INVESTING, NON-C APITAL FINANC ING, AND C APITAL AND RELATED FINANC ING TRANSAC TIONS C hange in fair value of investm ents recognized as a com ponent of interest inco C hange in interest receivable affecting interest received ($9,003.05) $63.28 Waycross College Annual Financial Report FY 2004 14 WAYCROSS COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations Waycross College serves the southeastern region of Georgia by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Southeast Georgia. Reporting Entity Waycross College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Waycross College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Waycross College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Waycross College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Waycross College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the College's report. For FY2004, Waycross College is reporting the activity for the Waycross College Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement Waycross College Annual Financial Report FY 2004 15 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the College was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the 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 College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Waycross College Annual Financial Report FY 2004 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Waycross College when complete. For the year ended June 30, 2004, GSFIC transferred no capital additions to Waycross College. Deposits Deposits represent good faith deposits from students. Waycross College does not require student deposits. Deferred Revenues Deferred revenues include amounts received for tuition and fees and continuing education fees prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Waycross College Annual Financial Report FY 2004 17 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. 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. Waycross College had accrued liability for compensated absences in the amount of $204,190.10 as of 7-1-2003. For FY2004, $150,833.93 was earned in compensated absences and employees were paid $170,307.91, for a net decrease of $19,473.98. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $184,716.12. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Waycross College Annual Financial Report FY 2004 18 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Quasi-Endowm ents Total Restricted Ex pendable June 30, 2004 $100,434.36 $100,434.36 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets June 30, 2004 $190,773.84 145,835.87 11,253.30 216,880.86 $564,743.87 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Waycross 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 College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Waycross College Annual Financial Report FY 2004 19 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for sponsored and unsponsored scholarships. Waycross College Annual Financial Report FY 2004 20 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus Waycross 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, bill, 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Waycross College), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. Waycross College Annual Financial Report FY 2004 21 Categorization of Deposits The 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 College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the 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 College's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Ca r r y ing Amount Cash Deposits $674,694.58 Investment Portfolio Accounts Total Cash Deposits $674,694.58 Bank Balances $743,759.05 $743,759.05 Risk Categories 1 2 3 $100,000.00 $0.00 $643,759.05 $100,000.00 $0.00 $643,759.05 Waycross College Annual Financial Report FY 2004 22 Categorization of Investments The College's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the College or its agent in the College's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the College's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the College's name. At June 30, 2004, the College's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations Risk Ca te gorie s 1 2 $0.00 $0.00 3 $0.00 Ca rry ing Amount $0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 46,136.34 262,134.61 $308,270.95 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the College did not own any specific, identifiable investment securities of the pool. Waycross College Annual Financial Report FY 2004 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O ther Less A llowance for D oubtful A ccounts Net A ccounts Receivable $15,376.88 4,524.73 101,434.69 121,336.30 548.86 $120,787.44 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $68,752.75 5,371.03 11,913.38 $86,037.16 Note 5. Notes/Loans Receivable The College does not have Notes/Loans receivable. Waycross College Annual Financial Report FY 2004 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $358,789.49 358,789.49 Additions $0.00 7,350.00 7,350.00 Reductions $0.00 0.00 Ending Balance 6/30/2004 $358,789.49 7,350.00 366,139.49 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 1,343,722.00 10,910,220.50 980,473.00 1,243,115.53 1,110,165.80 15,587,696.83 669,901.43 3,279,641.95 691,462.06 889,913.24 1,069,915.06 6,600,833.74 8,986,863.09 $9,345,652.58 125,736.68 52,644.47 16,915.89 195,297.04 87,098.03 5,544.05 92,642.08 1,343,722.00 11,035,957.18 980,473.00 1,208,661.97 0.00 1,121,537.64 0.00 15,690,351.79 62,444.95 356,302.70 47,395.92 78,464.63 51,364.00 595,972.20 (400,675.16) ($393,325.16) 6,244.50 35,630.27 4,739.59 86,982.78 5,544.05 139,141.19 726,101.88 3,600,314.38 734,118.39 881,395.09 0.00 1,115,735.01 0.00 7,057,664.75 (46,499.11) 8,632,687.04 ($46,499.11) $8,998,826.53 Waycross College Annual Financial Report FY 2004 25 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $159,480.18 781.80 $160,261.98 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $0.00 Additions $0.00 Reductions Ending Balance June 30, 2004 $0.00 $0.00 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 204,190.10 150,833.93 204,190.10 150,833.93 $204,190.10 $150,833.93 170,307.91 170,307.91 184,716.12 0.00 184,716.12 $170,307.91 $184,716.12 Current Portion $0.00 35,462.65 35,462.65 $35,462.65 Note 9. Lease Obligations Waycross College is not obligated under any operating leases for the use of real property (land, buildings, and office facilities) and equipment, nor is it obligated under capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES Waycross College has no capital leases. OPERATING LEASES Waycross College has no operating leases. Waycross College Annual Financial Report FY 2004 26 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description Waycross College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of Waycross College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Waycross College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $212,282.36 $184,714.97 $180,268.71 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Waycross College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the Waycross College Annual Financial Report FY 2004 27 employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Waycross College and the covered employees made the required contributions of $ 101,019.02 (10.03%) and $ 50,358.69 (5%), respectively. Georgia Defined Contribution Plan Plan Description Waycross 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. Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $ 3,182.44 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Waycross College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Waycross College Annual Financial Report FY 2004 28 Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. Waycross College, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Waycross College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Waycross College (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the Waycross College Annual Financial Report FY 2004 29 policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 15 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Waycross College recognized as incurred $ 67,096.72 of expenditures, which was net of $29,414.15 of participant contributions. Waycross College Annual Financial Report FY 2004 30 Note 14. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $1,043,233.96 136,542.87 318,918.84 3,281.19 2,386.91 136,327.42 261.88 $0.00 $0.00 $0.00 372,216.20 108,580.15 11,536.68 33,884.59 261,181.42 61,313.26 $0.00 402,809.61 96,360.67 7,738.78 3,971.60 163,819.45 6,587.64 $0.00 654,620.87 200,577.69 584.00 15,238.83 4,776.14 163,842.45 1,852.18 Total Expenses $1,640,953.07 $0.00 $0.00 $848,712.30 $681,287.75 $1,041,492.16 Natural C lassification Plant Operations & Maintenance Func tional Classific ation F Y 2004 Scholarships Auxiliary Unallocated & Fellowships Enterprises Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 298,615.41 101,612.67 (4,176.13) 341.19 143,362.16 95,783.92 44,198.92 $ 0.00 576,884.02 $ 0.00 56,617.32 11,130.69 4,176.13 91.84 980.21 364,356.76 8,512.51 $ 0.00 426,573.45 Total Expenses $ 679,738.14 $ 576,884.02 $ 445,865.46 $ 426,573.45 Total Expenses $ 1,043,233.96 1,921,422.28 837,180.71 584.00 38,228.51 576,884.02 189,361.61 1,185,311.42 549,299.84 $ 6,341,506.35 Waycross College Annual Financial Report FY 2004 31 Note 15. Component Units Component Unit Notes Waycross College Foundation (foundation) is a legally separate, tax-exempt component unit of Waycross College (college). The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the college in support of its programs. The twenty four-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources or income thereon that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the college's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2004, the foundation distributed $ 74,059.00 to the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Office at 2001 South Georgia Parkway, Waycross, GA 31502. Investments for Component Units: Waycross College Foundation holds endowment investments in the amount of $1.1 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Waycross College Foundation, in conjunction with the donors, has established a spending plan whereby an amount equivalent to 5% of the endowed corpus may be paid from cash earnings for academic scholarships. All gains from investments are set aside as a reserve. Long Term Liabilities for Component Units: There are no long-term liabilities. Waycross College Annual Financial Report FY 2004 32 State University of West Georgia Financial Report For the Year Ended June 30, 2004 State University of West Georgia Carrollton, Georgia Beheruz N. Sethna President William N. Gauthier Vice President for Business and Finance STATE UNIVERSITY OF WEST GEORGIA ANNUAL FINANCIAL REPORT FY 2004 Table of Contents Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 State University of West Georgia Foundation Balance Sheet .................................10 Statement of Revenues, Expenses, and Changes in Net Assets .............................. 11 State University of West Georgia Foundation Statement of Activities ......................13 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Cash and Cash Equivalents, Other Deposits, and Investments............................. 22 Note 3 Accounts Receivable............................................................................................. 25 Note 4 Inventories............................................................................................................. 25 Note 5 Notes/Loans Receivable........................................................................................ 25 Note 6 Capital Assets........................................................................................................ 26 Note 7 Deferred Revenue.................................................................................................. 27 Note 8 Long-Term Liabilities ........................................................................................... 27 Note 9 Lease Obligations.................................................................................................. 28 Note 10 Retirement Plans ................................................................................................. 30 Note 11 Risk Management................................................................................................ 33 Note 12 Contingencies...................................................................................................... 34 Note 13 Post-Employment Benefits Other Than Pension Benefits .................................. 34 Note 14 Natural Classifications With Functional Classifications..................................... 35 Note 15 Component Units ........................................................................ 36 STATE UNIVERSITY OF WEST GEORGIA Management's Discussion and Analysis Introduction State University of West Georgia is one of the 34 institutions of the University System of Georgia. The State University of West Georgia, a charter member of the University System of Georgia, is a selectively focused, public comprehensive institution providing undergraduate and graduate education in arts and sciences, business and education. The University located in Carrollton, Georgia, was founded in 1906 and remains second to none in relation to our theme of Educational Excellence in a Personal Environment. In the fall of 2003, we had the highest headcount, highest credit hour generation and the highest SAT scores in the history of the University. West Georgia offers a range of disciplinary, interdisciplinary and professional programs at the baccalaureate level. The State University of West Georgia offers 113 programs of study, including 60 at the Bachelor's level, 52 at the Masters and Specialist level, and one Doctoral program. During fall semester, the Southern Association of Colleges and Schools (SACS) reaffirmed State University of West Georgia's accreditation for another 10 years, based on an accreditation visit in February 2003. In addition, the University has achieved national recognition in several areas including, academic debate, faculty-directed student research and athletic competition. The institution continues to grow as shown by the comparison that follows: Faculty Students FY2004 FY2003 FY2002 398 10,255 355 9,675 344 9,030 Overview of the Financial Statements and Financial Analysis State University of West Georgia is proud to present its financial statements for fiscal year 2004. The emphasis of discussions about these statements will be on current year data. 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for FY 2003 and FY 2004. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of State University of West Georgia. The Statement of Net Assets presents end- State University of West Georgia Annual Financial Report FY 2004 1 of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed A ssets: C urrent A ssets C apital A ssets, net O ther A ssets Total A ssets June 30, 2004 $16,206,907.84 56,213,475.19 1,863,246.96 74,283,629.99 June 30, 2003 $15,235,860.88 55,821,328.92 1,876,989.84 72,934,179.64 Lia b ilitie s : C urrent Liabilities Noncurrent Liabilities Total Liabilities Net A ssets: Invested in C apital A ssets, net of debt Restricted - nonexpendable Restricted - expendable C apital Projects U n r e s tr ic te d Total Net A ssets 8,147,016.52 901,201.25 9,048,217.77 56,142,434.82 2,060,580.45 7,032,396.95 $65,235,412.22 6,410,164.46 1,010,599.14 7,420,763.60 55,680,944.45 2,349,819.39 7,482,652.20 $65,513,416.04 The total assets of the institution increased by $1,349,450.35. A review of the Statement of Net Assets will reveal that the increase was primarily due to a reclassification of grant deferred revenues, which was not totally deferred in the prior year. This resulted in a net variance of $900,000.00. There was also an increase of $392,146.27 due to investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. State University of West Georgia Annual Financial Report FY 2004 2 The total liabilities for the year increased by $1,627,454.17. The primary cause for the increase was in current liabilities, primarily $872,692.68 in accounts payable activity due to higher volume of year end commitments and $616,461.15 increase in advance tuition and fee payments for summer semester. (This appears as a contingent liability in deferred revenue.) The ($109,397.89) decrease in non-current is due to a reduction in the compensated absence liability. The combination of the increase in total assets of $1,349,450.35 and the increase in total liabilities of $1,627,454.17 causes a decrease in total net assets of ($278,003.82). The decrease is due primarily to the overall increase in current liabilities versus current assets and can be summarized by the increase in deferred revenue. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present revenues received by the institution (both operating and nonoperating), the expenses paid by the institution, (operating and non-operating), and any other gains or losses that might impact the financial statements. Generally speaking operating revenues are the receipts for the goods and services provided by us, to our clients. Operating expenses are those expenses paid to acquire or produce the goods and services provided and to carry out the mission of the institution. Non-operating revenues are revenues, received that are not directly tied to an operating expense. An example is state appropriations, which are non-operating because they are provided by the Georgia Legislature without the Legislature directly receiving commensurate goods and services, Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operating Revenues Operating Expenses Operating Loss Nonoperating Revenues and Expenses Income (Loss) Before other revenues, expenses, gains or losses Other revenues, expenses, gains or losses Increase in Net Assets Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated Net Assets at End of Year June 30, 2004 $65,824,833.96 109,311,260.73 (43,486,426.77) 41,613,228.62 (1,873,198.15) 3,246,839.36 1,373,641.21 65,513,416.04 (1,651,645.03) 63,861,771.01 $65,235,412.22 June 30, 2003 $58,872,401.46 99,978,475.12 (41,106,073.66) 41,142,224.72 36,151.06 733,367.32 769,518.38 75,407,256.12 (10,663,358.46) 64,743,897.66 $65,513,416.04 The Statement of Revenues, Expenses, and Changes in Net Assets reflect an overall decrease in the net assets at the end of the year, after the prior year adjustment. Some highlights of the State University of West Georgia Annual Financial Report FY 2004 3 information presented on the Statement of Revenues, Expenses, and Changes in Net Assets, which can be better understood with reference to the statement of Revenues by Source are as follows: An overall increase in the operating revenues of $6.9 million, the impact of a 10% ($1.6 million) tuition increase granted by the Regents of the University System of Georgia, plus an increase in fall and spring head count and credit hours. We served 10,255 students in the fall, up from 9,674 in fall 2002, resulting in an additional $1.4 million in tuition revenue. The Federal Grants and Contracts increased $3.0 million, due entirely to an increase in Federal Direct Loans (part of the financial aid program), resulting from the larger numbers of students. The loan dollar value increased from $17.3 million to $20.5 million. Auxiliary revenues also increased by $1.4 million, the result of the additional students having an impact on bookstore sales, and food service revenues. During the summer of 2003, the food service facilities were completely renovated which had a significant impact on the food service program, and thus contributed to the increased revenue. Non operating revenues increased overall by $500,000 a result of a $1.7 million reduction in state operating funds during the fiscal year, offset by a gain in the net assets of $2.5 million due to prior year adjustments in the capital assets. (This is a further tweaking of our asset values, resulting from the conversion to GASB 39, and the asset revaluation in FY 2002). Investment income was down by $100,000, because of the continued weak economy. Capital gifts of $3.3 million were booked with the construction completion of the new Adamson Hall. This building is a reproduction of the earlier Adamson, which was one of the original campus buildings constructed in 1917. It was torn down two years ago. The new building looks like the original and will be used as offices and classrooms for the Richards College of Business and the Department of Continuing Education. Under non-operating revenues, state appropriations decreased by approximately ($1,677,588.95), caused by a 5.5% budget cut at the state level. The budget cuts continue to pose challenges for all institutions within the University System of Georgia. State University of West Georgia Annual Financial Report FY 2004 4 Revenue by Source For the Years Ended June 30, 2004 and June 30, 2003 Operating Revenue Tuition and Fees Federal Appropriations G rants and C ontracts Sales and Services of Educational D epartments A ux ilia r y O the r Total Operating Revenue Nonoperating Revenue State Appropriations G rants and C ontracts G ifts Investment Incom e O the r Total Nonoperating Revenue C apital G ifts and G rants S ta te Other C apital G ifts and G rants Total C apital G ifts and G rants Total Revenues June 30, 2004 $18,924,497.76 29,248,604.60 271,488.40 16,772,399.34 607,843.86 65,824,833.96 38,308,824.05 116,081.07 4,000.00 208,317.15 2,978,034.18 41,615,256.45 3,246,839.36 3,246,839.36 $110,686,929.77 June 30, 2003 $15,893,590.02 26,264,773.00 258,475.01 15,349,273.41 1,106,290.02 58,872,401.46 39,986,413.00 14,000.00 300,991.05 843,687.20 41,145,091.25 161,197.90 572,169.42 733,367.32 $100,750,860.03 State University of West Georgia Annual Financial Report FY 2004 5 Expenses (By Functional Classification) For the Years Ended June 30, 2004 and June 30, 2003 Operating Expenses I n s tr u c tio n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient C are (MC G only) Total Operating Expenses Nonoperating Expenses Interest Expense (C apital A ssets) Total Expenses June 30, 2004 $34,137,865.20 860,659.05 163,571.16 11,275,494.68 4,816,802.95 8,114,356.49 10,372,642.62 21,840,006.38 15,740,715.18 1,989,147.02 109,311,260.73 June 30, 2003 $33,042,336.23 922,605.36 176,203.62 9,820,240.78 4,468,874.19 7,685,324.44 8,283,586.30 18,542,333.21 13,384,178.04 3,652,792.95 99,978,475.12 2,027.83 $109,313,288.56 2,866.53 $99,981,341.65 Total expenditures increased by $9.3 million, with expenditure highlights as follows: An increase instructional expense of $1.0 million reflecting the increased cost of educating the additional students. An increase in academic support expense of $1.5 million reflecting increased support costs for the additional students in the areas of library collections, $552,000, and other library and instructional technology costs. Other areas of institutional support, student service support, reflect the costs of the additional students. Scholarships and fellowships, increased by $3.3 million reflecting the increased student financial aid. Auxiliary enterprises expenditures increased by $2.4 million reflecting the cost of generating revenue. The compensation and employee benefits category increased by approximately $1,263,149.57. The increase reflects a 10% increase in all health benefits and an increase in the number of faculty and staff employees. Per legislative directive and BOR budgeting practice, the University did not grant any salary increases in the 2004 fiscal year. This reflects the continued poor economic conditions in the state. Utilities increased by $354,523.59 during the past year. The increase was primarily associated with a combination of increased usage because of our record headcount, (more classes), a colder than normal winter, and overall rising utility costs. Also, during FY 2003, we had a credit of $200,000 a rebate against our utility costs, which understated the true cost in FY 2003. State University of West Georgia Annual Financial Report FY 2004 6 Statement of Cash Flows The final statement presented by the State University of West Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2004 and 2003, Condensed C ash Provided (used) By: Operating Activities Non-capital Financing Activities C apital and Related Financing Activities Investing Activities Net C hange in C ash C ash, Beginning of Year C ash, End of Year June 30, 2004 ($ 4 0 ,1 5 1 ,7 6 2 .2 8 ) 4 1 ,1 1 3 ,2 8 6 .6 6 (1 ,9 1 1 ,8 6 0 .8 0 ) 2 0 8 ,3 1 7 .1 5 (7 4 2 ,0 1 9 .2 7 ) 1 4 ,0 2 3 ,4 2 3 .1 2 $ 1 3 ,2 8 1 ,4 0 3 .8 5 June 30, 2003 ($ 4 0 ,1 9 7 ,8 9 3 .0 8 ) 4 1 ,1 6 0 ,0 6 3 .9 0 (2 ,4 3 5 ,7 1 4 .8 2 ) 3 0 0 ,9 9 1 .0 5 (1 ,1 7 2 ,5 5 2 .9 5 ) 1 5 ,1 9 5 ,9 7 6 .0 7 $ 1 4 ,0 2 3 ,4 2 3 .1 2 Capital Assets The University had significant capital asset additions for facilities in fiscal year 2004. A new parking lot (400 vehicles) was completed at a cost of $456,000 the new Adamson Hall was completed at a cost of $3.2 million, Row Hall was renovated (mechanical systems and new windows) $976,000 and the Z-6 and UCC food service facilities were completely renovated, with our ARAMARK partners. Cost to the university was $400,000, for infrastructure improvements. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Component Units In compliance with GASB Statement No. 39, State University of West Georgia has included the financial statements and notes for all required component units for the calendar year 2003. The State University of West Georgia Foundation had endowment investments $11,314.911 as of December 31, 2003. The UWG Real Estate Foundation does not have any assets at the end of June 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 15, Component Units. State University of West Georgia Annual Financial Report FY 2004 7 Economic Outlook The University continues to enjoy significant growth in student headcount. Our numbers increased by 580 students, the second year in a row with an increase in the 6-7% range, and the fourth record setting year in a row. Facilities projects designed to enhance campus life include the completion of our privatized University Suites housing facility (612 beds in partnership with the State University of West Georgia Foundation), a second phase of housing (602 beds) which will start construction this fall and is scheduled for completion in fall 2005, a new privatized campus center, and the Health Wellness and Lifelong Learning Center, which we expect will start construction in the summer of 2005. All of these projects are expected to increase the number of on campus residents and further our efforts toward positive growth and retention. Overall, the growth comes at a time when we continue to have budget cuts. The cumulative effect, on operating funds in the last three years is about 16.3%, or a total of $5.2 million. This does not include the $748,000 we lost in MRR (maintenance, repair and rehabilitation) funds in 2003. Because of the budget cuts we are having a difficult time maintaining services at our usual high levels of customer support. We continue to make our case for additional funding and in FY 2005, the USG revised their budget allocation system to adjust allocations for some of the underfunded schools, State University of West Georgia, being one of them. The additional funds are welcome and we are very grateful, but we still have a long way to go to achieve even modest parity within our sector. With the additional funds, we should be able to make improvements in the under-funded areas unless there are further budget cuts. The overall market position of the university is strong, and although we have some challenges on the financial resource side, we have a strong administrative team, that pulls together even as our resources per student continue to decline. We continue to manage this institution efficiently. As we move into FY 2005 we expect strong continued growth in undergraduate enrollment, a tight budget because of the weak economy, the continued need to manage our resources very efficiently, and the maintaining of our conservative approach to budget forecasting and management. _______________________ Beheruz N. Sethna, President State University of West Georgia _______________________ William N. Gauthier, Vice President for Business and Finance State University of West Georgia State University of West Georgia Annual Financial Report FY 2004 8 Statement of Net Assets STATE UNIVERSITY OF WEST GEORGIA STATEMENT OF NET ASSETS June 30, 2004 June 30, 2004 ASSETS Current Assets C ash and C ash Equivalents $13,281,403.85 Short-term Investments 600,000.00 Accounts Receivable, net Receivables - Federal Financial Assistance 481,953.61 Receivables - State General Appropriations Allotment Receivables - Other 643,798.63 I n v e n to r ie s 759,002.40 Other Assets 440,749.35 Total C urrent Assets 16,206,907.84 Noncurrent Assets Noncurrent C ash I nv e s tm e nts Notes Receivable, net C apital Assets, net Total Noncurrent Assets TOTAL ASSETS LIA BILIT IE S Current Liabilities Accounts Payable and Accrued Liabilities D e p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations C urrent Portion of Long-term Debt C ompensated Absences (current portion) Total C urrent Liabilities Noncurrent Liabilities C ompensated Absences Long-term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in C apital Assets, net of related debt Restricted for Nonexpendable Ex p e nd a b le C apital Projects Unr e s tr ic te d TOTAL NET ASSETS 1,863,246.96 56,213,475.19 58,076,722.15 74,283,629.99 1,315,705.73 359,952.50 4,216,349.66 125,366.99 963,709.08 11,840.60 1,154,091.96 8,147,016.52 893,842.60 7,358.65 901,201.25 9,048,217.77 56,142,434.82 2,060,580.45 7,032,396.95 $65,235,412.22 State University of West Georgia Annual Financial Report FY 2004 9 State University of West Georgia Foundation Balance Sheet State Univ ersity of West Georgia Foundation Balance Sheet (FASB) Decem ber 31, 2003 A s s e ts C ash and C ash Equivalents Notes and Mortgages Receivable Endowm ent Investm ents Pledges Receivable, net Investm ents in Real Estate C apital A ssets, net Total A ssets Lia b ilitie s A ccounts Payable and A ccrued Liabilities D eposits Long-Term Debt Liabilities under S plit-Interest A greem ents Total Liabilities Net Assets U n r e s tr ic te d Tem porarily Restricted Perm anently Restricted Total Net A ssets $1,955,601.00 4,509.00 10,588,942.00 1,031,423.00 4,500.00 13,584,975.00 0.00 457,587.00 1,068,842.00 12,058,546.00 $13,584,975.00 State University of West Georgia Annual Financial Report FY 2004 10 Statement of Revenues, Expenses and Changes in Net Assets STATE UNIVERSITY OF WEST GEORGIA STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS for the Year Ended June 30, 2004 June 30, 2004 RE VE NU E S Operating Revenues Student Tuition and Fees Less: Sponsored and Unsponsored Scholarships Less: Uncollectible Accounts Federal Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r Sales and Services of Educational D epartments Auxiliary Enterprises Residence Halls B o o k s to r e Food Services P a r k in g /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues E XPE NS E S Operating Expenses S a la rie s : Fa c u lty S ta ff B e n e fits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D epreciation Total Operating Expenses Operating Incom e (loss) $24,002,585.67 5,035,101.16 42,986.75 27,586,460.39 713,185.45 948,958.76 271,488.40 5,578,360.65 3,305,938.03 3,336,414.78 568,526.38 1,326,717.80 2,214,520.44 441,921.26 607,843.86 65,824,833.96 21,989,066.52 23,131,899.99 12,459,575.65 823,894.72 22,552,432.14 3,141,292.06 21,727,139.19 3,485,960.46 109,311,260.73 (43,486,426.77) State University of West Georgia Annual Financial Report FY 2004 11 Statement of Revenues, Expenses and Changes in Net Assets, Continued NONOPERA T ING REVENUES (EXPENSES) State Appropriations G rants and C ontracts Fe d e r a l S ta te O th e r G ifts Investm ent Incom e (endowm ents, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Incom e before other revenues, expenses, gains, or loss C apital G rants and G ifts Fe d e r a l S ta te O th e r Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustm ents Net Assets-beginning of year, restated Net Assets-End of Year June 30, 2004 38,308,824.05 116,081.07 4,000.00 208,317.15 (2,027.83) 2,978,034.18 41,613,228.62 (1,873,198.15) 3,246,839.36 3,246,839.36 1,373,641.21 65,513,416.04 (1,651,645.03) 63,861,771.01 $65,235,412.22 State University of West Georgia Annual Financial Report FY 2004 12 State University of West Georgia Foundation Statement of Activities State University of West Georgia Foundation Statement of Activities (Functional Display) (FASB) For the Year Ended December 31, 2003 Temporarily Unrestricted Restricted Permanently Restricted Total Re v e nue s Gifts Investment Income Net Realized and Unrealized Gain on Securities Gain on Sale of Real Estate Rental Income Other Income Reclassifications Program Equipment Acquisition Time Total Revenues $226,937.00 226,937.00 $1,240,832.00 24,685.00 233,843.00 1,499,360.00 $1,225,709.00 1,943,964.00 10,669.00 3,180,342.00 $2,693,478.00 1,968,649.00 0.00 0.00 0.00 244,512.00 0.00 0.00 0.00 4,906,639.00 Expenses Instruction Research Institutional Support Academic Support Student Services Student Financial Aid Fundraising Total Expenses C hange in Net Assets 35,322.00 771,380.00 720,159.00 69,817.00 105,139.00 121,798.00 295,819.00 22,040.00 1,809,398.00 (310,038.00) 2,451.00 189,655.00 175,470.00 367,576.00 2,812,766.00 773,831.00 0.00 945,136.00 0.00 0.00 541,106.00 22,040.00 2,282,113.00 2,624,526.00 Net Assets Beginning Net Assets Ending Net Assets 335,789.00 $457,587.00 1,378,880.00 $1,068,842.00 9,245,780.00 $12,058,546.00 10,960,449.00 $13,584,975.00 State University of West Georgia Annual Financial Report FY 2004 13 Statement of Cash Flows STATE UNIVERSITY OF WEST GEORGIA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2004 CA SH F LOWS F ROM OPERA TING A CTIVITIES Tuition and Fees Federal Appropriations G rants and C ontracts (Exchange) Sales and Services of Educational D epartments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees C ollection of Loans to Students and Employees Auxiliary Enterprise C harges: Residence Halls B o o k s to r e Food Services P a r k ing /T r a n s p o r ta tio n Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net C ash Provided (used) by Operating Activities CA SH F LOWS F ROM NON- CA PITA L F INA NCING A CTIVITIES State Appropriations Agency Funds Transactions G ifts and G rants Received for Other Than C apital Purposes Net C ash Flows Provided by Non-capital Financing Activities CA SH F LOWS F ROM CA PITAL A ND RELA TED F INA NCING ACTIVITIES C apital G rants and G ifts Received Proceeds from sale of C apital Assets Purchases of C apital Assets Principal Paid on C apital D ebt and Leases Interest Paid on C apital D ebt and Leases Net C ash used by C apital and Related Financing Activities CA SH F LOWS F ROM INVESTING A CTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investm ents Purchase of Investments Net C ash Provided (used) by Investing Activities Net Increase/Decrease in C ash C ash and C ash Equivalents - Beginning of year C ash and C ash Equivalents - End of Year June 30, 2004 $18,903,035.53 8,365,846.27 271,488.40 (38,160,202.86) (45,076,018.30) (2,051,781.14) (481,664.59) 495,407.47 5,704,128.87 3,240,748.66 3,356,716.14 561,079.24 1,306,090.19 2,189,960.08 488,038.90 735,364.86 (40,151,762.28) 38,308,824.05 720,098.22 2,084,364.39 41,113,286.66 (1,898,905.24) (10,927.73) (2,027.83) (1,911,860.80) 208,317.15 208,317.15 (742,019.27) 14,023,423.12 $13,281,403.85 State University of West Georgia Annual Financial Report FY 2004 14 Statement of Cash Flows, Continued RECONCILIA T ION OF OPERA T ING LOSS T O NET CA SH PROVIDE D (USED) BY OPE RA T ING A CT IVIT IE S: Operating Income (loss) Adjustm ents to Reconcile Net Incom e (loss) to Net C ash Provided (used) by Operating Activities D epreciation C hange in Assets and Liabilities: Receivables, net I nv e n to r ie s Other Assets Accounts Payable Deferred Revenue Other Liabilities C ompensated Absences Net C ash Provided (used) by Operating Activities June 30, 2004 ($43,486,426.77) 3,485,960.46 (456,097.39) (81,350.27) (111,086.84) 239,760.38 155,468.64 152,718.60 (50,709.09) ($40,151,762.28) State University of West G eorgia had no Non-C ash Investing, Non-C apital Financing, or C apital and Related Financing Transactions State University of West Georgia Annual Financial Report FY 2004 15 STATE UNIVERSITY OF WEST GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2004 Note 1. Summary of Significant Accounting Policies Nature of Operations State University of West Georgia serves the state and national communities by providing its students with academic instruction that advances their fundamental knowledge, and prepares them for future careers by offering degrees at the bachelors, masters and doctoral level. Reporting Entity State University of West Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of State University of West Georgia as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. State University of West Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, State University of West Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus State University of West Georgia) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Balance Sheet and Statement of Activities) are reported discretely in the University's report. For FY2004, State University of West Georgia is reporting the activity for the State University of West Georgia Foundation and the UWG Real Estate Foundation. See Note 15. Component Units, for foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for 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 was required to implement State University of West Georgia Annual Financial Report FY 2004 16 GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the University was 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 GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University 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 University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University'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-university transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. State University of West Georgia Annual Financial Report FY 2004 17 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are recorded on the consumption method and are valued at cost using the weighted average method. Resale inventories are valued at cost using the first-in first-out ("FIFO") method. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University'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. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. 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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute 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. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to State University of West Georgia when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $3,246,839.36 to State University of West Georgia. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. State University of West Georgia Annual Financial Report FY 2004 18 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary 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 at year-end for financial statement purposes. 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. State University of West Georgia had accrued liability for compensated absences in the amount of $2,098,643.65 as of 7-1-2003. For FY2004, $1,584,659.90 was earned in compensated absences and employees were paid $1,635,368.99, for a net decrease of $50,709.09. The ending balance as of 6-30-2004 in accrued liability for compensated absences was $2,047,934.56. Noncurrent Liabilities Noncurrent 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 noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. State University of West Georgia Annual Financial Report FY 2004 19 Expendable Restricted Net Assets include the following: Restricted - E&G and O ther O rganized A ctiv ities Federal Loans Institutional Loans Term Endowm ents Q uasi-Endowm e nts Total Restricted Ex pendable June 30, 2004 $0.00 1,811,240.96 249,339.49 $2,060,580.45 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. June 30, 2004 R & R Reserve Reserve for Encumbrances Reserve for Inventory O ther Unrestricted Total Unrestricted Net A ssets $2,506,190.89 1,130,875.33 128,731.79 3,266,598.94 $7,032,396.95 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes State University of West Georgia, 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 University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: State University of West Georgia Annual Financial Report FY 2004 20 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. 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. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University, 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 University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for sponsored and unsponsored scholarships. State University of West Georgia Annual Financial Report FY 2004 21 Note 2. Cash and Cash Equivalents, Other Deposits, and Investments State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus State University of West 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 any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates 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 Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus State University of West Georgia), the option of exempting demand deposits from the collateral requirements. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. State University of West Georgia Annual Financial Report FY 2004 22 Categorization of Deposits The University'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 University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University'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 University's name, and amounts uncollateralized. Cash Deposits as of June 30, 2004 Cash Deposits Investment Portfolio Accounts Total Cash Deposits C arrying Amount $1,008,411.74 Bank Balances $1,008,411.74 Risk Categories 1 2 $100,000.00 $908,411.74 $1,008,411.74 $1,008,411.74 $100,000.00 $908,411.74 3 $0.00 $0.00 State University of West Georgia Annual Financial Report FY 2004 23 Categorization of Investments The University's investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University's name. At June 30, 2004, the University's investments consisted of the following: Ty pe of Inv estm ents C om m on S tock C orporate Bonds S ecurities and C orporate O bligations 1 $0.00 2 $0.00 3 $0.00 Amount 0.00 T o ta ls $0.00 Investm ents Not S ubject to C ategorizations: Board of Regents S hort-Term Fund Legal Fund Balanced Income Fund Total Return Fund Investm ent Portfolio A ccounts Mutual Funds Real Estate S tate Inv estm ent Pool S hort-Term Investm ents Total Inv estm ents $0.00 $0.00 $0.00 1,852,340.72 10,420,651.39 600,000.00 $12,872,992.11 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. State University of West Georgia Annual Financial Report FY 2004 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2004. June 30, 2004 S tudent Tuition and Fees A ux iliary Enterprises and O ther O perating A ctiv ities Federal Financial A ssistance S tate G eneral A ppropriations A llotm ent O th e r Less A llowance for D oubtful A ccounts Net A ccounts Receiv able $257,723.58 111,245.37 481,953.61 274,829.68 1,125,752.24 $1,125,752.24 Note 4. Inventories Inventories consisted of the following at June 30, 2004. B ookstore Food Services Physical Plant O th e r T o ta l June 30, 2004 $627,127.20 131,875.20 $759,002.40 Note 5. Notes/Loans Receivable Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2004 and 2003. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was zero. State University of West Georgia Annual Financial Report FY 2004 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2004: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2003 $554,184.25 579,680.49 1,133,864.74 Additions $0.00 6,206,993.30 6,206,993.30 Reductions $0.00 6,028,286.77 6,028,286.77 Ending Balance 6/30/2004 $554,184.25 758,387.02 1,312,571.27 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 79,947,056.60 1,376,803.34 11,195,758.14 106,915.94 12,425,015.64 48,616.00 105,100,165.66 3,194,636.28 456,123.35 3,292,776.28 552,290.00 7,495,825.91 1,304,618.00 2,830,288.02 62,634.00 35,100.00 4,232,640.02 0.00 81,837,074.88 1,832,926.69 11,658,246.40 106,915.94 12,914,671.64 13,516.00 108,363,351.55 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 25,748.29 32,655,068.07 548,391.09 7,766,818.31 139,092.97 9,263,176.71 14,406.04 50,412,701.48 2,574.83 7,313,601.69 75,640.86 2,228,584.54 21,383.19 581,075.00 484.15 10,223,344.26 28,323.12 5,792,254.10 7,564.08 1,187,868.69 87,422.24 62,634.00 7,531.88 7,173,598.11 0.00 34,176,415.66 616,467.87 8,807,534.16 73,053.92 9,781,617.71 7,358.31 53,462,447.63 Total Capital Assets, Being Depreciated, Net 54,687,464.18 (2,727,518.35) (2,940,958.09) 54,900,903.92 Capital Assets, net $55,821,328.92 $3,479,474.95 $3,087,328.68 $56,213,475.19 State University of West Georgia Annual Financial Report FY 2004 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2004. Prepaid Tuition and Fees Research Other D eferred Revenue T o ta ls June 30, 2004 $2,968,913.36 1,247,436.30 $4,216,349.66 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2004 was as follows: Leases Lease Obligations Beginning Balance July 1, 2003 $30,126.98 Additions $0.00 Reductions Ending Balance June 30, 2004 $10,927.73 19,199.25 Current Portion $11,840.60 Other Liabilities Compensated Absences Other Long Term Liabilities Total Total Long Term Obligations 2,098,643.65 1,584,659.90 2,098,643.65 1,584,659.90 1,635,368.99 1,635,368.99 2,047,934.56 0.00 2,047,934.56 1,154,091.96 1,154,091.96 $2,128,770.63 $1,584,659.90 $1,646,296.72 $2,067,133.81 $1,165,932.56 State University of West Georgia Annual Financial Report FY 2004 27 Note 9. Lease Obligations State University of West Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Year Ending June 30: Year 2005 1 2006 2 2007 3 2008 4 2009 5 2010 through 2014 6-10 2015 through 2019 11-15 2020 through 2024 16-20 2025 through 2029 21-25 2030 through 2034 26-30 2035 through 2039 31-35 2040 through 2044 36-40 Total m inim um lease paym ents Less: Interest Less: Executory costs (if paid) Principal Outstanding Real Property C apital Leases O perating Leases $12,955.56 7,557.41 $333,708.79 290,479.87 162,676.41 131,297.06 97,170.58 68,392.53 20,512.97 1,313.72 $19,199.25 $1,083,725.24 CAPITAL LEASES The University has one capital lease on a printing and publications Imagesetter machine. The amount is $13,000 annually. The lease ends in 2006 and the current remaining obligation is $20,513. In June of 2004, the University entered into an agreement to purchase, for installation in July, 2004 a new University phone (PBX) system, to replace the Centrex system, through Bell South. The system will be leased through a financing agreement, negotiated between the USG, and Sun Trust. The system will be paid as a lease purchase over five years. The amount to be amortized is $1.4 million, with payments starting in FY 2005. There is no financial on the FY 2004 statements. State University of West Georgia Annual Financial Report FY 2004 28 OPERATING LEASES The State University of West Georgia had a total of 82 operating leases and 4 real estate leases for fiscal year 2004. The operating leases provide for various renewal options, on a one year annual basis, through the next six years. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and mailing systems. The real estate leases consist of three buildings and a rental fee for the use of a stadium. The building leases are one year, renewable obligations that extend for one to two more years. The stadium lease extends for three years. Operating lease expenditures, for equipment were $345,000 in 2004 and $289,000 in 2005. Real estate lease expenditures were $78,000 in 2004 and $61,000 for 2005. In spring 2003, the University entered into a ground lease with the State University of West Georgia Foundation, for the foundation to develop 612 beds of student housing. The University Suites were completed in the summer of 2004, for occupancy in fall 2004, FY 2005. The University has a rental agreement with the Foundation, to lease the facility, for the 25 years of bonded indebtedness. The monthly rent is $86,191, and the impact on FY 2005 is $948,101. This is a non-cancelable operating lease. The university does not have any non-cancelable leases that affect FY 2004. State University of West Georgia Annual Financial Report FY 2004 29 Note 10. Retirement Plans Teachers Retirement System of Georgia Plan Description State University of West Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees of State University of West Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. State University of West Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 2,194,986.27 $ 2,191,615.93 $ 2,129,640.40 Employees' Retirement System of Georgia Plan Description State University of West Georgia 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 of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years 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 State University of West Georgia Annual Financial Report FY 2004 30 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years 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 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2004, for employees covered by ERS was $46,000. The University's total payroll for all employees was $45,120,966.51. Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University 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 University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the University amount to 5.66% of covered payroll and included the amounts contributed on behalf of the employees 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 2004 amounted to $5,523.60, of which $2,603.60 was made by the University and $2,920.00 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. State University of West Georgia Annual Financial Report FY 2004 31 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy State University of West Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. State University of West Georgia and the covered employees made the required contributions of $1,712,668.53 (10.03%) and $853,774.27 (5%), respectively. Georgia Defined Contribution Plan Plan Description State University of West Georgia 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. State University of West Georgia Annual Financial Report FY 2004 32 Contributions 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. Total contributions made by employees during fiscal year 2004 amounted to $68,702.76 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Note 11. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. State University of West Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. 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. State University of West Georgia, as an organizational unit of the Board of Regents of the University 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the State University of West Georgia Annual Financial Report FY 2004 33 performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 12. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although State University of West Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against State University of West Georgia (an organizational unit of the Board of Regents of the University 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, 2004. Note 13. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2004, there were 380 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, State University of West Georgia recognized as incurred $1,333,553.76 of expenditures, which was net of $521,799.03 of participant contributions. State University of West Georgia Annual Financial Report FY 2004 34 Note 14. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2004 are shown below: Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 Functional Classification FY2004 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $21,316,509.47 4,138,556.10 6,163,448.25 463,585.37 9,844.37 208,811.67 1,810,148.31 26,961.66 $154,258.75 258,076.96 63,398.72 39,754.46 2,898.16 1,179.68 284,625.82 56,466.50 $0.00 123,076.94 30,277.62 2,742.28 1,376.92 6,097.40 $488,155.30 5,265,971.41 1,460,731.24 $17,018.00 2,795,798.48 684,655.66 127,419.37 67,426.42 3,060,861.81 804,929.13 51,520.14 4,105.00 49,145.39 1,211,437.49 3,122.79 $0.00 3,920,653.19 2,220,176.23 58,452.84 60,579.02 1,794,875.46 59,619.75 Total Expenses $34,137,865.20 $860,659.05 $163,571.16 $11,275,494.68 $4,816,802.95 $8,114,356.49 Natural C lassification Plant Operations & Maintenance Functional Classification F Y 2004 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $ 0.00 3,941,668.44 1,218,394.99 (2,115,626.07) 10,029.32 2,349,392.10 5,072,037.80 (103,253.96) $ 0.00 21,840,006.38 $ 13,125.00 2,688,098.47 618,492.94 2,115,626.07 70,390.94 695,578.23 403,380.86 8,487,055.10 648,967.57 $ 0.00 1,989,147.02 Total Expenses $ 10,372,642.62 $ 21,840,006.38 $ 15,740,715.18 $ 1,989,147.02 Total Expenses $ 21,989,066.52 23,131,899.99 12,459,575.65 0.00 823,894.72 22,552,432.14 3,141,292.06 21,727,139.19 3,485,960.46 $ 109,311,260.73 State University of West Georgia Annual Financial Report FY 2004 35 Note 15. Component Units Component Unit Notes-State University of West Georgia Foundation (Development) State University of West Georgia Foundation is a legally separate, tax-exempt component unit of State University of West Georgia. The foundation acts primarily as a fund-raising organization to supplement resources available to the university for support of its programs. The foundation board consists of approximately 40 members and is made up of alumni and friends of the university. Although the university does not control the timing or amount of receipts from the foundation, the majority of resources or income that the foundation holds and invests are restricted to the activities of the university by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the university, the foundation is considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the foundation's financial information in the university's financial reporting entity for these differences. However, the FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's fiscal year is January 1 through December 31, 2003. During the year ended December 31, 2003, the foundation distributed $1,314,937 to the University for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from the Administrative Offices at 1601 Maple St, Carrollton, GA 30118. Component Unit Notes-UWG Real Estate Foundation During the spring of 2004, the UWG Real Estate Foundation (foundation) was formed. By resolution of the Internal Revenue Service, (IRS), it is a legally separate, tax-exempt component unit of the State University of West Georgia (university). (The IRS ruling was issued August 23, 2004). The foundation was formed to construct auxiliary buildings and facilities for use by the university and then lease the completed buildings to the institution. The nine-member board of the foundation is self-perpetuating and is controlled by friends of the university. The foundation does not have any receipts or assets as of June 30, 2004. The first facility project will be a campus center, with construction expected to start in January, 2005, and be completed for use in mid 2006. The majority of resources or income thereon that the foundation is expected to generate will be restricted to the real estate activities of the university. Because these restricted resources held by the foundation will only be used by, or for the benefit of, the university, the foundation would be considered a component unit of the university and is discretely presented in the university's financial statements. The foundation is a private nonprofit organization that will report under FASB standards. State University of West Georgia Annual Financial Report FY 2004 36 Investments for Component Units: State University of West Georgia Foundation (Development) State University of West Georgia Foundation holds endowment investments in the amount of $11,314,911. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. State University of West Georgia Foundation, in conjunction with the donors, has established a spending plan whereby up to 5% of the corpus balance earnings may be used for academic scholarships and 1% to 3% may be used for an administrative fee. The remaining balance of the earnings are set aside as a reserve. The State University of West Georgia Housing Foundation, LLC was formed in July, 2003 to construct additional housing for the University. The Foundation is the sole member of this LLC. At December 31, 2003 the project was in progress with a targeted completion date of fall 2004. Long Term Liabilities for Component Units: State University of West Georgia Foundation (Development) Student Housing Bonds were issued by the State University of West Georgia Foundation to finance student housing on university property in the amount of $13,205,000. The bonds, serial and term, are secured by pledges of gross receipts from student housing at State University of West Georgia. The Foundation is financing the student housing project by issuing variable rate bonds. The rate is the Weekly Swap Index published by the Bond Market Association, adjusted weekly, with a cap of 12.0%. The current rate is 1.15%. I understand that the historical average rate over the last ten years has been 3.5%. The fixed bond rate for our project would be approximately 6.5%. The Foundation chose the variable rate bonds in order to take advantage of the low rates available at this time. In addition, the Foundation has the option of doing an "interest rate swap" if the rates increase by swapping all or a part of the debt for fixed rate bonds at a later time. Therefore, the Foundation has the flexibility to switch to a fixed rate. Changes in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: Revenue Bonds Payable Beginning Balance January 1, 2003 Additions Reductions Ending Amounts due Balance within December 31, 2003 One Year Student Housing $0.00 $13,205,000.00 $0.00 $13,205,000.00 $405,783.16 Total Long Term Debt $0.00 $13,205,000.00 $0.00 $13,205,000.00 $405,783.16 State University of West Georgia Annual Financial Report FY 2004 37 Debt Service Obligations for Component Unit: State University of West Georgia Foundation (Development) A nnual debt s ervice requirements to maturity for Student Hous ing revenue bonds payable are as follows : Bonds Payable Year Ending M arch 31: 2004 2005 2006 2007 2008 2009 t hrough 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26 Principal Interes t & LOC Total $0.00 375,000.00 385,000.00 400,000.00 2,185,000.00 2,565,000.00 3,005,000.00 3,520,000.00 770,000.00 $405,783.16 405,791.46 401,017.66 389,366.56 377,336.93 1,692,758.56 1,329,762.58 903,774.45 404,922.73 13,860.00 $405,783.16 405,791.46 776,017.66 774,366.56 777,336.93 3,877,758.56 3,894,762.58 3,908,774.45 3,924,922.73 783,860.00 $13,205,000.00 $6,324,374.09 $19,529,374.09 State University of West Georgia Annual Financial Report FY 2004 38