Annual financial report, fiscal year 2005

ANNUAL FINANCIAL REPORT
Board of Regents of the University System of Georgia
For the Year Ended: June 30, 2005
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Fiscal Year 2005 Annual Financial Report
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A Publication of the Office of Internal Audit 2005 Board of Regents of the University System of Georgia

ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA
For the Year Ended: June 30, 2005
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Consolidated Annual Financial Report

Institution Annual Financial Reports
q Georgia Institute of Technology q Georgia State University q Medical College of Georgia q University of Georgia q Georgia Southern University q Valdosta State University q Albany State University q Armstrong Atlantic State University q Augusta State University q Clayton State University q Columbus State University q Fort Valley State University q Georgia College and State University q Georgia Southwestern State University q Kennesaw State University q North Georgia College and State University q Savannah State University q Southern Polytechnic State University

q University of West Georgia q Dalton State College q Macon State College q Abraham Baldwin Agricultural College q Atlanta Metropolitan College q Bainbridge College q Coastal Georgia Community College q Darton College q East Georgia College q Floyd College q Gainesville College q Georgia Perimeter College q Gordon College q Middle Georgia College q South Georgia College q Waycross College q Skidaway Institute of Oceanography q University System Office

ANNUAL FINANCIAL REPORT
Board of Regents of the University System of Georgia
For the Year Ended June 30, 2005
"Creating a More Educated Georgia"

Board of Regents of The University System of Georgia
Annual Financial Report June 30, 2005
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 Revenues, Expenses and Changes in Net Assets ........................................ 32 Statement of Cash Flows .................................................................................................. 51
Notes to the Financial Statements
Note 1 Summary of Significant Accounting Policies .................................................. 52 Note 2 Deposits and Investments................................................................................. 59 Note 3 Accounts Receivable........................................................................................ 67 Note 4 Inventories........................................................................................................ 67 Note 5 Notes/Loans Receivable................................................................................... 67 Note 6 Capital Assets................................................................................................... 68 Note 7 Deferred Revenue............................................................................................. 69 Note 8 Long Term Liabilities ...................................................................................... 69 Note 9 Significant Commitments................................................................................ 69 Note 10 Lease Obligations............................................................................................. 69 Note 11 Retirement Plans .............................................................................................. 75 Note 12 Risk Management............................................................................................. 78 Note 13 Contingencies................................................................................................... 79 Note 14 Post Employment Benefits Other Than Pension Benefits................................ 79 Note 15 Natural Classifications with Functional Classifications .................................. 80 Note 16 Component Units ............................................................................................. 81

BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA
June 30, 2005

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, 2012
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, 2012

Elridge W. McMillan .................Atlanta Fifth District Term Expires January 1, 2010
Michael J. Coles ....................Kennesaw Sixth District Term Expires January 1, 2008
Richard L. Tucker..............Lawrenceville Seventh District Term Expires January 1, 2012
Connie Cater ............................Macon Eighth District Term Expires January 1, 2006
Patrick W. Pittard ......................Atlanta Ninth District Term Expires January 1, 2008
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

Joel O. Wooten, Jr.......................Chairman Timothy J. Shelnut ............. Vice Chairman Thomas C. Meredith ..................Chancellor

William R. Bowes .....................Treasurer Gail S. Weber .........Secretary to the Board

Annual Financial Report FY2005 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 13, 2006

Interim Chancellor Corlis P. Cummings Board of Regents University System of Georgia
Dear Interim Chancellor Cummings:
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, 2005.
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 FY2005 2

UNIVERSITY SYSTEM OF GEORGIA
Annual Financial Report FY2005 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 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 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 FY2005 4

STATE RESOURCES
The General Appropriations Act of 2005, as amended, provided a total of $1,670,074,292 to the University System of Georgia. In addition, indirect funding from the Department of Administrative Services (DOAS) provided $3,583,000 and House Bill 1181 provided $6,243,177 from Tobacco funds. The amounts were as follows:

STATE APPROPRIATIONS AVAILABLE General Appropriations Act of 2005 House Bill 1181
General State Funds Tobacco funds Indirect DOAS Funding - Communications House Bill 84 General State Funds
TOTAL STATE APPROPRIATIONS AVAILABLE

$1,651,799,330 6,243,177 3,583,000
18,274,962
$1,679,900,469

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 Total Educational and General

$10,021,056 30,156,111
493,379 2,831,338 17,295,253 33,349,738 20,651,083

TOTAL ALLOCATIONS BY BOARD OF REGENTS

$1,401,477,363 128,514,165 6,243,177
114,797,958 28,867,806

1,679,900,469 $1,679,900,469

Annual Financial Report FY2005 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 were led by Chancellor Thomas C. Meredith and the Board of Regents at June 30, 2005. The University System continues to thrive as shown by the following statistics:

Faculty

Students

FY2005 FY2004 FY2003

11,531 11,274 10,626

262,149 257,715 241,878

Overview of the Financial Statements and Financial Analysis

The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2005. 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 2004 and FY2005.

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 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.

Annual Financial Report FY2005 6

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

Asse ts: Current Assets Capital Assets, net Other Assets Total Assets

June 30, 2005
$947,979,849.96 4,296,787,691.41
186,302,259.14 5,431,069,800.51

June 30, 2004
$967,965,917.14 3,820,578,831.89
265,591,459.96 5,054,136,208.99

Liabilitie s : Current Liabilities Noncurrent Liabilities Total Liabilities

509,673,815.40 722,090,349.96 1,231,764,165.36

599,470,011.14 519,089,808.10 1,118,559,819.24

Ne t Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Ne t As s e ts

3,617,349,272.10 118,133,173.33 198,810,437.25 21,226,392.45 243,786,360.02
$4,199,305,635.15

3,344,344,298.42 110,605,284.81 214,894,160.38 48,794,309.89 216,938,336.25
$3,935,576,389.75

The total assets of the institution increased by $376,933,591.52. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $476,208,859.52 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 $113,204,346.12. The combination of the increase in total assets of $376,933,591.52 and the increase in total liabilities of $113,204,346.12 yields an increase in total net assets of $263,729,245.40. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $273,004,973.68.

Annual Financial Report FY2005 7

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, 2005

June 30, 2004

Operating Revenues Operating Expenses Operating Loss

$2,825,156,653.83 4,663,773,494.41 (1,838,616,840.58)

$2,589,007,666.01 4,329,890,871.25 (1,740,883,205.24)

Nonoperating Revenues and Expenses Income (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses Increase in Net Assets

1,788,577,591.48 (50,039,249.10)
301,253,507.11 251,214,258.01

1,723,746,569.65 (17,136,635.59)
398,545,015.20 381,408,379.61

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

3,935,576,389.75 12,514,987.39
3,948,091,377.14

3,604,648,977.55 (50,480,967.41)
3,554,168,010.14

Net Assets at End of Year

$4,199,305,635.15

$3,935,576,389.75

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:

Annual Financial Report FY2005 8

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2005
$695,664,180.31 11,537,500.71
1,221,599,455.04 105,786,007.00 391,461,435.97 399,108,074.80
2,825,156,653.83
1,676,360,954.76 61,806,941.42 54,754,440.68 22,855,806.20 8,173,142.86
1,823,951,285.92
276,013,805.56 25,239,701.55
301,253,507.11
$4,950,361,446.86

June 30, 2004
$670,113,329.92 13,885,343.98
1,185,964,548.75 55,585,260.69
362,483,691.01 300,975,491.66 2,589,007,666.01
1,628,294,046.57 75,818,809.02 26,898,053.28 11,076,681.72 6,176,855.63
1,748,264,446.22
288,947,516.91 109,597,498.29 398,545,015.20
$4,735,817,127.43

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
Total Operating Expenses

June 30, 2005
$1,323,314,195.56 724,674,718.51 381,049,885.70 325,414,901.69 173,525,170.80 638,303,116.65 350,471,825.78 143,593,840.78 365,456,631.37 65,781,126.24 172,188,081.33
4,663,773,494.41

Nonoperating Expenses Interest Expense (Capital Assets)

35,373,694.44

Total Expenses

$4,699,147,188.85

June 20, 2004
$1,141,553,684.34 710,589,107.88 377,577,598.69 312,467,204.85 164,330,214.03 630,479,986.72 304,703,195.62 147,295,114.37 320,677,234.64 61,550,568.19 158,666,961.92
4,329,890,871.25
24,517,876.57
$4,354,408,747.82

Annual Financial Report FY2005 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 University System 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 System. 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 noncapital 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, 2005 and 2004, 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

June 30, 2005
($1,498,551,179.64) 1,798,238,947.07 (218,233,085.12) (7,884,248.48) 73,570,433.83 467,098,895.47

June 30, 2004
(1,486,924,500.38) 1,747,145,363.31 (168,098,929.55)
(51,933,170.88) 40,188,762.50 477,104,740.67

Cash, End of Year

$540,669,329.30

$517,293,503.17

Capital Assets
The University System of Georgia had many significant capital asset additions and renovations during FY2005. Some of these additions and renovations include the following:
At Georgia Institute of Technology: The Married and Family Housing Complex and Parking Deck ($70.3M), The Food Processing Technology Building ($5.3M), and The Penny and Roe Stamps Student Center Commons ($6M).
At the University of Georgia: The East Campus Village Residence Halls ($73.2M), the East Village Commons Dining Hall ($17.2M), the Veterinary Bio-Resource Facility ($5.8M), the Hull Street Parking Deck ($9.5M), and the South Campus Parking Deck Expansion ($5.5M).
At Georgia State University: Atlanta Jail Property ($7.5M)
At the Medical College of Georgia: Major renovations to the Interdisciplinary Research Center ($7.9M)
At Valdosta State University: Renovations to Nevins Hall ($4.4M)

Annual Financial Report FY2005 10

At Augusta State University: Classroom Replacement ($18.9M) At Clayton State University: University Learning Center ($22.3M) At Fort Valley State University: Health and PE Building ($16.3M) At Georgia College and State University: Russell Library & Information Technology Center ($16.6M) At Georgia College and State University: Central Chiller ($3.9M) At Kennesaw State University: Classroom and Convocation Center ($13.9M) At Macon State College: Nursing, Health Science and Outreach Complex ($16.3M) At Darton College: Physical Education Building ($12.4M) For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the notes to the financial statements. Long-Term Debt and Liabilities The University System of Georgia had Long-Term Debts and Liabilities of $823,192,449.71 of which $101,102,099.75 was reflected as current liability at June 30, 2005. 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, the University System of Georgia has included the financial statements and notes for all required component units for FY2005. System-wide, there were 54 component units at 30 of the colleges and universities. All 54 component units are discretely presented in this consolidated Annual Financial Report. Nine of the foundations were also included as component units of the State of Georgia in the State Comprehensive Annual Financial Report (CAFR) for FY2005. The 54 component units had combined total assets of $4.8 billion and total liabilities of $2.3 billion at June 30, 2005. The assets included $2.1 billion in investments and $1.2 billion in capital assets. The liabilities included $1.9 billion in long-term liabilities. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.
Annual Financial Report FY2005 11

Economic Outlook After three years of budget cuts through fiscal year 2005, the University System of Georgia financial picture appears to be improving significantly. FY 2006 state appropriations for current University System of Georgia operations, including institutions and other organized activities, were $1.8 billion, an increase of 8.5%, or $140.7 million, over fiscal year 2005 appropriations. This was one of the largest percentage increases provided to higher education systems in the country. It restores the University System of Georgia's share of state funding to 11.5%. As a result of continuing strong state support, the University System of Georgia has had to rely less than most higher education systems on non-state revenue sources. Tuition rate increases this year of 8% for the University System of Georgia's research institutions and 5% for all other USG institutions have boosted total revenues for educational and general expenses to the highest levels ever. Total funds generated for the University System of Georgia, including all fund sources, now exceed $5 billion annually. With a solid base of state funding support, and the recent growth in appropriations and non-state revenues, the University System of Georgia remains financially strong. Enrollment in the system continues to grow although at rates lower than previously projected. Nonetheless, increases in funding based on enrollment growth (i.e., the funding formula) are projected to be fairly high in future years. There do not appear to be any conditions or economic factors on the horizon that would affect the University System of Georgia's operations or its financial position.
___________________________ William R. Bowes Vice Chancellor for Fiscal Affairs University System of Georgia
Annual Financial Report FY2005 12

Statement of Net Assets
UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005
AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Others Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expe nda ble Capital P rojects U nre s tric te d TOTAL NET ASSETS

Unive rs ity Sys te m of Ge orgia
(Primary Gove rnme nt)
$529,505,901.76 125,384,825.64
56,447,965.74
7,458,093.00 94,877,109.99
84,871,864.93
18,840,541.73 30,526,077.36
67,469.81 947,979,849.96
11,163,427.54 2,650,527.00
145,416.51 129,463,484.26
42,879,403.83
4,296,787,691.41
4,483,089,950.55 5,431,069,800.51
80,647,110.64 12,493,364.07 27,784,267.11
5,953,360.38 22,839,310.65 176,937,057.85
8,294,499.19 64,995,639.34
8,627,106.42
18,595,197.71
82,008,479.18 426,167.36 72,255.50
509,673,815.40
658,145,729.72 1,702,403.07
58,633,246.47
1,244,050.96 2,364,919.74 722,090,349.96 1,231,764,165.36
3,617,349,272.10
118,133,173.33 198,810,437.25
21,226,392.45 243,786,360.02 $4,199,305,635.15

Annual Financial Report FY2005 13

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Ge orgia Te ch Athle tic
As s ociation

Component Uni ts Ge orgia Te ch Fo undatio n

Ge orgia Te ch Re s e arch
Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble E xpe nda ble Capital P rojects U nre s tric te d TOTAL NET ASSETS

$7,335,336.00
1,241,436.00 3,719,002.00
27,000.00 388,032.00 510,579.00 13,221,385.00
61,369,437.00
7,775,926.00 105,438,994.00
2,872,088.00 177,456,445.00 190,677,830.00
2,058,377.00
5,565,801.00 767,501.00
235,897.00 1,779,481.00
751,616.00 11,158,673.00
108,994,692.00 108,994,692.00 120,153,365.00
(945,636.00) 12,467,317.00 43,646,392.00 15,356,392.00 $70,524,465.00

$3,125,000.00 4,800,000.00
5,941,918.33 6,539.00
728,000.00 6,263,233.19 20,864,690.52
1,003,837,000.00 1,284,000.00
175,409,227.81
5,182,081.67 42,842,000.00 21,540,000.00 1,250,094,309.48 1,270,959,000.00
1,517,592.87
9,575,932.07 10,302,000.00
5,131,821.08 4,115,633.03
268,430.75
30,911,409.80 61,369,437.00
285,073,153.20
346,442,590.20 377,354,000.00
3,175,346.57 296,172,000.00 266,785,093.97
12,031,906.03 315,440,653.43 $893,605,000.00

$35,665,205.00 1,387,956.00
29,210,625.00
17,310.00 66,281,096.00
2,428,892.00 31,409,896.00 33,838,788.00 100,119,884.00
1,967,309.00
34,387,629.00
36,354,938.00 26,989,798.00
26,989,798.00 63,344,736.00
2,428,892.00 34,346,256.00 $36,775,148.00

Annual Financial Report FY2005 14

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Ge orgia Advance d Te chnology Ve nture s

Component Uni ts Ge orgia Te ch Alumni As s ociation

Ge orgia Te ch Facilitie s , Inc.

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects Unrestricted TOTAL NET ASSETS

$1,583,777.00
1,513,345.00
3,097,122.00
76,585,105.00 76,585,105.00 79,682,227.00
849,726.00
1,500,000.00 75,632.00 14,374.00
2,439,732.00 49,631,945.00
6,821,580.00
56,453,525.00 58,893,257.00 20,076,225.00
712,745.00 $20,788,970.00

$1,837.00

$63,000.00

1,178,991.00
11,406.00 3,539.00
1,195,773.00

9,201,000.00 10,302,000.00 19,566,000.00

578,346.00

208,717,000.00

484,954.00 1,063,300.00 2,259,073.00
336,742.00

13,240,000.00 4,243,000.00
226,200,000.00 245,766,000.00
11,017,000.00

500,000.00 300,000.00
33,539.00 174,885.00
156,752.00
1,501,918.00

2,150,000.00 13,167,000.00

0.00 1,501,918.00
484,954.00
272,201.00 $757,155.00

54,488,000.00
173,005,000.00
227,493,000.00 240,660,000.00
(1,311,000.00)
12,125,000.00 (5,708,000.00) $5,106,000.00

Annual Financial Report FY2005 15

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Ge orgia State Unive rs ity Re s e arch Fo undatio n

Component Uni ts Ge orgia State Unive rs ity Fo undatio n

M e dical Colle ge of Ge orgia He alth, Inc.

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$5,875,296.00 1,624,787.00 4,909,291.00
69,503.00 4,648,137.00 17,127,014.00
5,305,184.00
3,731,752.00 9,036,936.00 26,163,950.00
6,510.00
4,648,137.00 161,897.00
6,001,560.00
10,818,104.00
0.00 10,818,104.00
3,731,752.00 2,000,000.00
361,547.00 9,252,547.00 $15,345,846.00

$18,472,377.00
1,178,958.00 2,561,476.00
111,389.00 22,324,200.00
86,166,685.00
7,235,119.00 62,380,196.00
5,085,454.00 160,867,454.00 183,191,654.00
1,766,747.00
10,383,469.00 629,034.00 651,277.00
13,430,527.00
10,408,676.00
33,439,966.00 43,848,642.00 57,279,169.00 18,282,993.00 59,821,377.00 41,422,769.00
6,385,346.00 $125,912,485.00

$78,276,837.00 8,184,573.00
137,059,859.58
201,173.42 5,753,058.00
831,804.00 230,307,305.00
15,013,190.00
60,267,711.00 75,280,901.00 305,588,206.00
11,781,557.00
219,612.00 0.00
10,067,509.00 1,098,111.00
10,369,000.00 8,892,686.00
40,189,161.00 82,617,636.00
2,636,435.00
8,826,000.00 11,462,435.00 94,080,071.00 56,344,004.00 155,164,131.00
$211,508,135.00

Annual Financial Report FY2005 16

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

M e dical Colle ge of Ge orgia
Foundation, Inc.

Component Uni ts M e dical Colle ge of
Ge orgia De ntal Fo undatio n

M e dical Colle ge of Ge orgia Re s e arch
Ins titute

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$16,078,399.00 337,212.00
254,478.00
187,129.00 80,826.00
16,938,044.00 216,720.00
99,116,075.00 113,513.00
2,414,803.00 4,373,735.00
280,379.00 106,515,225.00 123,453,269.00
6,451.79
2,035,942.00 22,809.21
2,065,203.00
0.00 2,065,203.00 4,373,735.00 94,091,271.00 16,328,492.00 6,594,568.00 $121,388,066.00

$524,636.81 3,423,390.02
608,936.87 4,556,963.70

$4,611,024.00 3,513,180.00 707,360.00
8,831,564.00

0.00 4,556,963.70
419,217.00
4,137,746.70

28,198.00 28,198.00 8,859,762.00
27,219.00
68,075.00 4,710,329.00

4,556,963.70

4,805,623.00

0.00 4,556,963.70
$0.00

0.00 4,805,623.00
28,198.00
4,025,941.00 $4,054,139.00

Annual Financial Report FY2005 17

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

M e dical Colle ge of Ge orgia PPG Fo undatio n

Component Uni ts Unive rs ity of
Ge orgia Re s e arch Fo undatio n

Unive rs ity of Ge orgia Athle tic
As s ociation

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$21,757,598.00 25,344,147.00
28,957.00
851.00 180,803.00 47,312,356.00
16,423,575.00
24,759,477.00 2,386,565.00
43,569,617.00 90,881,973.00
1,569,463.00 745,493.00
2,936,485.00
5,251,441.00
471,830.00
33,368,784.00 33,840,614.00 39,092,055.00
5,094,483.00
46,695,435.00 $51,789,918.00

$3,388,932.00
24,326,885.00
473,569.00 14,326,065.00 42,515,451.00
7,687,500.00 33,557,355.00

$42,713,096.00 2,273,308.00
2,498,531.00
219,554.00 47,704,489.00

607,158.00 497,425.00 42,349,438.00 84,864,889.00
7,142,806.00
14,326,065.00 3,780,816.00
22,211,510.00
47,461,197.00
11,657,546.00
11,657,546.00 59,118,743.00
607,158.00
25,138,988.00 $25,746,146.00

157,256,707.00 1,542,895.00
158,799,602.00 206,504,091.00
1,966,099.96 1,041,140.00 1,282,736.00 1,814,023.00 18,236,663.00
1,568,211.04 2,029,126.00
238,707.00
28,176,706.00
2,650,527.00
1,542,895.00
69,682,274.00
73,875,696.00 102,052,402.00
82,599,225.00
2,295,518.00 19,556,946.00 $104,451,689.00

Annual Financial Report FY2005 18

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Unive rs ity of Ge orgia
Fo undatio n

Component Uni ts Ge orgia Southe rn
Unive rs ity Hous ing Fo undatio n

Ge orgia Southe rn Unive rs ity Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From Primary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From Primary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries Payable Benefits P ayable Contracts P ayable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to Primary Government Capital Lease (current portion) Current Portion of Long-term Debt Estimated Third-P arty Payor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to Primary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) Deposits Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS

$12,330,672.00 52,415,674.00
3,085,128.00 10,086,128.00
26,908,561.00 104,826,163.00
425,917,587.00 87,671.00
20,827,237.00 187,007,627.00 633,840,122.00 738,666,285.00
4,793,532.00 2,300,684.00
5,126,247.00
2,953,288.00 25,079.00
15,198,830.00
13,243,328.00 210,067,183.00 223,310,511.00 238,509,341.00
249,596,597.00 238,332,497.00
12,227,850.00 $500,156,944.00

$49,029,129.00
2,402,425.00 849,919.00
1,511,400.00 53,792,873.00

$52,758.00 33,938,153.00
34,366.00 1,138,228.00
21,250.00 35,184,755.00

31,943,963.00 38,767,867.00
36,780,363.00 107,492,193.00 161,285,066.00
1,372,802.00

1,106,376.00
1,764,898.00 423,082.00
3,294,356.00 38,479,111.00
15,829.00

2,224,077.00 2,047,916.00
985,000.00

173,992.00 3,741,522.00

6,629,795.00

3,931,343.00

38,767,867.00
114,393,489.00 153,161,356.00 159,791,151.00
942,009.00 551,906.00 $1,493,915.00

0.00 3,931,343.00
423,082.00
23,659,597.00 8,792,660.00
1,672,429.00 $34,547,768.00

Annual Financial Report FY2005 19

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

GSU - Southe rn B oos te rs , Inc.

Component Uni ts GSU Re s e arch & Se rvice Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble E xpe nda ble Capital P rojects U nre s tric te d TOTAL NET ASSETS

$501,791.00
2,337.00 388,585.00

$698,405.00 1,588,551.00

892,713.00 553,828.00
6,155.00 579,000.00
548,843.00 417,620.00 2,105,446.00 2,998,159.00
77,313.00
54,588.00
19,947.00
151,848.00

235,103.00 2,522,059.00
0.00 2,522,059.00
20,000.00 400,870.00 1,823,841.00
2,244,711.00

230,606.00
230,606.00 382,454.00
417,620.00
1,194,789.00 643,305.00 359,991.00
$2,615,705.00

0.00 2,244,711.00
277,348.00 $277,348.00

Valdos ta State Unive rs ity Fo undatio n
$1,984,637.00
50,000.00
320,669.00 1,311,385.00 3,666,691.00
36,431,071.00
184,749.00 23,464,194.00 60,080,014.00 63,746,705.00
3,819,481.00
99,603.00 940,278.00
4,859,362.00
38,226,153.00 38,226,153.00 43,085,515.00
15,136,733.00 1,902,680.00 3,621,777.00
$20,661,190.00

Annual Financial Report FY2005 20

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Albany State Unive rs ity Fo undatio n

Component Uni ts Arms trong
Atlantic State Univ. Foundation

ASSU Educational Prope rtie s Foundation, Inc.

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$909,856.00
909,856.00
2,556,935.00 7,745,073.00 10,302,008.00 11,211,864.00
292,528.00
80,565.00 373,093.00
2,391,718.00 2,391,718.00 2,764,811.00 5,272,790.00 2,952,539.00
221,724.00 $8,447,053.00

$577,092.00
58,094.00
635,186.00
4,314,908.00 58,480.00
4,373,388.00 5,008,574.00
0.00
0.00 0.00 3,287,469.00 1,625,332.00 95,773.00 $5,008,574.00

$523,116.00 1,974,449.00
49,157.00
2,546,722.00
27,163,425.00 27,163,425.00 29,710,147.00
354,856.00 99,307.00
450,000.00 12,532,388.00 13,436,551.00
16,800,000.00 16,800,000.00 30,236,551.00 (2,618,963.00)
2,092,559.00 ($526,404.00)

Annual Financial Report FY2005 21

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Augus ta State Unive rs ity Fo undatio n

Component Uni ts Augus ta State
Unive rs ity Athle tic Fo undatio n

Clayton State Unive rs ity Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$16,401,839.00
48,131.00 250,563.00
35,500.00 852,409.00 17,588,442.00
12,838,311.00 1,509,195.00
684,167.00 15,706,558.00 30,738,231.00 48,326,673.00
222,169.10
1,155.00
1,450.90 35,500.00
260,275.00
32,361,713.00 32,361,713.00 32,621,988.00
268,804.00 11,376,055.00
1,265,443.00 2,794,383.00 $15,704,685.00

$290,130.00
6,488.00
2,847.00 5,599.00 305,064.00

$658,594.00 154,898.00
1,097,461.00
1,942.00 10,025.00 1,922,920.00

2,080,565.00 2,080,565.00 2,385,629.00
174,030.00 4,724.00
16,142.00
13,450.00
208,346.00

1,922,355.00 1,922,355.00 3,845,275.00
22,131.00
22,131.00

1,558,658.00 1,558,658.00 1,767,004.00
508,457.00
110,168.00 $618,625.00

0.00 22,131.00
1,355,533.00 2,384,896.00
82,715.00 $3,823,144.00

Annual Financial Report FY2005 22

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Clayton State Unive rsity Walte r
& Em ilie Spive y Fo u n d.

Component Uni ts
Colum bus State Unive rsity Foundation

Colum bus State Unive rsity Alum ni
As s ociat ion

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble E xpe nda ble Capital P rojects U nre s tric te d TOTAL NET ASSETS

$738,392.00
29,114.00 767,506.00
7,166,989.00 13,847.00
7,180,836.00 7,948,342.00
307,636.00
307,636.00
0.00 307,636.00
13,847.00 7,626,859.00 $7,640,706.00

$6,239,308.00
13,329.00 8,532,917.00
129,569.00 174,695.00 15,089,818.00
23,287,295.00
20,256,348.00 43,543,643.00 58,633,461.00
61,602.00
25,282.00
86,884.00
1,158,922.00 1,158,922.00 1,245,806.00
12,454,351.00 16,516,169.00 27,775,744.00
641,391.00 $57,387,655.00

$166,302.00 7,703.00
2.00 2,978.00 43,204.00
150.00 220,339.00
39,990.00
4,464.00 44,454.00 264,793.00
6,625.00
4,940.00
11,565.00
0.00 11,565.00
4,464.00 76,874.00 97,520.00 74,370.00 $253,228.00

Annual Financial Report FY2005 23

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Fo u n da t io n Prope rtie s, Inc.

Component Uni ts
Colum bus State Unive rsity Athle tic
Fund, Inc.

Ge orgia Colle ge & State Unive rsity Foundation, Inc.

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$9,244,488.00
127,356.00
888,112.00 10,259,956.00
5,451,206.00
59,226,546.00 64,677,752.00 74,937,708.00
2,205,348.00
264,011.00 214,845.00 440,000.00 4,926,343.00 8,050,547.00 15,115,155.00
46,538.00 26,940,000.00
284,724.00 42,386,417.00 50,436,964.00 16,231,822.00
8,268,922.00 $24,500,744.00

$142,787.00
44,908.00 1,200.00 9,953.00 2,083.00
200,931.00
1,405,378.00
18,562.00 1,423,940.00 1,624,871.00
48,292.00
5,511.00 18,855.00
72,658.00

$684,216.00 8,745,856.00
48,582.00
218,685.00 2,805,698.00 12,503,037.00 12,498,274.00
10,979,497.00
6,500.00 77,469,008.00 100,953,279.00 113,456,316.00
4,924,890.00
68,100.00 1,411,181.00
265,000.00
6,669,171.00

0.00 72,658.00
18,562.00
1,219,724.00 372,307.00
(58,380.00) $1,552,213.00

96,038,076.00
96,038,076.00 102,707,247.00
1,043,420.00
8,237,420.00 959,173.00 0.00 509,056.00
$10,749,069.00

Annual Financial Report FY2005 24

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Ge orgia Colle ge & State Unive rsity
Alumni Association., I n c.

Component Uni ts
Ge orgia Southwe ste rn State
Unive rsity Foundation, Inc.

GSSU Re se arch and De ve lopme nt Corp.,
I n c.

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expe nda ble Capital P rojects U nre s tric te d TOTAL NET ASSETS

$205,763.00

$1,545,251.00

2,500.00
8,111.00 1,748.00 16,687.00 234,809.00

94,662.00 386,508.00
17,849.00
96,270.00 2,140,540.00

5,055,352.00

22,064,943.00

98,867.00
5,154,219.00 5,389,028.00

957,038.00 23,021,981.00 25,162,521.00
20,018.00

115,056.00

0.00

135,074.00

0.00 0.00
98,867.00
5,040,045.00 120,781.00
129,335.00 $5,389,028.00

0.00 135,074.00
957,038.00
6,478,048.00 4,487,863.00
6,745.00 13,097,753.00 $25,027,447.00

$18,154.00
18,154.00
541,620.00 541,620.00 559,774.00
0.00
0.00 0.00 541,620.00 18,154.00 $559,774.00

Annual Financial Report FY2005 25

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Ke nne s aw State Unive rs ity Fo undatio n

Component Uni ts North Ge orgia
Colle ge & State Unive rs ity Fo undatio n

Southe rn Polyte chnic State
Unive rs ity Foundation, Inc.

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$3,655,013.00
922,530.00 3,496,981.00 1,899,351.00
177,274.00 212,842.00 450,778.00 17,859,483.00 28,674,252.00
15,295,143.00 757,397.00
73,509,538.00
403,133.00 98,352,514.00 13,178,112.00 201,495,837.00 230,170,089.00
5,554,749.39
3,038,633.00 3,236,631.00 5,194,831.00
658,276.61 2,310,000.00
19,993,121.00
33,415,436.00 20,548.00
210,930.00 164,491,448.00
198,138,362.00 218,131,483.00
(7,623,346.00) 10,113,623.00
5,802,636.00 3,745,693.00 $12,038,606.00

$2,095,882.00
76,853.00
43,718.00 55,063.00 2,271,516.00
15,953,141.00
135,525.00 8,810,632.00 24,899,298.00 27,170,814.00 1,774,697.00
100,000.00
1,874,697.00
107,250.00 28,584.00
10,700,000.00 10,835,834.00 12,710,531.00
11,320,995.00 3,560,168.00 (420,880.00)
$14,460,283.00

$817,665.02
428,333.53 38,014.06
96,306.83 1,380,319.44
6,418,988.16
29,472,197.33 35,891,185.49 37,271,504.93
630,277.50 31,667.41
139,152.00 (258,394.99)
850,000.00
1,392,701.92
34,840,000.00 34,840,000.00 36,232,701.92 (1,787,656.67)
867,369.00 411,555.25 1,547,535.43 $1,038,803.01

Annual Financial Report FY2005 26

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Unive rs ity of We s t Ge orgia
Fo undatio n

Component Uni ts Unive rs ity of We s t
Ge orgia Re al Es tate Foundation

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$1,879,912.00 18,684,928.00
586,806.00 2,144.00
68,586.00 27,582.00 21,249,958.00
12,664,768.00
83,000.00 20,159,050.00 32,906,818.00 54,156,776.00
1,191,032.00
1,191,032.00
37,694,382.00 37,694,382.00 38,885,414.00
178,766.00 13,227,827.00
1,377,454.00 487,315.00
$15,271,362.00

$26,312,614.00
299,277.00
86,739.00 51,132.00 814,761.00 27,564,523.00
5,660,911.00 5,660,911.00 33,225,434.00 1,494,777.00
353,277.00 1,021,022.00
7,476.00
2,876,552.00
30,930,376.00 30,930,376.00 33,806,928.00
(581,494.00) ($581,494.00)

Dalton State Colle ge
Fo undatio n
$1,669,138.00
161,488.00
1,830,626.00
8,939,673.00 363,016.00
9,302,689.00 11,133,315.00
90,652.00
90,652.00
0.00 90,652.00 7,134,345.00 409,942.00 1,009,961.00 2,488,415.00 $11,042,663.00

Annual Financial Report FY2005 27

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

M acon State Colle ge
Fo undatio n

Component Uni ts Abraham B aldwin A g ric ultural Colle ge Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) Deposits Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expe nda ble Capital P rojects U nre s tric te d TOTAL NET ASSETS

$158,708.00
1,203,536.00
1,362,244.00
5,407,933.00
705,411.00 1,901,996.00 8,015,340.00 9,377,584.00
54,158.00
802,321.00 856,479.00
0.00 856,479.00 1,901,996.00 6,002,912.00
78,905.00 6,673.00
530,619.00 $8,521,105.00

$458,421.00
120,253.00
206,039.00 784,713.00 7,483,831.00
5,685,041.00
244,017.00 30,248,826.00 43,661,715.00 44,446,428.00
1,486,142.00
166,739.00
4,455.00 689,220.00
2,346,556.00
31,908,071.00 31,908,071.00 34,254,627.00
368,207.00 6,291,032.00 2,588,381.00
97,777.00 846,404.00 $10,191,801.00

B ainbridge Colle ge
Fo undatio n $42,592.16
42,592.16 10,000.00 10,000.00 52,592.16
0.00
0.00 0.00 52,592.16 $52,592.16

Annual Financial Report FY2005 28

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Coas tal Ge orgia C o mmunity Colle ge Fo undatio n

Component Uni ts Darton Colle ge Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$250,150.00 4,235,272.00
739,741.00
5,225,163.00
1,530,410.00 28,022.00
1,558,432.00 6,783,595.00
0.00
0.00 0.00 3,092,095.00 1,340,199.00 499,196.00 1,852,105.00 $6,783,595.00

$1,081,271.00
56,000.00
1,137,271.00
828,523.00
828,523.00 1,965,794.00
0.00
0.00 0.00 1,092,802.00 224,746.00 574,925.00 73,321.00 $1,965,794.00

Eas t Ge orgia Colle ge
Foundation, Inc.
$90,431.00
1,650.00 17,094.00
8,413.00 3,978.00 106,340.00 227,906.00
654,182.00
153,600.00 807,782.00 1,035,688.00
211.00
211.00
0.00 211.00 153,600.00 796,483.00 85,394.00 $1,035,477.00

Annual Financial Report FY2005 29

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Floyd Colle ge Fo undatio n

Component Uni ts Gaine s ville Colle ge Fo undatio n

Gordon Colle ge Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$253,971.00 580,875.00
834,846.00
300,786.00 300,786.00 1,135,632.00
5,278.00
5,278.00
0.00 5,278.00 300,786.00 443,000.00 167,250.00 336,626.00 (117,308.00) $1,130,354.00

($388,652.00)
352,727.00
491,873.00 455,948.00
8,402,110.00 8,400.00
8,410,510.00 8,866,458.00
0.00
0.00 0.00 2,533,260.00 5,572,074.00 761,124.00 $8,866,458.00

$180,865.00 1,617,197.00
12,787,815.00 14,585,877.00
3,597,579.00
3,604,500.00 7,202,079.00 21,787,956.00
274,725.00 10,486.00
285,211.00
16,195,754.00 16,195,754.00 16,480,965.00
34,623.00 86,843.00 5,185,525.00 $5,306,991.00

Annual Financial Report FY2005 30

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

M iddle Ge orgia Fo undatio n

Component Uni ts South Ge orgia Colle ge Fo undatio n

Waycros s Colle ge Fo undatio n

AS S ETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Margin Allocation Funds Receivables - Other Leases Receivable P ledges Receivable Contributions Receivable Due from Component Units Due From P rimary Government Inventories (note 4) P repaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Due from Component Units Due From P rimary Government Short-Term Investments Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts P ayable Salaries P ayable Benefits P ayable Contracts P ayable D e pos its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to P rimary Government Capital Lease (current portion) Current P ortion of Long-term Debt Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) US DOE Settlement (current portion) Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s (note 8) Due to Component Units Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) & Other Noncurrent Liab. Compensated Absences (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities US DOE Settlement (noncurrent) Notes and Loans P ayable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for N one xpe nda ble Expendable Capital P rojects U nre s tric te d TOTAL NET ASSETS

$145,026.00 181,708.00
1,209.00
327,943.00
118,292.00 639,374.00
63,150.00 820,816.00 1,148,759.00
5,750.00
5,750.00
0.00 5,750.00 63,150.00 723,094.00 320,406.00 1,524.00 34,835.00 $1,143,009.00

$146,208.18
146,208.18 2,538,577.04 2,538,577.04 2,684,785.22
0.00
0.00 0.00 2,086,093.88 130,673.76 468,017.58 $2,684,785.22

$115,295.00 121,466.00
691.00 138.00 237,590.00
1,162,020.00
1,162,020.00 1,399,610.00
1,878.00
50.00
1,928.00
0.00 1,928.00 1,162,020.00 109,717.00 125,945.00 $1,397,682.00

Annual Financial Report FY2005 31

Statement of Revenues, Expenses and Changes in Net Assets

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXP ENSES, AND CHANG ES IN NET ASSETS
June 30, 2005
Unive rs ity Sys te m of Ge orgia
(Primary Gove rnme nt)

R E VE N U E S
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Fe de ra l Sta te O the r Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P arking/Transportation Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operatin g Exp en s es
Salaries : Fa c u lt y St a ff
Ben efits Oth er Pers o nal Services Trav el Sch olars h ip s an d Fello ws hip s Ut ilit ie s Sup plies an d Other Services Dep reciatio n Oth er Op erating Exp en s e Pay ments to Oth er Co mpo nent Units Pay ments to o r o n b ehalf of College/Un ivers ity
To tal Op erating Exp en s es Operatin g Income (los s )
NONOPERATING REVENUES (EXPENS ES ) State A pp rop riatio ns Gran ts and Co ntracts Fed eral State Ot h er Gift s In ves tment Income (en do wmen ts , au xiliary and o ther) In teres t Income In teres t Exp en s e (capital as s ets ) Comb ined M arg in A llo cation Oth er No no peratin g Rev en ues Net No no peratin g Rev enu es In co me befo re oth er reven ues , expens es , g ains , or los s Cap ital Grants and Gifts Fed eral State Ot h er Lo s s on Bo nd Retirement A d dition s to permanent end owments To tal Other Rev en ues In creas e in Net A s s ets
NET AS S ETS Net A s s ets -beg inn in g o f y ear, as originally rep orted Prior Year A dju s tmen ts Net A s s ets -beg inn in g o f y ear, res tated Net A s s ets -En d of Year

$876,227,371.24 180,563,190.93
11,537,500.71
707,312,536.69 216,155,635.75 298,131,282.60 105,786,007.00
2,874,211.24
120,019,949.03 71,578,267.00 76,815,871.50 36,954,323.70 30,527,982.11 40,758,879.05 14,806,163.58
396,233,863.56 2,825,156,653.83
855,522,585.15 1,285,026,047.03
650,266,880.10 3,228,395.84
42,814,924.95 161,843,155.64 142,211,175.64 1,302,428,315.90 220,432,014.16
4,663,773,494.41 (1,838,616,840.58)
1,676,360,954.76
17,792,247.64 2,714,779.07
41,299,914.71 54,754,440.68 22,855,806.20
(35,373,694.44)
8,173,142.86 1,788,577,591.48
(50,039,249.10)
3,853,579.32 276,013,805.56
21,386,122.23
301,253,507.11 251,214,258.01
3,935,576,389.75 12,514,987.39
3,948,091,377.14 $4,199,305,635.15

Annual Financial Report FY2005 32

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Ge orgia Te ch Athle tic
As s ociation

Component Uni ts Ge orgia Te ch Fo undatio n

Ge orgia Te ch Re s e arch
Fo undatio n

Operating Revenues Student Tuition and Fees (net of allowance for doubt Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services Depreciation Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other Interest Income Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, ga Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues Increase in Net Assets
NET ASSETS Net Assets-beginning of year, as originally reported P rior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00
18,440,665.00
2,970,825.00 21,411,490.00
11,300,620.00 2,046,925.00 9,559.00 1,918,443.00 1,055,859.00 1,040,721.00 7,404,566.00 4,706,126.00 8,070,895.00
37,553,714.00 (16,142,224.00)
9,772,230.00 6,112,591.00 (6,093,557.00)
9,791,264.00 (6,350,960.00)
0.00 (6,350,960.00) 76,875,425.00 76,875,425.00 $70,524,465.00

$0.00 32,612,406.77 34,569,665.86
15,472,000.00
1,264,000.00 83,918,072.63
1,551,000.00 321,000.00 50,000.00 1,000.00
6,145,000.00 2,353,000.00 49,839,000.00 60,260,000.00 23,658,072.63
53,582,334.14 (13,276,000.00)
40,306,334.14 63,964,406.77
16,822,593.23 16,822,593.23 80,787,000.00 812,818,000.00 812,818,000.00 $893,605,000.00

$0.00
263,242,490.00 12,999,629.00 48,748,609.00
6,639,834.00 331,630,562.00
674,442.00 5,385,669.00 322,162,494.00 328,222,605.00 3,407,957.00
756,705.00 681,623.00 1,438,328.00 4,846,285.00
0.00 4,846,285.00 31,928,863.00 31,928,863.00 $36,775,148.00

Annual Financial Report FY2005 33

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Ge orgia Advance d Te chnology Ve nture s

Component Uni ts Ge orgia Te ch Alumni As s ociation

Ge orgia Te ch Facilitie s , Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Fe de ra l State O the r Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Benefits Other P ersonal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00
14,195.00 1,009,611.00 5,377,562.00
1,039,919.00 7,441,287.00
29,715.00 7,221.00 7,980.00
316,448.00 3,667,734.00 1,461,968.00
5,491,066.00 1,950,221.00
23,142.00 19,494.00 (2,763,828.00)
(2,721,192.00) (770,971.00)
0.00 (770,971.00) 21,559,941.00 21,559,941.00 $20,788,970.00

$0.00
716,873.00 1,290,128.00
179,238.00 2,186,239.00
2,528,886.00 643,424.00 45,815.00 253,821.00 94,179.00
1,258,962.00 136,251.00 801,262.00
5,762,600.00 (3,576,361.00)
3,745,381.00 97,202.00 (5,007.00)
3,837,576.00 261,215.00
0.00 261,215.00 495,940.00 495,940.00 $757,155.00

$0.00
228,000.00 745,000.00
612,000.00 1,585,000.00
462,000.00 60,000.00
522,000.00 1,063,000.00
(133,000.00) 1,829,000.00 (8,505,000.00) (6,809,000.00) (5,746,000.00)
0.00 (5,746,000.00) 10,852,000.00 10,852,000.00 $5,106,000.00

Annual Financial Report FY2005 34

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Ge orgia State Unive rs ity Re s e arch Fo undatio n

Component Uni ts Ge orgia State Unive rs ity Fo undatio n

M e dical Colle ge of Ge orgia He alth, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State O the r Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 D e pre c ia tion Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State O the r Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 O the r Loss on Bond Retirement Additions to permanent endowments 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

$0.00
37,074,566.00 4,547,596.00 8,508,265.00
50,130,427.00
602,104.00 144,239.00 49,057,069.00 49,803,412.00 327,015.00
269,984.00 425,334.00 695,318.00 1,022,333.00
0.00 1,022,333.00 14,323,513.00 14,323,513.00 $15,345,846.00

$0.00 849,532.00 4,307,441.00
10,247,054.00

$0.00

15,404,027.00
641,470.00 162,752.00 192,179.00
4,667,838.00 2,224,553.00
6,686,723.00 14,575,515.00
828,512.00
11,808,314.00 5,504,206.00 (2,505,962.00)
14,806,558.00 15,635,070.00

310,336,817.00
7,213,266.00 317,550,083.00
133,959,407.00 36,927,136.00 38,647,963.00 398,315.00 3,246,541.00
109,139,056.00 16,323,600.00
338,642,018.00 (21,091,935.00)
31,761,251.00 4,980,518.00
2,473,304.00
(7,458,093.00) (778,736.00)
30,978,244.00 9,886,309.00

1,012,459.00 1,012,459.00 16,647,529.00
109,264,956.00
109,264,956.00 $125,912,485.00

0.00 9,886,309.00
201,621,826.00
201,621,826.00 $211,508,135.00

Annual Financial Report FY2005 35

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

M e dical Colle ge of Ge orgia
Foundation, Inc.

Component Uni ts M e dical Colle ge of
Ge orgia De ntal Fo undatio n

M e dical Colle ge of Ge orgia Re s e arch
Ins titute

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 4,660,225.00
1,469,105.00
(13,125.00) 1,276,863.00 7,393,068.00
473,936.37 144,896.63
25,427.00 17,704.00 288,873.00 275,790.00 12,200,000.00 13,426,627.00 (6,033,559.00)
7,299,401.00
9,941.00 7,309,342.00 1,275,783.00
3,753,476.00 3,753,476.00 5,029,259.00 116,358,807.00 116,358,807.00 $121,388,066.00

$0.00

$0.00
75,122.00
41,377,823.00 7,416,498.00 112,400.00

4,175,027.00
4,175,027.00
318,792.90 143,051.05
8,433.77 1,994,682.53
22,484.38
1,767,666.32
4,255,110.95 (80,083.95)

47,966.00 49,029,809.00
23,493.00 436,555.00
478.00 47,876,901.00 48,337,427.00
692,382.00

80,083.95
80,083.95 (0.00)

0.00 692,382.00

0.00 (0.00)
0.00
0.00 ($0.00)

0.00 692,382.00
3,361,757.00
3,361,757.00 $4,054,139.00

Annual Financial Report FY2005 36

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

M e dical Colle ge of Ge orgia PPG Fo undatio n

Component Uni ts Unive rs ity of
Ge orgia Re s e arch Fo undatio n

Unive rs ity of Ge orgia Athle tic
As s ociation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00
86,004,557.00
86,004,557.00
9,348,857.00 13,948,592.00
1,391,125.00 268,450.00 47,366.00
8,805,272.00 663,957.00
55,537,118.00 90,010,737.00 (4,006,180.00)
2,976,725.00 (826,783.00) 110,280.00 2,260,222.00 (1,745,958.00)
0.00 (1,745,958.00) 53,535,876.00 53,535,876.00 $51,789,918.00

$0.00 131,815,923.00

$0.00

65,449,621.00

13,380,173.00 145,196,096.00

65,449,621.00

8,945,205.00 46,083.00
130,895,226.00 139,886,514.00
5,309,582.00

21,256,578.44 4,034,865.00
22,100,476.56 47,391,920.00 18,057,701.00

1,418,112.00
570,283.00 1,988,395.00 7,297,977.00

847,559.00 629,679.00
(1,832,381.00)
79,329.00 (275,814.00) 17,781,887.00

0.00 7,297,977.00
18,448,169.00
18,448,169.00 $25,746,146.00

0.00 17,781,887.00
86,669,802.00
86,669,802.00 $104,451,689.00

Annual Financial Report FY2005 37

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Unive rs ity of Ge orgia
Fo undatio n

Component Uni ts Ge orgia Southe rn
Unive rs ity Hous ing
Fo undatio n

Ge orgia Southe rn Unive rs ity Fo undatio n

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 22,992,752.00 20,635,171.00
6,179,579.00 49,807,502.00
1,351,246.00 175,795.00
83,406.00 7,940,022.00 5,448,303.00 22,901,776.00 37,900,548.00 11,906,954.00
34,076,184.00 (7,725,849.00) 10,236,901.00 36,587,236.00 48,494,190.00
0.00 48,494,190.00 451,662,754.00 451,662,754.00 $500,156,944.00

$0.00

$0.00
2,135,387.00 1,087,339.00

61,588.00 61,588.00

292,055.00 3,514,781.00

109,332.00
109,332.00 (47,744.00)

92,732.00
895,674.00 1,667.00
1,551,855.00 2,541,928.00
972,853.00

873,651.00 2,028,478.00 (2,298,381.00)
603,748.00 556,004.00

190,696.00
190,696.00 1,163,549.00

0.00 556,004.00
937,911.00
937,911.00 $1,493,915.00

2,214,665.00 2,214,665.00 3,378,214.00
31,169,554.00
31,169,554.00 $34,547,768.00

Annual Financial Report FY2005 38

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

GSU- Southe rn B oos te rs , Inc.

Component Uni ts GSU Re s e arch & Se rvice Fo undatio n

Valdos ta State Unive rs ity Fo undatio n

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 1,180,980.00
142,090.00
85,840.00 1,408,910.00
28,372.00 382,055.00
18,488.00 728,029.00 1,156,944.00 251,966.00
16,564.00 (15,069.00)
1,495.00 253,461.00
0.00 253,461.00 2,362,244.00 2,362,244.00 $2,615,705.00

$0.00
3,005,441.00 505,576.00 328,627.00

$0.00 499,318.00
745,095.00

26,108.00 3,865,752.00

569,358.00 1,813,771.00

39,195.00
3,709,976.00 3,749,171.00
116,581.00

450,902.53 127,704.00
1,415,275.47 1,993,882.00 (180,111.00)

15,202.00
15,202.00 131,783.00

2,422,465.00
2,422,465.00 2,242,354.00

0.00 131,783.00
145,565.00
145,565.00 $277,348.00

246,078.00 246,078.00 2,488,432.00
18,172,758.00
18,172,758.00 $20,661,190.00

Annual Financial Report FY2005 39

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Albany State Unive rs ity Fo undatio n

Component Uni ts Arms trong
Atlantic State Univ. Foundation

AASU Educational Prope rtie s ,
Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State O the r Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Benefits Other P ersonal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D e pre c ia tion Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments Total Other Revenues Increase in Net Assets
NET ASSETS Net Assets-beginning of year, as originally reported P rior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00 639,068.00
639,068.00
600,408.00 65,462.00 98,914.00
480,512.00 1,245,296.00 (606,228.00)
(38,221.00) (119,092.00) (157,313.00) (763,541.00)
0.00 (763,541.00) 9,210,594.00 9,210,594.00 $8,447,053.00

$0.00 327,951.00
53,804.00
381,755.00
77,195.00 35,642.00 385,392.00 498,229.00 (116,474.00)
52,891.00
52,891.00 (63,583.00)
44,616.00 44,616.00 (18,967.00) 5,027,541.00 5,027,541.00 $5,008,574.00

$0.00 3,826,329.00
3,826,329.00 281,605.00 351,315.00
1,118,231.00 1,069,324.00 2,820,475.00 1,005,854.00
(1,459,693.00) (1,459,693.00)
(453,839.00)
0.00 (453,839.00)
(72,565.00) (72,565.00) ($526,404.00)

Annual Financial Report FY2005 40

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Augus ta State Unive rs ity Fo undatio n

Component Uni ts Augus ta State
Unive rs ity Athle tic Fo undatio n

Clayton State Unive rs ity Fo undatio n

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 1,343,613.00
412,730.00
1,756,343.00 11,897.00
57,592.00 1,013,163.00 1,082,652.00
673,691.00
360,056.00 (35,864.00) 324,192.00 997,883.00
515,168.00 515,168.00 1,513,051.00 14,191,634.00 14,191,634.00 $15,704,685.00

$0.00

$0.00
1,498,325.00 56,777.00

875,671.00 875,671.00
445,236.00 10,490.00
353,709.00 167,280.00
976,715.00 (101,044.00)

29,965.00 1,585,067.00
224,774.00
183,771.00
313,674.00 722,219.00 862,848.00

2,511.00 (67,356.00)
38,036.00 (26,809.00) (127,853.00)

(33,011.00)
(33,011.00) 829,837.00

0.00 (127,853.00)
746,478.00
746,478.00 $618,625.00

191,139.00 191,139.00 1,020,976.00
2,802,168.00
2,802,168.00 $3,823,144.00

Annual Financial Report FY2005 41

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Clayton State Unive rs ity Walte r & Emilie Spive y
Fo undatio n

Component Uni ts Columbus State Unive rs ity Fo undatio n

Columbus State Unive rs ity Alumni
As s ociation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00
0.00 23,491.00
450,900.00 474,391.00 (474,391.00)
494,294.00 494,294.00
19,903.00
0.00 19,903.00 7,620,803.00 7,620,803.00 $7,640,706.00

$0.00 454,564.00 (335,557.00)
27,361.00 146,368.00
10,451.00
212,789.00 54,566.00 78,564.00
356,370.00 (210,002.00)
(46,643.00) (46,643.00) (256,645.00)
6,776.00 6,776.00 (249,869.00) 57,637,524.00 57,637,524.00 $57,387,655.00

$0.00 15,135.00 (2,045.00)
13,090.00
4,750.00 1,217.00
4,097.00 55.00
12,001.00 22,120.00 (9,030.00)
37.00
37.00 (8,993.00)
0.00 (8,993.00) 262,221.00 262,221.00 $253,228.00

Annual Financial Report FY2005 42

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Fo undatio n Prope rtie s , Inc.

Component Uni ts Columbus State
Unive rs ity Athle tic Fund, Inc.

Ge orgia Colle ge & State Unive rs ity Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State O the r Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
E XP E N SE S Operating Expenses
Salaries: Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D e pre c ia tion Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State O the r Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 O the r Loss on Bond Retirement Additions to permanent endowments 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

$0.00 191,586.00
82,525.00
149,993.00 424,104.00
18,081.00 2,885.00
47,557.00 90,151.00 87,445.00
8,111.00 254,230.00 169,874.00
(92,462.00) (61,242.00)
(310.00) (154,014.00)
15,860.00
0.00 15,860.00 24,484,884.00 24,484,884.00 $24,500,744.00

$0.00
4,075.00 (25,854.00)

$0.00
3,019,216.00 246,027.00
7,360,040.00

52,004.00 30,225.00
821.00 60.00
16,923.00 30.00
1,297.00 37,444.00 56,575.00 (26,350.00)

281,754.00 10,907,037.00
55,764.00
4,364.00 5,685,174.00 1,565,091.00
278,714.00 7,589,107.00 3,317,930.00

0.00 (26,350.00)

293,959.00 (3,254,321.00)
(2,960,362.00) 357,568.00

0.00 (26,350.00)
1,578,563.00
1,578,563.00 $1,552,213.00

(1,066,839.00) 223,110.00 (843,729.00) (486,161.00)
11,235,230.00
11,235,230.00 $10,749,069.00

Annual Financial Report FY2005 43

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Ge orgia Colle ge & State Unive rs ity
Alumni As s ociation, Inc.

Component Uni ts Ge orgia
Southwe s te rn State Unive rs ity Foundation, Inc.

GSSU Re s e arch and De ve lopme nt Corporation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Fe de ra l State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and Patient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Sa la rie s : Fa c ulty Staff
Benefits Other P ersonal Services Tra ve l Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Fe de ra l State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Fe de ra l State Other Loss on Bond Retirement Additions to permanent endowments 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

$0.00 170,257.00 202,419.00
131,812.00 504,488.00
64.00
9,458.00 110,595.00
5,162.00 186,108.00 311,387.00 193,101.00
164,833.00
164,833.00 357,934.00
168,633.00 168,633.00 526,567.00 4,862,461.00 4,862,461.00 $5,389,028.00

$0.00 842,725.00 394,863.00
326,798.00 1,564,386.00
130,163.00 54,074.00
2,279.00 205,889.00
3,189.00 1,649,220.00 2,044,814.00 (480,428.00)
0.00 (480,428.00)
131,387.00 131,387.00 (349,041.00) 25,376,487.00
1.00 25,376,488.00 $25,027,447.00

$0.00 9,600.00
69,236.00
78,836.00 29,017.00 20,527.00 11,138.00 240,720.00 301,402.00 (222,566.00)
0.00 (222,566.00)
0.00 (222,566.00) 782,340.00 782,340.00 $559,774.00

Annual Financial Report FY2005 44

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Ke nne s aw State Unive rs ity Fo undatio n

Component Uni ts North Ge orgia Colle ge & State Unive rs ity Fo undatio n

Southe rn Polyte chnic State
Unive rs ity Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 2,651,919.00
13,995,996.00
175,513.00 16,823,428.00
657,236.00
926,723.00 7,924,149.00 3,528,413.00 1,725,376.00 14,761,897.00 2,061,531.00
1,082,235.00 (7,146,039.00) (6,063,804.00) (4,002,273.00)
397,191.00 397,191.00 (3,605,082.00) 15,643,688.00 15,643,688.00 $12,038,606.00

$0.00 743,290.00 2,670,415.00
172,599.00 3,586,304.00
316,618.00 132,278.00
10,879.00 357,867.00 207,254.00 620,623.00 310,779.00 678,650.00 2,634,948.00 951,356.00
(547,106.00) (547,106.00) 404,250.00
299,089.00 299,089.00 703,339.00 13,756,944.00 13,756,944.00 $14,460,283.00

$0.00 733,314.25 140,123.68
3,167,440.00
4,040,877.93
274,195.66 30,323.20
252,726.02 1,447,382.96 1,382,828.00
510,560.60 3,898,016.44
142,861.49
6,887.16 (1,374,274.81) (1,367,387.65) (1,224,526.16)
83,501.00 83,501.00 (1,141,025.16) 2,179,828.17 2,179,828.17 $1,038,803.01

Annual Financial Report FY2005 45

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Univers ity of Wes t Georgia Foundation

Component Uni ts
Univers ity of Wes t Georgia Real Es tate
Foundation

Dalton S tate College Foundation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 1,442,856.00
471,862.00
766,223.00 2,680,941.00
371,685.00 90,186.00
858,047.00 1,077,504.00 2,397,422.00
283,519.00
997,686.00
997,686.00 1,281,205.00
376,956.00 376,956.00 1,658,161.00 13,613,201.00 13,613,201.00 $15,271,362.00

$0.00

$0.00
1,127,968.00 218,300.00

0.00

1,346,268.00

17,087.00
17,087.00 (17,087.00)

33,488.00
279,317.00 312,805.00 1,033,463.00

471,458.00
(1,016,394.00)
(19,471.00) (564,407.00) (581,494.00)

0.00 1,033,463.00

0.00 (581,494.00)
0.00 ($581,494.00)

150,705.00 150,705.00 1,184,168.00
9,858,495.00
9,858,495.00 $11,042,663.00

Annual Financial Report FY2005 46

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

M acon State Colle ge
Fo undatio n

Component Uni ts Abraham B aldwin
Agricultural Colle ge Fo undatio n

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Fe de ra l State O the r Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
E XPE N SE S Operating Expenses
Sa la rie s : Faculty Staff
Benefits Other P ersonal Services Travel Scholarships and Fellowships U tilitie s Supplies and Other Services D e pre c ia tion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Fe de ra l State O the r Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Fe de ra l State O the r Loss on Bond Retirement Additions to permanent endowments 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

$0.00 334,333.00
92,373.00
55,615.00 482,321.00
60,257.00 751,097.00 811,354.00 (329,033.00)
(61,781.00)
(61,781.00) (390,814.00)
85,910.00 85,910.00 (304,904.00) 8,826,009.00 8,826,009.00 $8,521,105.00

$0.00 1,025,640.00 3,959,119.00
4,984,759.00
103,918.00 4,069.00 4,455.00
2,631,308.00 817,934.00 242,811.00
3,804,495.00 1,180,264.00
0.00 1,180,264.00
140,185.00 140,185.00 1,320,449.00 8,871,352.00 8,871,352.00 $10,191,801.00

B ainbridge Colle ge
Fo undatio n $0.00
16,947.55
16,947.55
13,118.90 13,118.90
3,828.65
0.00 3,828.65
0.00 3,828.65 48,763.51 48,763.51 $52,592.16

Annual Financial Report FY2005 47

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Coas tal Ge orgia C o mmunity Colle ge Fo undatio n

Component Uni ts Darton Colle ge Fo undatio n

Eas t Ge orgia Colle ge
Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 1,882,925.00
167,948.00
2,050,873.00
27,154.00 488,165.00 515,319.00 1,535,554.00
0.00 1,535,554.00
1,701,277.00 1,701,277.00 3,236,831.00 3,546,764.00 3,546,764.00 $6,783,595.00

$0.00 850,504.00
18,530.00
869,034.00
153,252.00 176,283.00 329,535.00 539,499.00
6,101.00 6,101.00 545,600.00
51,000.00 51,000.00 596,600.00 1,369,194.00 1,369,194.00 $1,965,794.00

$0.00 268,550.00
12,925.00 281,475.00
126,269.00 25,116.00
151,385.00 130,090.00
19,173.00 19,173.00 149,263.00
0.00 149,263.00 886,214.00 886,214.00 $1,035,477.00

Annual Financial Report FY2005 48

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

Floyd Colle ge Fo undatio n

Component Uni ts Gaine s ville Colle ge Fo undatio n

Gordon Colle ge Fo undatio n

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 70,440.00
33,600.00 104,040.00
113,641.00 10,742.00
141,958.00 266,341.00 (162,301.00)
42,044.00 42,044.00 (120,257.00)
0.00 (120,257.00) 1,250,611.00 1,250,611.00 $1,130,354.00

$0.00 601,234.00 250,624.00
201,735.00 1,053,593.00
39,481.75 13,545.02
76,797.23 494,132.00 623,956.00 429,637.00
192,452.00
192,452.00 622,089.00
17,570.00 17,570.00 639,659.00 8,226,799.00 8,226,799.00 $8,866,458.00

$0.00 103,702.00
5,558.00
151.00 109,411.00
29,137.00 109,173.00 138,310.00 (28,899.00)
490,568.00 490,568.00 461,669.00
0.00 461,669.00 4,845,322.00 4,845,322.00 $5,306,991.00

Annual Financial Report FY2005 49

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF REVENUES, EXPENSES, AND CHANG ES IN NET ASSETS
June 30 2005

M iddle Ge orgia Colle ge
Fo undatio n

Component Uni ts South Ge orgia Colle ge Fo undatio n

Waycros s Colle ge Fo undatio n

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P a rking/Tra nsporta tion Health Services Intercollegiate Athletics Other Organizations Clinical and P atient Fees Net P atient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income 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 Other Operating Expense P ayments to Other Component Units P ayments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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 Loss on Bond Retirement Additions to permanent endowments 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

$0.00 150,912.00
41,714.00
192,626.00
10,902.00 96,238.00 107,140.00 85,486.00
0.00 85,486.00
1,000.00 1,000.00 86,486.00 1,056,523.00 1,056,523.00 $1,143,009.00

$0.00 80,747.89

$0.00
72,250.00 30,352.00

1,137.08 81,884.97
7,519.11 186,115.77 193,634.88 (111,749.91)

102,602.00
1,200.00 86.00
7,133.00
60,083.00 68,502.00 34,100.00

49,792.20
49,792.20 (61,957.71)

(13,284.00)
(13,284.00) 20,816.00

149,106.58 149,106.58
87,148.87
2,597,636.35
2,597,636.35 $2,684,785.22

61,515.00 61,515.00 82,331.00
1,315,351.00
1,315,351.00 $1,397,682.00

Annual Financial Report FY2005 50

Statement of Cash Flows
UNIVERSITY SYSTEM OF GEORGIA
STATEMENT OF CASH FLOWS June 30, 2005
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments P ayments to Suppliers P ayments to Employees P ayments 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 P arking/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 P urposes P rincipal P aid on Installment Debt Interest Paid on Installment Debt Other Nonoperating Receipts Net Cash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received P roceeds from sale of Capital Assets P urchases of Capital Assets P rincipal P aid 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 P roceeds from Sales and Maturities of Investments Interest on Investments P urchase of Investments Net Cash P rovided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) B Y OPERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash P rovided (used) by Operating Activities
D e pre c ia tion Change in Assets and Liabilities:
Receivables, net Inventories Other Assets Notes Receivable, Net Accounts P ayable Deferred Revenue Other Liabilities Compensated Absences
Net Cash P rovided (used) by Operating Activities
** NON-CASH INVESTING, NON-CAP ITAL FINANCING, AND CAP ITAL AND RELATED FINANCING TRANSACTIONS
Fixed assets acquired by incurring capital lease obligations Change in fair value of investments recognized as a component of interest income Gift of capital assets reducing proceeds of capital grants and gifts
Annual Financial Report FY2005 51

June 30, 2005
$723,359,426.31 9,419,901.31
1,215,645,022.89 97,361,845.07
(1,947,259,224.47) (2,134,316,363.53)
(188,684,833.97) (12,429,908.62) 11,399,445.19
192,370,455.88 68,167,422.69 95,249,604.92 38,835,188.36 31,695,437.63 42,021,280.78 12,741,527.64
245,872,592.28 (1,498,551,179.64)
1,676,360,954.76 (17,560,007.98) 128,053,865.00 (308,081.55) (91,918.40) 11,784,135.24
1,798,238,947.07
42,303,733.61 (3,227,194.20) (202,583,325.79) (19,632,858.25) (35,093,440.49) (218,233,085.12)
82,881,175.83 22,072,209.42 (112,837,633.73) (7,884,248.48) 73,570,433.83 467,098,895.47 $540,669,329.30
(1,838,616,840.58)
220,432,014.16
3,212,526.40 (1,944,380.97) (2,837,745.84) (1,107,439.23) 10,769,662.01 10,187,785.89 92,378,475.84 8,974,762.68
($1,498,551,179.64)
$224,859,284.28 $252,302.53
($268,790,583.33)

UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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 implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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) are discretely presented for the 54 component units of the University System of Georgia.
See Note 16. 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been
Annual Financial Report FY2005 52

prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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
Annual Financial Report FY2005 53

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $243,215,368.66 to University System of Georgia. This includes projects completed during FY2005 and additional expenditures for projects completed in prior years. This resulted in a cumulative total of $2,235,165,111.43 as of June 30, 2005.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University System 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.
Annual Financial Report FY2005 54

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 of Georgia had accrued liability for compensated absences in the amount of $131,781,521.99 as of 7-1-2004. For FY2005, $102,775.086.88 was earned in compensated absences and employees were paid $ 93,914,883.22 for a net increase of $8,860,203.66. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 140,641,725.65.
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 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 previously in Note 1 Capital Assets section.
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 FY2005 55

Expendable Restricted Net Assets include the following:

June 30, 2005

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments
Total Restricted Expendable

$107,141,837.56 44,564,973.45 18,410,072.35 4,770,738.25 23,922,815.64
$198,810,437.25

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.
June 30, 2005

R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted
Total Unrestricted Net Assets

$66,187,571.21 164,167,497.40
4,744,226.11 8,687,065.30 $243,786,360.02

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 FY2005 56

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.

Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.

Restatement of Prior Year Balances

The following institutions had restatements of prior year balances in FY2005:

Prior Year Adjustments - Restatements

Medical College of Georgia Kennesaw State University Bainbridge College South Georgia College Waycross College

$11,051,667.92 1,620,415.99 (871,955.53) 526,053.38 188,805.63

Total

$12,514,987.39

Medical College of Georgia: Restatement of prior year assets. Margin allocation funds due from component units as of June 30, 2004, were reported as revenue by the College in the current fiscal period. A prior period adjustment in the amount of $11,051,667.92 was made to increase net assets July 1, 2004, for margin allocation funds earned in fiscal year 2004.

Annual Financial Report FY2005 57

Kennesaw State University: Restatement of prior year net assets. Prior year net assets were restated due to a change in depreciation. The prior period adjustment on the Statement of Revenues, Expenses and Changes in Net Assets reflects this restatement of $1,620,415.99. Bainbridge College: Restatement of prior year net assets. Bainbridge College had a restatement of prior year net assets decreasing beginning net assets by ($871,955.53). This was due to removing capital assets that do not meet the capitalization threshold. South Georgia College: Restatement of prior year net assets. Prior year net assets were restated due to a $526,053.38 correction in capital assets. This is shown as a prior year adjustment on the Statement of Revenues, Expenses and Changes in Net Assets. Waycross College: Restatement of prior year net assets. Prior period accumulated depreciation for the library collection has been restated in the amount of $188,805.63. Accumulated depreciation had been overstated due to an error in the library collection depreciation schedule.
Annual Financial Report FY2005 58

Note 2. Deposits and Investments
DEPOSITS
Funds belonging to the State of Georgia (and thus the University System) 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 the University System), 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.
At June 30, 2005, the carrying value of deposits was $281,123,560.77 and the bank balance was $315,204,903.11. Of the University System's deposits, $311,281,942.32 was uninsured. Of these uninsured deposits, $3,922,960.79 was collateralized with securities held by the financial institution's trust department or agent in the University System's name, $69,208,648.97 was collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System's name and $242,073,293.35 were uncollateralized.
Annual Financial Report FY2005 59

INVESTMENTS
The University System maintains investment policy guidelines that are intended to foster sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to the Board of Regents investment policy. All investments must be consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The University System's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment type
Debt Securities U.S. Treasuries U.S. Agencies Certificates of Deposit Corporate Debt General Obligation Bonds Money Market Mutual Fund Mortgage Backed Securities (U.S. Agencies) Municipal Obligation Mutual Bond Fund Repurchase Agreements

Fair Value

LessThan 1 Year

Investment Maturity More Than
1-5 Years 6-10 Years 10 Years

$29,652,355.03 162,014,948.99
35,000.00 6,124,714.72
970,057.60 601,677.69 326,044.24 1,200,000.00 45,714,509.43 4,945,321.00 $251,584,628.70

$895,236.03 65,170,532.91
241,898.10 713,950.00 54,931.45
1,200,000.00 442,538.00
4,945,321.00 $73,664,407.49

$23,684,035.04 95,995,209.16
35,000.00 2,678,870.95
212,112.00 546,746.24 72,323.00
45,036,970.75
$168,261,267.14

$4,114,863.46 808,065.18

$958,220.50 41,141.74

3,191,014.40 43,995.60

12,931.27

76,073.06

177,648.18

95,135.76

139,864.92

$8,329,147.46 $1,329,806.61

Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Real Estate Investment Fund

168,366.57 21,736,542.68 61,171,495.80
241,927.11 5,146,812.03

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

165,004,293.65 9,485,428.40

$514,539,494.94

The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but

Annual Financial Report FY2005 60

does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share.
The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $1.98 at June 30, 2005. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 1.07 years.
The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).
The University System serves as fiscal agent for various cooperative organizations. The University System pools the monies of these organizations with the University System's monies for investment purposes. The University System 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 investment pool is not rated. 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.
The University System maintains investment policy guidelines for each pooled investment fund that is offered to qualified University System participants. These policies are intended to foster sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to the Board of Regents investment policy. All investments must be consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
Units of the University System of Georgia and their affiliated organizations may participate in the Pooled Investment Fund program. The overall character of the pooled fund portfolio should be one of above average quality processing, at most, an average degree of investment risk.
Short-Term Fund The Short-Term fund provides a current return and stability of principal while affording a means of overnight liquidity for projected cash needs. Holdings in this fund are restricted to U. S. Government obligations and obligations of selected U. S. Government Agencies, in accordance with Georgia Code 50-17-59 and 50-17-63. The investment maturities of this fund will range between daily and two years. The Weighted Average Maturity of the Short-Term fund is 1.1 years. Investments shall be limited to fixed income securities.
Annual Financial Report FY2005 61

Legal Fund The Legal fund provides an opportunity for greater income and modest principal growth to the extent possible with the securities allowed under Georgia Code 50-17-59 and 50-17-63. Holdings for this fund should have a limited degree of financial risk, such as U. S. Treasury obligations or U. S. Agency securities. The investment maturities of this fund will typically range between one and five years, with a maximum of thirty years for any individual investment. The Weighted Average Maturity for debt securities of the Legal fund is 3.9 years.
Balance Income Fund The Balanced Income fund is designed to be a convenient vehicle to invest endowment funds and other funds that are not subject to the regulations on state funds under Georgia law. This fund is comprised of fixed income, equity, and cash equivalent instruments. The investment maturities for debt securities of this fund will typically range between three and five years. The Weighted Average Maturity for debt securities of the Balanced Income fund is 4.4 years.
The equity allocation range shall be between 30% and 40%, with a target of 35% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 60% and 70%, with a target of 65% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality short-term instruments.
Total Return Fund The Total Return fund is another pool designed for the investment of endowment and other funds that are not subject to Georgia law limiting investment of state funds. This pool offers the greatest percentage of overall equity exposure, with well over half of the funds typically invested in equities. The investment maturities for debt securities of this fund will typically range between three and five years. The Weighted Average Maturity for debt securities of the Total Return fund is 4.4 years.
The equity allocation range shall be between 60% and 70%, with a target of 65% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 30% and 40%, with a target of 35% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality short-term instruments.
Diversified Fund The Diversified fund is designed to gain further diversification and increase exposures to assets that have lower correlation to equity and bond markets by utilizing alternative asset classes. In addition, this fund is constructed to build an optimal portfolio where return is increased and risk is reduced. The investment maturities for debt securities of this fund will typically range between three and five years. The Weighted Average Maturity for debt securities of the Diversified fund is 4.4 years.
The equity allocation range shall be between 50% and 75% of the portfolio. The fixed income (bond) portion of the portfolio shall be between 20% and 40%. The portfolio may also consist of Hedge Funds, Real Estate and Venture Capital/Private Equity/Post Venture Capital.
Annual Financial Report FY2005 62

Hedge Funds - The investment approach to this asset class is to use a multi-strategy, multimanager fund of hedge funds. The Board of Regents believes that a fund of fund strategy will provide the best access to a highly diversified pool of hedge fund strategies and managers.
Real Estate - The Board of Regents' approach for investing in this asset class is to use real estate investment trusts (REITs). REITs are more liquid than owning commercial real estate and diversification can be achieved by purchasing a mutual fund.
Venture Capital/Private Equity/Post Venture Capital - This asset class is the riskiest and most volatile permitted investment opportunity. This asset should be considered as an additional diversification investment strategy due to the low correlation with stock and bonds.
Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality short-term instruments.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair market value of an investment. The University System's policy for managing interest rate risk is to comply with Regents policy and applicable Federal and state laws.
The University System's policy for managing interest rate risk is contained in the investment policy guidelines for the various pooled investment funds:
1. In the Short-Term Fund, the average maturity of the fixed income portfolio shall not exceed three years.
2. In all the other pooled funds, the average maturity of the fixed income portfolio shall not exceed ten years.
3. Fixed income investments shall be limited to U. S. Treasury government agency, and corporate debt instruments having minimum investment grade credit ratings of BAA by Moody's and/or Standard and Poor's.
4. The fixed income target allocation is defined in the investment policy guidelines for each pooled investment fund. These targets may be modified upon recommendation of the fund's investment manager and approval by the Board of Regents.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University System will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University System's policy for managing custodial credit risk for investments is:
1. The University System has appointed a federally regulated banking institution as custodian. The custodian performs its duties to the standards of a professional custodian and is liable to the University System for claims, losses, liabilities, and expenses arising
Annual Financial Report FY2005 63

from its failure to exercise ordinary care, its willful misconduct, or its failure to otherwise act in accordance with the contract.
2. All securities transactions are to be settled on a delivery vs. payment basis through an approved depository institution such as the Depository Trust Company or The Federal Reserve.
3. Repurchase agreements are to be collateralized by United States Treasury securities at 102% of the market value of the investment at all times.
At June 30, 2005, $168,067,579.44 was uninsured and held by the University System's custodian bank or a depositary institution, but not in the University System's name.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University System's policy for managing credit quality risk is to comply with Regents policy and applicable Federal and state laws.
The University System's formal policy for managing credit quality risk is contained in the investment policy guidelines for the various pooled investment funds:
1. In all pooled funds except the Diversified Fund, all debt issues must be investment grade with ratings of at least BAA by Moody's and Standard and Poor's at the time of purchase.
2. The Diversified Fund is permitted to invest in noninvestment grade debt issues up to a limit of 15% of the entire portfolio.
3. The portfolios shall be well diversified as to issuer and maturity.

Related Debt Investments U. S. Agencies Certificates of Deposit Corporate Debt General Obligation Bonds Money Market Mutual Fund Mortgage Backed Securities (U.S. Agencies) Municipal Obligation Mutual Bond Fund Repurchase Agreements - Underlying U. S. Agency Securities

Fair Value

AAA

AA

A

Ba

Baaa

Unrated

$162,014,948.99 35,000.00
6,124,714.72 970,057.60 601,677.69 326,044.26 1,200,000.00 45,714,509.43

$105,493,297.27
556,842.81 868,843.60
318,269.59 1,200,000.00

$0.00
1,479,913.01 101,214.00

$0.00 2,222,083.13

$0.00

$0.00

565,872.20 1,121,589.00

$56,521,651.72 35,000.00 178,414.57
601,677.69 7,774.67
45,714,509.43

4,945,321.00 4,945,169.00

152.00

$221,932,273.69 $113,382,422.27 $1,581,127.01 $2,222,083.13 $565,872.20 $1,121,589.00 $103,059,180.08

Annual Financial Report FY2005 64

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University System's policy for managing concentration of credit risk is to diversify investments to the extent that any single issuer shall be limited to 5% of the market value in a particular investment fund. United States Government and United States Governmental agency securities are exempt from this requirement. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The University System's policy for managing foreign currency risk is to comply with Regents policy and applicable Federal and state laws. The University System's policy for managing exposure to foreign currency credit risk for the various pooled funds is:
1. The Diversified Fund is the only pooled investment fund authorized to hold foreign investments. The current approved asset allocation target for international equity is 0 10% and for global fixed income 0 - 10%. As of June 30, 2005, the Diversified Fund had 7% ($3,265,537.84) exposure to international equity and 0% exposure to global fixed income.
2. The Diversified Fund is subject to exchange rate risk on these investments, which does ultimately impact performance.
3. The market value of all international investments is reported in United States Dollars (securities held by international investment managers).
4. Direct currency hedging is not permissible under the current investment policy guidelines.
Annual Financial Report FY2005 65

Condensed financial information for the investment pool follows:

Statement of Net Assets - June 30, 2005

Assets

Cash Investments Interest Receivable

$ 10,703,990.77 157,445,069.61
161,914.26

$168,310,974.64

Net Assets Held in Trust for Pool Participants

Internal Portion External Portion

$ 10,994,502.03 157,316,472.61

$168,310,974.64

Statement of Changes in Net Assets - Year Ended June 30, 2005

Revenues

Interest Income Net Increase (Decrease) in Fair Value of Investments

$ 4,674,812.30 -945,372.36

Total Revenues

$ 3,729,439.94

Expenses

Operating Expenses Administrative Expenses

434,303.05

Net Increase (Decrease) in Assets Resulting from Operations

$ 3,295,136.89

Distribution to Participants Capital Transactions

-13,131,964.50 13,609,344.43

Total Increase (Decrease) in Net Assets

$ 3,772,516.82

Net Assets July 1, 2004

164,538,457.82

Net Assets June 30, 2005

$168,310,974.64

Annual Financial Report FY2005 66

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance State General Appropriations Allotment Georgia State Financing and Investment Commission Margin Allocation Funds Other
Sub Total Less Allowance for Doubtful Accounts
Net Accounts Receivable

June 30, 2005
$18,878,325.55 13,783,869.01 80,849,981.31
8,769,447.24 7,458,093.00 125,580,498.96 255,320,215.07 11,665,181.41 $243,655,033.66

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Physical Plant Other
Total

June 30, 2005
$12,076,231.57 1,504,514.95 1,953,664.23 3,306,130.98
$18,840,541.73

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, 2005. 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, 2005 the allowance for uncollectible loans was approximately $1,619,512.22.

Annual Financial Report FY2005 67

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Restated Be g. Bal. July 1, 2004

Additions

Re ductions

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

$131,762,706.86 15,590,660.58 168,780,661.39 316,134,028.83

$24,222,468.59 567,880.00
98,131,212.04 122,921,560.63

$365,000.00
128,995,570.18 129,360,570.18

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

238,467,934.97 3,696,888,629.85
212,413,146.36 896,599,792.92 172,680,957.93 527,010,192.45
1,426,510.99 5,745,487,165.47

14,595,636.17 531,047,150.81 15,233,978.19 78,488,730.75 65,420,123.51 31,198,021.76
41,513.33 736,025,154.52

1,276,420.97 32,837,638.84 1,885,397.51 53,369,736.28 5,457,974.98 1,488,942.97
10,750.00 96,326,861.55

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

44,530,151.47 1,116,124,440.68
64,548,425.84 599,165,278.55 14,897,023.14 397,966,672.52
603,140.14 2,237,835,132.34

3,748,032.17 99,355,993.00 6,185,865.73 75,054,690.60 11,008,155.43 25,050,735.98
28,541.25 220,432,014.16

145,165.99 13,469,602.43
853,863.95 41,680,824.01 2,676,948.81 1,347,033.16
921.84 60,174,360.19

Total Capital Assets, Being Depreciated, Net

3,507,652,033.13

515,593,140.36

36,152,501.36

Capital Assets, net

$3,823,786,061.96 $638,514,700.99 $165,513,071.54

End. Bal. June 30, 2005
$155,620,175.45 16,158,540.58 137,916,303.25 309,695,019.28
251,787,150.17 4,195,098,141.82
225,761,727.04 921,718,787.39 232,643,106.46 556,719,271.24
1,457,274.32 6,385,185,458.44
48,133,017.65 1,202,010,831.25
69,880,427.62 632,539,145.14 23,228,229.76 421,670,375.34
630,759.55 2,398,092,786.31
3,987,092,672.13
$4,296,787,691.41

Annual Financial Report FY2005 68

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

June 30, 2005

Prepaid Tuition and Fees Research Other Deferred Revenue
Totals

$95,368,798.63 37,334,963.90 44,233,295.32
$176,937,057.85

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Be g. Bal. July 1, 2004

Additions

Re ductions

End. Bal. June 30, 2005

C urre nt Portion

Le as e s Lease Obligations
Other Liabilities Deferred Revenue (noncurrent) Compensated Absences US DOE Settlement Notes & Loans Total
Total Long Term Obligations

$471,656,629.37
1,973,595.20 131,781,521.99
2,046,749.65 2,505,614.80 138,307,481.64
$609,964,111.01

$225,028,957.01 234,890.36
102,775,086.88
103,009,977.24 $328,038,934.25

$19,982,146.25
468,595.20 93,914,883.22
376,531.33 68,439.56 94,828,449.31
$114,810,595.56

$676,703,440.14
1,739,890.36 140,641,725.65
1,670,218.32 2,437,175.24 146,489,009.57
$823,192,449.71

$18,557,710.42
37,487.29 82,008,479.18
426,167.36 72,255.50 82,544,389.33
$101,102,099.75

Note 9. Significant Commitments

The University System of Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $54,046,086.97 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.

Note 10. 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.
CAPITAL LEASES

Several of the institutions in the University System of Georgia had capital leases as of June 30, 2005. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2006 and 2035. Expenditures for fiscal year 2005 were $55,355,840.69 of which $35,373,694.44 represented interest. Total principal paid on capital leases was $19,982,146.25 for the fiscal year ended June 30, 2005. Interest rates range from 2.87 percent to 9.14 percent.

Annual Financial Report FY2005 69

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:
Georgia Institute of Technology
Georgia Institute of Technology had four capital leases with related parties in fiscal year 2005. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000.00 for the Parker H. Petit 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, 2005 the remaining long-term debt obligation (principal) under the lease was $19,495,000.00, and the amount due (principal and interest) in the next fiscal year is $1,425,453.76.
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, 2005 the remaining long-term debt obligation (principal) under the lease was $137,275,320.00, and the amount due (principal and interest) in the next fiscal year is $9,936,557.29.
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 February 2001 and expires February 2031. At June 30, 2005 the remaining long-term debt obligation (principal) under the lease was $43,430,000.00, and the amount due (principal and interest) in the next fiscal year is $3,068,017.52.
In May 2005 Georgia Institute of Technology entered into a capital lease of $70,320,000.00 with Georgia Tech Facilities, Inc., a discretely presented component unit, for a complex of buildings collectively named "Married Family Housing". The lease term is for 25 years and expires in June, 2030. At June 30, 2005 the remaining long-term debt obligation under the lease was $70,320,000.00 and the amount due (principal and interest) in the next fiscal year is $4,742,545.02.
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, 2005 the remaining longterm debt obligation (principal) under the lease was $63,399,609.54 and the amount due (principal and interest) in the next fiscal year is $4,012,528.01. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or
Annual Financial Report FY2005 70

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
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, 2005 on these capital leases is $30,972,130.00 and $11,951,903.15 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI. Georgia State University had no new capital building leases with related entities in the current fiscal year.
Georgia State University also has various capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $703,875.00.
Medical College of Georgia
Medical College of Georgia has various leases for equipment with an outstanding balance at June 30, 2005 in the amount of $2,755,796.76.
University of Georgia
The University of Georgia occupies six real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2011, 2032, 2033, and three expire in 2034. The equipment capital leases expire between 2006 and 2010. Expenditures for fiscal year 2005 were $12,362,027.39, of which $9,459,657.79 represented interest and $2,902,369.60 represented principal paid on capital leases. Interest rates range from 0.65 percent to 8.48 percent. The carrying values of assets held under capital lease, including the current liability portion, at June 30, 2005 were $149,387,597.14.
All six 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 lease 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 University of Georgia entered into the fifth and sixth capital
Annual Financial Report FY2005 71

leases with The University of Georgia Real Estate Foundation, whereby the University leases the East Campus Village dormitory complex and the East Village Commons dining hall for a 30 year period that began July 1, 2004, and expires June 30, 2005. The outstanding liability at June 30, 2005 on these capital leases is $148,387,597.14.
Georgia Southern University
Georgia Southern University had one capital lease with related entities in the current fiscal year. In September 2003, Georgia Southern 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. an affiliated organization, 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, 2005 on this capital leases is $41,040,443.18.
Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $424,327.72.
Valdosta State University
Valdosta State University had two capital leases with related entities in the current fiscal year. In 2005, Valdosta State University entered into a capital lease of $19,285,471.00 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC. The University leases a Centennial Hall, a housing unit located on Sustella Avenue for a twenty-five year period. In July of 2004, the University entered into a capital lease of $1,141,194.06 at 6.25 percent with the Valdosta State University Foundation, also a related party, whereby the University leases a building for a six-year period. The outstanding liability at June 30, 2005 on these capital leases is $18,956,090.22 and $979,334.21 respectively.
Valdosta State University also has various capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $55,629.13.
Kennesaw State University
Kennesaw State University had five 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 expires April 2027. The outstanding liability at June 30, 2005 on this capital lease is $3,775,691.36.
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 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
Annual Financial Report FY2005 72

ground lease, ownership of the parking decks transfers to the University. The outstanding liability at June 30, 2005 on this capital lease is $22,327,339.50.
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 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. In December 2004, the University entered into a capital lease at 7.2% for additional space in the complex, bringing the value of the lease to $3,378,929.27. The outstanding liability at June 30, 2005 on these capital leases is $3,271,876.90.
In February 2004, the University entered into a capital lease of $200,000.00 at 2.0 percent whereby the University leases a house for a fifteen-year period that expires January 2019. The outstanding liability at June 30, 2005 on this capital lease is $183,569.35.
In September 2004, the University entered into a capital lease of $14,323,133.54 at 5.79 percent whereby the University leases a parking deck for a twenty-five year period that began September 2004 and expires August 31, 2029. The deck is constructed on land owned by the University and leased to Kennesaw State University Foundation, Inc. for $197,600.00 annually for a period of twenty-five years commencing in July 2005. At the expiration of the ground lease, ownership of the parking deck transfers to the University. The outstanding liability at June 30, 2005 on this capital lease is $14,037,349.82.
Georgia Perimeter College
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, 2005 is $15,866,074.54. This lease will expire in 2023.
University System Office
The University System Office entered into five new Capital Lease Obligations in the current year. In September 2004, the University System Office entered into a capital lease of $12,027,359.68 at 4.88 percent for an office building with the Daniels Bridge Technology Center, LLC. The lease term for the building is a twenty-year period that began October 2004, and expires September 2025. The University System Office may cancel the lease agreement at the end of any fiscal year when sufficient appropriations, revenues, income, grants or other funding sources are not available. The University System Office has the option to purchase the property for the redemption price and the payment of $10.
In December 2004, lease obligation number 216 was completed for Optical Fiber Use for a principal amount of $2,684,626.00 at an interest rate of 4.47 percent. In February 2005, lease obligation number 224 was completed for numerous items of equipment for a principal amount of $2,995,012.10 at an interest rate of 4.95 percent. In June 2005, lease obligation numbers 232 and 240 were completed for numerous items of equipment for principal amounts of
Annual Financial Report FY2005 73

$1,737,387.00 and $1,448,479.97 respectively, at an interest rate of 5.65 percent. All of the above obligations were entered into with SunTrust Bank and have maturity dates during FY 2010.

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 2007 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 $120,883,297.73.

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum lease payments
Less: Interest Less: Executory costs (if paid) Principal Outstanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Total Capital Le as e s

Total Ope rating Le as e s

$56,507,535.42 55,915,027.76 55,366,355.09 54,818,343.67 53,249,455.19
259,275,262.20 266,515,296.86 238,233,909.33 176,126,597.79
60,217,089.78

$23,085,251.23 9,711,417.93 7,491,042.85 6,377,227.52 6,062,842.93
23,279,231.83 14,600,993.28 15,445,293.72 14,829,996.44

1,276,224,873.09 584,314,609.98 15,206,822.97
$676,703,440.14

$120,883,297.73

Annual Financial Report FY2005 74

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

Employees' Retirement System of Georgia

Required Contribution
$106,062,476.85 $106,773,703.51 $106,408,437.39

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 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.

Annual Financial Report FY2005 75

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 7.16% 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 2005 amounted to $368,058.04, of which $284,942.51 was made by the University System and $84,020.99 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, 2005, financial report, which may be obtained through ERS.
Annual Financial Report FY2005 76

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $64,013,570.64 (9.65%) and $32,852,619.33 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 FY2005 77

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 2005 amounted to $6,109,564.65 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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 FY2005 78

performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 12,178 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, the University System of Georgia recognized as incurred $49,212,798.28 of expenditures, which was net of $18,141,227.28 of participant contributions.
Annual Financial Report FY2005 79

Note 15. Natural Classifications with Functional Classifications

The University System's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation

In s t ru ct io n
$591,725,381.02 213,267,793.23 333,625,240.57
1,908,620.92 10,875,197.68 (1,086,742.40) 7,139,853.90 130,202,792.51 35,656,058.13

Re s e arc h
$194,951,323.17 224,405,005.34 75,184,319.05
323,809.78 16,999,835.18 1,917,942.96 1,621,359.00 190,468,326.68 18,802,797.35

Public Service
$49,280,681.26 128,915,814.78 40,709,648.61
683,581.96 5,381,799.47
929,368.71 20,392,314.18 129,024,795.79 5,731,880.94

Academic Support
$11,180,326.37 161,937,789.41 42,545,171.28
90,725.36 3,271,125.10
243,346.15 2,747,579.81 77,784,050.07 25,614,788.14

Student Services
$599,842.07 92,129,854.66 21,706,021.88
76,704.39 1,763,168.76 2,215,142.30 1,717,018.56 50,274,838.01 3,042,580.17

In s titu tio n al Support
$1,523,494.75 197,024,766.56 69,966,592.29
146,322.37 2,791,203.99 2,672,687.19 9,831,531.52 340,323,047.51 14,023,470.47

Total Expenses

$1,323,314,195.56

$724,674,718.51

$381,049,885.70

$325,414,901.69

$173,525,170.80

$638,303,116.65

Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Expenses

Plant Operations & Maintenance

Sc h o lars h ip s & Fellowships

$125,332.04 109,416,250.65 28,016,088.48 (7,409,330.93)
298,204.99 30,000.00 81,829,437.01 111,952,172.15 26,213,671.39

$69,516.00 20,238.38 25,367.57
7,516.16 143,432,060.37
39,089.35 52.95

$350,471,825.78

$143,593,840.78

Functional Classification FY2005

A u xilia ry En te rp ris e s

Unallocated Exp en s es

$799,132.14 94,887,822.42 21,342,913.08 7,407,961.99 1,196,924.64 11,489,350.36 16,659,925.57 186,039,197.89 25,633,403.28

$0.00 13,291.60 6,345.13
48,178.17 65,713,311.34

$365,456,631.37

$65,781,126.24

MCG only Patient Care
$5,267,556.33 63,007,420.00 17,139,172.16
229,948.98
272,156.09 86,271,827.77
$172,188,081.33

Total Exp en s es
$855,522,585.15 1,285,026,047.03
650,266,880.10 3,228,395.84 42,814,924.95
161,843,155.64 142,211,175.64 1,302,428,315.90 220,432,014.16
$4,663,773,494.41

Annual Financial Report FY2005 80

Note 16. Component Units
Georgia Institute of Technology
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.
During the year ended June 30, 2005, the Association distributed $4,672,816.87 to the Institute for scholarships and $3,398,077.78 in other payments that were either expense reimbursements or support for Institute programs. The Institute distributed to the Association, $1,991,697.34 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 Advanced Technology Ventures, Inc. (GATV) is a Georgia non-profit organization formed to support Georgia Institute of Technology's technology transfer and economic development mission and its Advanced Technology Development Center (ATDC) incubator program. GATV provides capital and operating support for technology transfer and economic activities including ATDC incubator facilities and services to ATDC affiliated companies.
GATV 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. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. Georgia Advanced Technology Ventures fiscal year is July 1 through June 30.
Annual Financial Report FY2005 81

Complete financial statements for GATV can be requested at the following address:
Georgia Advanced Technology Ventures, 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 is 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 FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. The Alumni Association's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Alumni Association paid $801,262.00 to the Institute primarily for employee salary and insurance costs. The Institute funded $145,497.00 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
Georgia Tech Facilities, Inc., (Facilities) is a legally separate, tax-exempt component unit 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
Annual Financial Report FY2005 82

benefit of, the Institute, Facilities is considered a component unit of Georgia tech and is discretely presented in the Institute's financial statements.
The Georgia Tech Facilities, Inc 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. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. Facilities fiscal year is July 1 through June 30.
Investments carried as capital assets valued at $208,717,000.00 and bonds payable are included in Facilities financial statements. The corresponding buildings and associated long-term debt are included in the Institute's report. Note 10 of this financial report provides information on related party leases. Complete financial statements for Facilities can be requested at the following address:
Georgia Tech Facilities, Inc. Treasurer's Office
Lyman Hall, Room 315 Atlanta, GA 30332-0257
Attention: Joel Hercik
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 is 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 FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $49,839,000.00 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.
Annual Financial Report FY2005 83

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 Research Corporation and its subsidiary Georgia Tech Applied Research Corporation (referred to in the singular as GTRC in this document) are legally separate, taxexempt component units 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.
The Georgia Tech Research Corporation 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. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. The Research Corporation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, GTRC distributed $34,387,628.00 to the Institute, primarily as reimbursement for research and other sponsored activities conducted on campus. The Institute distributed $3,187,047.72 to GTRC, primarily for related-party rental payments. Note 10 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
Investments for Component Units The Georgia Tech Athletic Association utilizes the services of the Georgia Tech Foundation, Inc. for investment purposes. At June 30, 2005, the Foundation held $61,369,437.00 in investments for the Athletic Association. This amount is reflected as a Due To/From Component Units on the Statement of Net Assets for the respective organizations.
Georgia Tech Alumni Association holds investments in mutual funds valued at $578,346.00.
Georgia Tech Facilities, Inc. lists investments totaling $208,717,000.00 on its balance sheet, which is composed of investments in U.S. Treasury Notes totaling $65,458,000.00 and investments in real estate totaling $143,259,000.00. The U. S. Treasury notes will be used to construct facilities that will be leased by Georgia Institute of Technology.
Annual Financial Report FY2005 84

The Georgia Tech Foundation, Inc. (GTF) holds investments totaling $1.0 billion as of June 30, 2005, of which $310.8 million is the corpus of the endowment (permanently restricted). The corpus in 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 (12) quarter average market value of the endowment funds is allocated from the earnings for expenditure. In fiscal year 2005, the Foundation allocated 5.35% of that average.
Georgia Tech Research Corporation (GTRC) holds investments in the amount of $1.4 million. Investments consist of marketable securities.
Long Term Liabilities for Component Units The Georgia Tech Athletic Association, Inc. has one bond issue outstanding with a balance of $108,465,000 and one unsecured note payable totaling $1,012,694. The combined balance for the two is $109,477,694. The bonds payable total does not include an unamortized discount of $966,978 and an unamortized "swaption" premium of $2,263,457. 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.
Georgia Advanced Technology Ventures, Inc. has two long-term leases and two notes payable, one secured and one unsecured. The leases are for Centergy Floors 1-3 with an interest rate of 6.25% and Centergy Floors 4-5 with an interest rate of 7.75%. The balances for both leases total $49,631,945.00. The secured note payable has a balance of $6,000,000.00 and an interest rate of LIBOR plus 5.10%. The unsecured note has a balance of $215,939.00 and an interest rate of 6%. There is $605,641.00 in accrued interest payable associated with the discount on the capital lease.
Georgia Tech Facilities, Inc. has four bond issues outstanding with balances totaling $175,155,000. 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 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.
Georgia Tech Foundation, Inc. has three bond issues outstanding with balances totaling $222,055,000 (not including an unamortized bond discount of $1,683,000). 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 3.0% to 6.6%. Details of outstanding balances and current year activity for the three bond issues are shown in the statements, which follow.
Annual Financial Report FY2005 85

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Georgia Tech Foundation, Inc. Bonds Payable
Series 2001A Series 2001A (Tax Exempt) Series 2002A (Taxable) Georgia Tech Facilities, Inc. Bonds Payable Series 1997A Series 1997B Series 2003 Series 2004 Georgia Tech Athletic Association Bonds and Notes Payable Series 2001 and Note Payable Georgia Advanced Technology Ventures Capital Lease Payable Centergy Floor 1-5
Total Long Term Debt

Be g in n in g Balance
July 1, 2004

A d d it io n s

$44,220,000.00 109,255,000.00 72,585,000.00

$0.00

10,370,000.00 19,945,000.00 70,320,000.00 75,205,000.00

112,536,503.00

33,365,772.00 $547,802,275.00

23,087,753.00 $23,087,753.00

Re d u c t io n s

En d in g Balance June 3, 2005

Amounts due within
One Year

$790,000.00 1,900,000.00 1,315,000.00

$43,430,000.00 107,355,000.00 71,270,000.00

$825,000.00 1,975,000.00 1,380,000.00

235,000.00 450,000.00

10,370,000.00 19,710,000.00 69,870,000.00 75,205,000.00

245,000.00 470,000.00 1,435,000.00

1,762,330.00

110,774,173.00

1,779,481.00

$6,452,330.00

56,453,525.00 $564,437,698.00

14,374.00 $8,123,855.00

Debt Service Obligations Annual debt service requirements to maturity for Georgia Tech Foundation, Inc. Series 2001A, 2002A, and 2002B bonds payable are as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2032

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

P rinc ipa l
$4,180,000.00 4,385,000.00 4,605,000.00 4,825,000.00 5,060,000.00 29,685,000.00 39,445,000.00 47,005,000.00 57,960,000.00 24,905,000.00

Interest
$12,079,973.78 11,879,629.78 11,662,200.03 11,437,490.53 11,203,636.65 51,584,868.85 41,821,414.47 29,440,424.40 15,293,067.00 1,326,603.00

Total
$16,259,973.78 16,264,629.78 16,267,200.03 16,262,490.53 16,263,636.65 81,269,868.85 81,266,414.47 76,445,424.40 73,253,067.00 26,231,603.00

$222,055,000.00

$197,729,308.49

$419,784,308.49

Annual Financial Report FY2005 86

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: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipa l
$2,150,000.00 2,550,000.00 3,920,000.00 4,040,000.00 4,185,000.00 23,820,000.00 30,480,000.00 39,400,000.00 39,330,000.00 20,535,000.00 4,745,000.00
$175,155,000.00

Interest
$8,449,238.78 8,383,616.28 8,309,060.65 8,186,708.76 8,049,312.50 37,307,903.17 30,647,177.80 21,742,330.18 11,327,250.01 4,366,750.00
237,247.00
$147,006,595.13

Total
$10,599,238.78 10,933,616.28 12,229,060.65 12,226,708.76 12,234,312.50 61,127,903.17 61,127,177.80 61,142,330.18 50,657,250.01 24,901,750.00 4,982,247.00
$322,161,595.13

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:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Unamortized Premium Unamortized Discount

Bonds and Note Payable Principal Interest

$1,779,481.00 1,855,480.00 1,951,979.00 2,052,978.00 2,149,479.00
12,445,864.00 16,309,323.00 21,066,775.00 27,916,335.00
1,950,000.00

$5,554,895.00 5,475,095.00 5,380,006.00 5,279,962.00 5,182,909.00
24,208,391.00 20,347,028.00 15,585,039.00
9,398,861.00 1,744,037.00

$109,477,694.00

$98,156,223.00

2,263,457.00 (966,978.00) $110,774,173.00

Total
$7,334,376.00 7,330,575.00 7,331,985.00 7,332,940.00 7,332,388.00
36,654,255.00 36,656,351.00 36,651,814.00 37,315,196.00 23,694,037.00
0.00 0.00
$207,633,917.00

Annual Financial Report FY2005 87

Annual debt service requirements to maturity for the Georgia Advanced Technology Ventures, Inc. capital lease payable are as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipa l
$0.00
1,218,496.90 4,867,377.41 10,000,767.57 17,160,042.26 18,153,011.58

Interest
$3,020,724.12 3,112,687.44 3,200,365.32 3,288,293.04 3,383,249.64 17,195,213.43 16,219,404.80 13,771,186.41 9,332,038.78 2,482,777.26

Total
$3,020,724.12 3,112,687.44 3,200,365.32 3,288,293.04 3,383,249.64 18,413,710.33 21,086,782.21 23,771,953.98 26,492,081.04 20,635,788.84

$51,399,695.72

$75,005,940.24

$126,405,635.96

Unammortized Premium Unamortized Discount

($1,767,750.72) 6,821,580.00
$56,453,525.00

Georgia State University

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 37-member board of the Foundation, of which 6 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 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. During the 2005 fiscal year, the Foundation adopted GASB Statement No. 35, Basic Financial Statement and Management's Discussion and Analysis for Public Colleges and University, and has applied those statements having been defined a component unit of the University under the provisions of GASB Statement No. 39 Determining Whether Certain Organizations Are Component Units. The objective of the GASB in developing the new reporting standards is to enhance the understandability and usefulness of the external financial reports of state and local governments to the citizenry, legislative and oversight bodies and investors and creditors. The Foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $6,686,723 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Ellen Burgin, Assistant Vice President Finance and Operations, Georgia State

Annual Financial Report FY2005 88

University Foundation, P. O. Box 3963, Atlanta, GA 30302-3963 or in person at 1 Park Place South, Atlanta, GA.
Georgia State University Research Foundation (the Research Foundation) is a legally separate, tax-exempt component unit of Georgia State University (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.
During the 2005 fiscal year, the Research Foundation adopted GASB Statement No. 35, Basic Financial Statement and Management's Discussion and Analysis for Public Colleges and University, and has applied those statements having been defined a component unit of the University under the provisions of GASB Statement No. 30 Determining Whether Certain Organizations Are Component Units. The objective of the GASB in developing the new reporting standards is to enhance the understandability and usefulness of the external financial reports of state and local governments to the citizenry, legislative and oversight bodies and investors and creditors. The Research Foundation's fiscal year is July 1 through June 30.
At the end of Fiscal Year 2005, the Research Foundation had a Due to Primary Government of $6,001,560 which is not reflected in the University's financial statements as a Due from Component Units. This amount includes $1,600,092 of Accounts Receivable Federal Financial Assistance and $4,401,468 of Accounts Receivable Other exclusive of Federal Pass-Thru. Additionally, the University shows $6,510 in Due from Component Units that is reflected on the Research Foundation's financial statements as Accounts Payable.
During the year ended June 30, 2005, the Research Foundation paid to the University $48,248,002 in grant revenue and $809,067 for support of research activities. Complete financial statements for the Research Foundation can be obtained from the office of the Georgia State University Research Foundation, Inc., Alumni Hall, 30 Courtland Street, Suite 219, Atlanta, GA 30303.
Investments for Component Units:
Georgia State University Foundation holds endowment investments in the amount of $75.2 million. The Foundation determines the spendable amounts for endowment funds using a total return formula and makes no spending allocations to restricted funds from the operating portfolio. Income from the operating portfolio is used to fund the Foundation's administrative activities pursuant to an unrestricted 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
Annual Financial Report FY2005 89

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.

Georgia State University Foundation also holds investments in real property (land, buildings, net of depreciation) valued at $62,380,196.04 (net of depreciation of $16,844,619.27).

Investments:
U.S. Equity Funds International Equity Funds Venture Capital Funds Futures and Hedge Funds Bond Funds REIT's
Total Investments

$32,887,322.53 10,046,059.85 7,559,578.75 9,462,320.82 19,883,393.26 6,328,009.79
$86,166,685.00

At June 30, 2005, the carrying value and fair value of Georgia State University Research Foundations investments was $5,305,184. Investments are comprised of common stock and mutual funds. The common stock investment in the amount of $322,335 is held by the Research Foundation. Other investments are held in Georgia State University Foundation's investment pool in the Research Foundation's name.

Common Stock Corporate Bonds Investments in Real Estate Total Investments

$5,305,184.00 $5,305,184.00

Long Term Liabilities for Component Units:
Changes in long-term liabilities for the fiscal year ended June 30, 2005 for the Foundation are as follows:

Rialto Center - Capital Lease Alpharetta Campus Facilities - Capital Lease Student Recreation Center - Bonds Piedmont Ellis - Promissory Note

Beginning Balance July 1, 2004
$4,003,881.60 7,602,675.00 29,445,000.00 9,000,000.00
$50,051,556.60

Additions $0.00
$0.00

Reductions
$170,853.33 375,750.00 1,430,000.00 166,668.00
$2,143,271.33

Ending Balance June 30, 2005
$3,833,028.27 7,226,925.00 28,015,000.00 8,833,332.00
$47,908,285.27

Amounts Due Within One Year
$263,001.74 388,275.00 1,490,000.00 8,833,332.00
$10,974,608.74

Rialto Center Facilities 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

Annual Financial Report FY2005 90

financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (the "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 will in turn lease the facilities to the University through a series of one year 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, 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 year ended June 30, 2005 amounted to $344,030.
Annual debt service requirements to maturity for the Rialto Center Capital Lease are as follows:
Rialto Capital Lease

Year Ending June 30: Year

2006

1

2007

2

2008

3

2009

4

2010

5

2011 through 2015

6-10

2016

11

Principal
$263,001.74 281,245.56 300,754.89 321,617.54 343,927.38 2,112,367.21 210,113.95
$3,833,028.27

Interest
$249,782.26 231,538.44 212,029.11 191,166.46 168,856.62 451,552.79
3,546.05
$1,508,471.73

Total
$512,784.00 512,784.00 512,784.00 512,784.00 512,784.00 2,563,920.00 213,660.00
$5,341,500.00

Alpharetta Campus Facilities Capital Lease
On September 23, 1998, $10,600,000 of revenue bonds were issued by the Development Authority of Alpharetta, Georgia (the "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
Annual Financial Report FY2005 91

principal and interest on the bonds with the balance to be paid by the Authority. The Foundation will in turn sublease 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 Authority amounted to $332,019 for the year ended June 30, 2005.
Annual debt service requirements to maturity for the Alpharetta Campus Facilities Capital Lease are as follows:
Alpharetta Capital Lease

Year Ending June 30: Year

Principal

Interest

Total

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2019

1 2 3 4 5 6-10 11-14

$388,275.00 404,975.00 421,675.00 438,375.00 455,075.00 2,584,325.00 2,534,225.00
$7,226,925.00

$314,614.41 298,973.68 282,469.35 264,956.94 246,318.72 904,295.82 240,340.65
$2,551,969.57

$702,889.41 703,948.68 704,144.35 703,331.94 701,393.72 3,488,620.82 2,774,565.65
$9,778,894.57

Student Recreation Center Bond

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 AMBAC Assurance Corporation. 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%. During 2005, interest expense, in the amount of $1,274,165 has been charged to operations.

Annual Financial Report FY2005 92

Annual debt service requirements to maturity for the Student Recreation Center Bonds are as follows:
Student Recreation Center Bonds

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2019

Year
1 2 3 4 5 6-10 11-14

Piedmont/Ellis Promissory Note

Principal
$1,490,000.00 1,550,000.00 1,615,000.00 1,680,000.00 1,755,000.00
10,035,000.00 9,890,000.00
$28,015,000.00

Interest
$1,216,338.36 1,155,386.68 1,090,576.64 1,021,464.96 948,220.00 3,470,489.18 889,041.68
$9,791,517.50

Total
$2,706,338.36 2,705,386.68 2,705,576.64 2,701,464.96 2,703,220.00
13,505,489.18 10,779,041.68
$37,806,517.50

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: Year

2006

1

Principal

Interest (Estimated)

$8,833,332.00

$160,000.00

Total $8,993,332.00

Working Capital Note

In 1998, the Foundation entered into an arrangement with a bank for a discretionary line of credit that was unsecured. Loan proceeds were used to finance the purchase of land for the Helen Aderhold Learning Center and repayments were scheduled to occur when pledge payments for the facility are received. After five (5) years and when the balance was reduced below $400,000, the loan was converted to a one-year renewable promissory note at Prime for the remainder of the repayments. The Foundation continues to repay the balance when pledge payments are received. The interest rate as of June 30, 2005 was 5.04%. The outstanding balance as of June 30, 2005 was $60,137.

Medical College of Georgia

Medical College of Georgia Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The Foundation acts primarily as a

Annual Financial Report FY2005 93

fund-raising organization to supplement the resources that are available to the College in support of its programs. The Foundation functions as an independent corporation governed by its articles of incorporation, by-laws and its Board of Directors. 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 Statements for Not-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 July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $12.2 million to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation office at 919 15th Street, Augusta, GA 30912 or from the Foundation's website at www.mcgfoundation.org.
The Foundation's investments are comprised of the following amounts at June 30, 2005:

Properties held for investment Equities Mutual funds and other equities Bonds Short-term investments

Cost $1,117,212 15,680,723 43,472,657 16,877,870 10,637,930

Fair Value $1,117,212 21,942,874 48,966,127 16,789,142 10,637,932

Total investments

$87,786,392

$99,453,287

Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The Foundation receives and manages funds and property 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 the College 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 is 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 to be a component unit of the College and is discretely presented in the College's financial statements.

Annual Financial Report FY2005 94

The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is from March 1, 2004 through February 28, 2005. Because the Foundation's year end differs from that of the College, amounts due to or due from the two entities are not consistent in this report.
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.
The Foundation's investments are comprised of the following amounts at June 30, 2005:

Certificates of deposit U.S. Treasury obligations Annuities Index fund Cash management fund Domestic equities

Cost $1,853,000
753,926 200,000 300,000
12,153 291,564

Fair Value $1,819,675 739,963 230,845 284,700 12,153 336,054

Total investments

$3,410,643

$3,423,390

Medical College of Georgia Research Institute, Inc. (Institute) is a legally separate, taxexempt component unit of Medical College of Georgia (College). The Institute was established in 1980 to contribute to the educational, research and service functions of the College in obtaining contracts from individuals, industrial or other private organizations, government or other public agencies for the performance of sponsored research, development or other programs by the various departments or other 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.
Prior to the year ended June 30, 2005, the Institute followed accounting principles generally accepted in the United States of America as applicable to not-for-profit organizations. During the year ended June 30, 2005, the Institute adopted accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The Institute adopted this change in accounting principles in order to be consistent with the accounting principles followed by its primary government, Medical College of Georgia. The information for the year ended June 30, 2005 has been presented in a manner consistent with the newly adopted accounting principles. The change in accounting principles had no effect on beginning net assets or the change in net assets. The Institute's fiscal year is July 1 through June 30.

Annual Financial Report FY2005 95

During the year ended June 2005, the Institute sub-contracted approximately $46 million of research projects to the College. Complete financial statements for the Institute can be obtained from the Medical College of Georgia's Office of Grants and Contracts at Medical College of Georgia, Augusta, GA 30912.
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 PPG 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 Medical College of Georgia Hospital and Clinics, which is operated by MCG 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. Georgia Esoteric and Molecular Labs, LLC was formed in 2004 by PPG to operate a specialized pathology laboratory with genetic or molecular testing capabilities. MCG-PPG Cancer Research Center, LLC was formed in 2004 by PPG to construct, own and operate a portion of a building to house a cancer research center on the campus of MCG. PPG is the sole partner and has sole voting control of each LLC. Because the PPG'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 PPG'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 the 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. Other adjustments required under accounting principles generally accepted in the United States 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The PPG's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the PPG distributed $55.5 million to the College for salaries and departmental support. Complete financial statements for the PPG can be obtained from the Administrative Office at 1499 Walton Way, Suite 1400, Augusta, Georgia 30901.
Annual Financial Report FY2005 96

The PPG's investments are comprised of the following amounts at June 30, 2005:

U. S. Treasury bonds and notes Corporate bonds and notes Common stocks Federal Home Loan Bank Mortgage-backed securities Mutual funds

Cost $9,257,215 8,582,299 9,112,713
226,364 2,164,472 9,580,046

Fair Value $9,268,123 8,697,780 11,419,965 227,622 2,176,520 9,977,712

Total investments

$38,923,109 $41,767,722.00

MCG Health, Inc. (Company) is a legally, separate tax-exempt component unit of Medical College of Georgia (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 (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 issues 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.

At June 30, 2005, MCG Health, Inc.'s cash deposits totaled $78,276,837. Of that amount, $100,000 was insured by the FDIC and $78,176,837 was uninsured, uncollateralized, or collateralized by securities held by the pledging institution or by its trust department or agent in other than the Company's name.

At June 30, 2005, MCH Health, Inc. maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.

Annual Financial Report FY2005 97

The Company's investments as of June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Certificate of Deposit Accrued Interest and Dividends
Total Investments

Fair Value
$0.00 20,405,831.00 1,147,969.00

Less Than 1 Year
$0.00 7,737,025.00
252,655.00

Investment Maturity

1-5

6 - 10

Years

Years

$0.00 12,668,806.00
895,314.00

$0.00

More than 10 Years
$0.00

21,553,800.00

$7,989,680.00

$13,564,120.00

$0.00

$0.00

118,243.00 76,651.00
$21,748,694.00

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. MCG Health, Inc. does not have a formal policy for managing interest rate risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Company will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Company does not have a formal policy for managing custodial credit risk for investments.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Company's policy for managing credit quality risk is as follows: The Company's assets may be invested only in investment grade bonds rated AA (or equivalent) or better. The Company's assets may be invested only in commercial paper rated A1 (or equivalent) or better. Fixed income maturity restrictions are as follows: Maximum maturity for any single security is five years, and weighted average portfolio maturity may not exceed 3 years. Securities comprising money market funds must be rated investment grade by Standard and Poors and/or Moody's.

Rated Debt Investments
Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value $20,405,831.00 1,147,969.00

AAA $0.00
447,465.00

$21,553,800.00

$447,465.00

Quality Ratings

AA

A

$0.00

$0.00

603,104.00

97,400.00

$603,104.00

$97,400.00

Unrated $20,405,831.00
$20,405,831.00

Annual Financial Report FY2005 98

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Company limits investments in any single equity security and any single government agency to 10% and 30%, respectively, of its investment portfolio. Individual U.S. Treasury securities may represent up to 30% of the total investment portfolio, while the total allocation to U.S. Treasury notes and bonds may represent up to 100% of the Company's aggregate bond position.
Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Company does not have a policy for managing exposure to foreign currency risk.
Long-Term Liabilities MCG Health, Inc. is the lessee of certain equipment under noncancellable leases expiring in various years through 2010. Interest rates range from 4.24% to 6.98%. Professional liability is the self-insured portion of professional liability risks. Accrued professional liability costs are determined actuarially.
Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Leases Lease Obligations Other Liabilities Professional Liabilities
Total Long Term Debt

Beginning Balance July 1, 2004
$2,094,713.00
6,328,000.00
$8,422,713.00

Additions $2,590,619.00 2,852,105.00 $5,442,724.00

Reductions $950,786.00 354,105.00 $1,304,891.00

Ending Balance June 30, 2005
$3,734,546.00
8,826,000.00
$12,560,546.00

Amounts due within
One Year $1,098,111.00
$1,098,111.00

Annual debt service requirements to maturity for capital leases are as follows:

Lease Obligations

Principal

Interest

2006 2007 2008 2009 2010

1

$1,098,111.08

$196,325.02

2

1,129,552.09

128,808.27

3

679,686.07

71,996.92

4

541,764.31

36,961.61

5

285,432.45

6,398.21

$3,734,546.00

$440,490.03

Total
$1,294,436.10 1,258,360.36 751,682.99 578,725.92 291,830.66
$4,175,036.03

Annual Financial Report FY2005 99

University of Georgia
The University of Georgia Research Foundation (the Research Foundation) is a legally separate, tax-exempt component unit of The University of Georgia. 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 2005, the Research Foundation transferred approximately $131 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. Approximately $2.2 million in 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.
DEPOSITS AND INVESTMENTS
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the Foundation's deposits may not be recovered. The Research Foundation does not have a deposit policy for custodial credit risk.
At June 30, 2005, the book value of the Foundation's deposits, including demand accounts and cash and cash equivalents held in managed investment accounts, was $3,388,932. The bank and investment account balances at June 30, 2005 were $4,541,947 of which $4,441,947 was uninsured. Of these uninsured deposits, none were collateralized with securities held by the financial institution's trust department or agent in the Foundation's name, $3,156,199 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Foundation's name and $1,285,748 were uncollateralized.
Investments The University of Georgia Research Foundation maintains both short-term and long-term investment policies. Both establish primary and secondary objectives, specify allowable investments, set target investment mix, and provide investment guidelines.
Annual Financial Report FY2005 100

The Foundation's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Inves tment Maturity

Fair

Less Than

1 -5

6 - 10

More than

Inves tment Type

Value

1 Year

Years

Years

10 Years

Debt Securities

U. S. Treasuries

$1,069,512.80

$0.00

$445,554.70

$566,263.10

$57,695.00

U. S. Agencies

2,396,368

1,474,553

360,952

560,863

Corporate Debt

17,813,771

14,899,864

2,722,658

191,249

Other Investments Equity Mutual Funds - Domes tic Equity Mutual Funds - International Equity Securities - Domes tic Equity Securities - International Managed Futures /Hedge Funds
Inves tment Pools University of Georgia Foundation
Long-Term Fund

21,279,652
2,118,412 1,428,138 4,696,172 1,044,229
769,866

$14,899,864.08

$4,642,766.03

$1,118,464.31

$618,558.10

2,220,886

Total Investments

$33,557,355

As of June 30, 2005, Research Foundation investments held by the University of Georgia Foundation in the long-term investment pool consists of investments in domestic and international equities (70.6%), fixed income instruments (10.0%), private equity investments (5.4%), real estate funds (6.2%), hedge funds (7.5%) and deposits (.3%) that are held by outside investment managers.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Foundation's policy for managing interest rate risk is divided between short-term and long-term investments. Short-term investments will have a maximum maturity of eighteen months to five years depending on type of investment. Longterm investments are managed using a planning timeline of five years or more and overall risk measurements rather than specific maturity limits.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Foundation will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Foundation does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2005, $27,030,053 of the Foundation's applicable investments were uninsured and held by the investment's counterparty in the Foundation's name.

Annual Financial Report FY2005 101

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Foundation's short-term investment policy specifies that corporate bonds be rated BBB (Standard & Poor's) or higher; the long-term policy requires a BBB- rating or higher.

Qualtity Ratings S tandard & Poor's AAA AA+ AAA+ A ABBB+ BBB BBBBB+ BB Mornings tar 5-Star 4-Star 3-Star Unrated
Non-rated inves tments GNMA s ecurities U.S . Treas ury s ecurities Total

Value
$461,186 124,990.00 420,606.00 1,739,165.00 606,895.00 923,842.00 5,107,850.00 3,697,868.00 2,004,597.00 1,303,248.00 1,884,710.00
1,599,681.00 1,428,138.00
518,731.00 1,564,675.00 23,386,182.00
370,507.00 1,069,513.00 $24,826,202

Rated Inves tments

Ag e nc i e s

Debt

$461,186

$0 124,990.00 420,606.00 1,739,165.00 606,895.00 923,842.00 5,107,850.00 3,697,868.00 2,004,597.00 1,303,248.00 1,884,710.00

1,564,675.00 2,025,861.00
370,507.00
$2,396,368

17,813,771.00 $17,813,771

Funds $0
1,599,681.00 1,428,138.00
518,731.00 3,546,550.00
$3,546,550

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of an entity's investment in a single issuer. The Foundation's policy for managing concentration of credit risk is divided between short-term and long-term investments. For short-term investments, maximum percentages are set for cash and cash equivalents at 15%, asset backed securities at 50% and corporate bonds at 90% while U. S. Treasuries, U. S. Agencies debt, and certificates of deposit may comprise 100% for the short-term investments. For long-term investment equities comprise 40-80%, bonds 20-60% and alternative investments can range 0-20%.

As of June 30, 2005, investments in a single issuer where those investments exceed 5% of total investments were as follows:

Federal Home Loan Mortgage Corporation

5%

General Motors Acceptance

6%

University of Georgia Foundation

7%

Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Foundation's investments are not exposed to foreign currency risk as securities denominated in currencies other than the U.S. dollar are not permissible by the Research Foundation's investment policy.

Annual Financial Report FY2005 102

CAPITAL ASSETS
Changes in capital assets for the University of Georgia Research Foundation for the year ended June 30, 2005 are as follows:

Beginning

Ending

Balances

Balance

7/1/2004

Additions

Reductions

6/30/2005

Capital Assets, Not Being Depreciated:

Land

$110,000

$0

$0

$110,000

Total Capital Assets Not Being Depreciated

110,000

0

0

110,000

Capital Assets, Being Depreciated: Library Repository Building Total Assets Being Depreciated

1,142,307 1,142,307

1,142,307

0

0

1,142,307

Less: Accumulated Depreciation Library Repository Building Total Accumulated Depreciation

599,066 599,066

46,083 46,083

645,149

0

645,149

Total Capital Assets, Being Depreciated, Net

543,241

(46,083)

0

497,158

Capital Assets, net

$653,241

($46,083)

$0

$607,158

Long Term Liabilities The University of Georgia Research Foundation had no long term liabilities at June 30, 2005

The University of Georgia Athletic Association (the Athletic Association) is a legally separate, tax-exempt component unit of The University of Georgia (the "University"). The Association was organized in 1938 as a not-for-profit corporation to promote intercollegiate athletic sports representing the University. The twenty-member board of 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 is 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, 2005, 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 $21,901,018 and were recognized as expenses of the Association. Capital assets net of accumulated depreciation of $139.2M 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.

Annual Financial Report FY2005 103

DEPOSITS AND INVESTMENTS
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the Association's deposits may not be recovered. Funds belonging to the State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia the option of exempting demand deposits from the collateral requirements.
At year-end, the book-carrying amount of the Association's deposits, including restricted cash and cash equivalents, was $42,713,096 and $46,525,928 in 2005 and 2004, respectively. The bank balance was $44,029,742 and $49,157,519 in 2005 and 2004, respectively.
Annual Financial Report FY2005 104

The Association's bank balance is classified as follows at June 30:

Am o u n t in su red b y th e F D IC an d F S L IC o r co llaterialized w ith secu rities h eld in th e Asso ciatio n s' n am e
U n co llateralized

2005

2004

$38,007,574 6,022,168
$44,029,742

$42,751,961 6,405,558
$49,157,519

Investments Since 2001, the Association has transferred funds to the University of Georgia Foundation (the "Foundation") for investment management. The current value of Association investments held by the Foundation is $2,273,308. The Association reflects the value of the investments as Receivables from the Foundation. The Athletic Association has ultimate control over the use of the assets and has the ability to request that all funds be returned to the Association at any time. The Foundation reports include a categorization of all investments, including those held for the Association.

As of June 30, 2005, Athletic Association investments held by the University of Georgia Foundation in the long-term investment pool consists of investments in domestic and international equities (70.6%), fixed income instruments (10.0%), private equity investments (5.4%), real estate funds (6.2%), hedge funds (7.5%) and deposits (.3%) that are held by outside investment managers.

CAPITAL ASSETS
Changes in capital assets for the University of Georgia Athletic Association for the year ended June 30, 2005 are as follows:

B eg inning

En di n g

B alanc e s

B alance

7/1/2004

A ddi ti o n s

R e du c ti on s

6/30/2005

Cap ital A s s ets , No t Bein g Dep reciated :

Co n s tru ctio n W o rk-in -Pro g res s

$5,005,013

$4,761,467

$5,005,013

$4,761,467

To tal Cap ital A s s ets No t Bein g Dep reciated

5,005,013

4,761,467

5,005,013

4,761,467

Cap ital A s s ets , Bein g Dep reciated : Lan d Imp ro v emen ts Bu ild in g s , Fixed Eq u ip men t, an d Infras ctructu re Oth er Eq u ip men t T o tal A s s ets Bein g Dep reciated

16,216,108
157,796,405 5,045,539
179,058,052

685,975
4,395,072 1,854,999 6,936,046

(5,005,013) 247,652
(4,757,361)

16,902,083
167,196,490 6,652,886
190,751,459

Les s : A ccu mu lated Dep reciatio n Lan d Imp ro v emen ts Bu ild in g s , Fixed Eq u ip men t, an d Infras ctructu re Oth er Eq u ip men t T o tal A ccu mu lated Dep reciatio n
To tal Cap ital A s s ets , Bein g Dep reciated , Net

4,056,169
25,834,727 4,535,225
34,426,121 144,631,931

691,864
2,886,206 252,028
3,830,098 3,105,948

0 (4,757,361)

4,748,033
28,720,933 4,787,253
38,256,219 152,495,240

Cap ital A s s ets , n et

$149,636,944

$7,867,415

$247,652

$157,256,707

Annual Financial Report FY2005 105

Long Term Liabilities

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are

shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2004

Additions

Reductions June 30, 2005 One Year

Revenue Bonds Payable

Athletic Association

Athletic Facilities

$84,502,614.00

$17,470,000.00

$27,315,132.00

$74,657,482.00

$2,324,681.00

Deferred Compensation

0.00

1,781,602.00

1,781,602.00

238,707.00

Total Long Term Debt

$84,502,614.00

$19,251,602.00

$27,315,132.00

$76,439,084.00

$2,563,388.00

Total long-term debt of the University of Georgia Athletic Association consisted of the following at June 30:

Annual Financial Report FY2005 106

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.
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).
Note payable to the University of Georgia over 20 years in annual payments of $477,917 at a rate fixed rate of 6.186% beginning in 1996.

2005

2004

$0

$340,000

2,946,082

10,560,000 3,224,540

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.
Development Authority of Athens-Clarke County Series 2001 revenue bonds. Interest is payable monthly based on a formula rate adjusted daily (2.28% and 1.1% in June 2005 and 2004, respectively). The loan matures in 2031, based on certain repayment provisions.
Development Authority of Athens-Clarke County Series 2003 revenue bonds. Interest is payable monthly based on a formula rate adjusted daily (2.28% and 1.1% in June 2005 and 2004, respectively). The loan matures in 2033, based on certain repayment provisions.

241,400

378,074

34,000,000

34,000,000

20,000,000

36,000,000

Development Authority of Athens-Clarke County Series 2005A revenue bonds. Interest is payable monthly based on a formula rate adjusted daily (3.28% in June 2005). The loan matures in 2021, based on certain repayment provisions.
Total Debt Less Current Portion of Debt
Total Long-Term Debt

17,470,000
74,657,482 2,324,681
$72,332,801.00

84,502,614 1,352,976
$83,149,638.00

Ramsey Student Center for Physical Activities Under an agreement with The University of Georgia, the Association assumed the responsibility for a portion of the funding for the construction of the Ramsey Student Center for Physical Activities. In fiscal 1996, the Association recorded as property approximately $7,800,000, representing the Association's share of the Ramsey Center based on estimated usage as defined in the agreement. The Association paid cash of $2,858,928, and subsequently recorded a liability of $4,941,072 at June 30, 1996 representing the remaining principal balance of the obligation. This balance is reported as the note payable to the University of Georgia above and has an outstanding principal balance at June 30, 2005 and 2004 of $2,946,082 and $3,224,540, respectively. The Association made payments of principal and interest of $477,917 during the year June 30, 2005 and will make an equal payment in each succeeding year through 2013. The interest rate associated with this liability is 6.19%.

Annual Financial Report FY2005 107

Revenue Bonds Payable On September 27, 2001, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $34 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2001 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $34 million to the Association. The Bonds are secured by a letter of credit issued by SunTrust Bank in favor of the Authority. The letter of credit expires on January 15, 2006. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.28% and 1.1% on June 30, 2005 and 2004, respectively). The loan matures in 2031, subject to certain early repayment provisions.
On August 28, 2003, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $36 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2003 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $36 million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that expires on August 28, 2005 and must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.28% and 1.1% on June 30, 2005 and 2004, respectively). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the Association redeemed $16 million of these bonds.
The Association has entered into a twenty-eight year interest rate swap agreement for the remaining $20 million of the Series 2003 Bonds. Based on the swap agreement, the association owes interest calculated at a fixed rate of 3.38% to the counterparty to the swap. In return, the counterparty owes the Association interest based on a variable rate that matches the rate required by the bonds. Only the net difference in interest payments is actually exchanged with the counterparty. The bond principal is not exchanged; it is only the basis on which the interest payments are calculated. The Association continues to pay interest to the bondholders at the variable rate provided by the bonds. However, during the term of the swap agreement, the Association effectively pays a fixed rate on the debt. The debt service requirements to maturity for these bonds are based on that fixed rate. The Association will be exposed to variable rates if the counterparty to the swap defaults or if the swap is terminated. A termination of the swap agreement may also result in the Association's making or receiving a termination payment. The market value of the interest rate swap agreement as of June 30, 2005 represented an $853,859 liability of the Association had the swap been terminated at that time
On January 27, 2005, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $17.47 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2005 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $17.47 million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that expires on January 27, 2006 and must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.28% on June 30, 2005). The loan matures in 2021 and requires yearly principal reductions.
Debt Service Obligations
Annual Financial Report FY2005 108

Annual debt service requirements at 06/30/2005 for the Athletic Association are as follows:

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Ye ar
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$2,324,683.00 1,850,371.00 1,904,951.00 1,866,794.00 1,922,025.00 9,471,991.00 9,062,778.00 6,045,556.00 3,833,333.00
36,375,000.00

Interest

To t al

$2,150,649.00 2,084,039.00 2,015,359.00 1,944,540.00 1,871,343.00 8,102,196.00 6,956,843.00 5,261,869.00 4,589,769.00
922,741.00

$4,475,332.00 3,934,410.00 3,920,310.00 3,811,334.00 3,793,368.00
17,574,187.00 16,019,621.00 11,307,425.00
8,423,102.00 37,297,741.00

$74,657,482.00

$35,899,348.00

$110,556,830.00

The University of Georgia 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 35-member Board of Trustees has fiduciary responsibility for managing the Foundation's assets. The Foundation Executive Committee is composed of the chairman, vicechairman, secretary, treasurer, the chairman from each of the other standing trustee committees and one at-large member. 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.

In 1996, the Foundation entered into a cooperative organization agreement with the Board of Regents which provided administrative services and facilities to the Foundation. In April 2005, the Board of Regents exercised its right to terminate the agreement after a period of 90 days. On July 1, 2005, the Foundation entered into an agreement with the University to provide administrative services and facilities to the Foundation, effectively terminating the cooperative organization agreement. The administrative services and facilities agreement expires on June 30, 2006 and provides for annual renewal. The Real Estate Foundation's $75 million revolving credit facility provides the bank with certain rights upon the termination of the cooperative organization agreement. In September of 2005, the Real Estate Foundation entered into a forbearance agreement with the bank whereby the bank agreed not to exercise their termination event rights until July 31, 2006.

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

Annual Financial Report FY2005 109

During the year ended June 30, 2005, the Foundation distributed $14,635,504 to the University for scholarships and donor restricted support. Facilities valued at $162 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.

INVESTMENTS

The University of Georgia Foundation holds investments in the amount of $426 million. The University of Georgia Foundation established a spending plan for all endowment funds effective with fiscal year 1999. Under this plan, funds are allowed to expend the lesser of Investment Return (dividend/interest yield and market appreciation) or the Spending Calculation for that fund. The Spending Calculation is derived by applying a "Spending Calculation Rate" to the average principal balance of the fund over the preceding 36 months. The Investment Committee of the Foundation's Board of Trustees establishes the "Spending Calculation Rate" to be used in the spending calculation each year. Gifts made to fund current expenditures are not endowed and, therefore, are not subject to the Spending Policy.

The University of Georgia Foundation also holds investments in real property valued at

$17,477,005.

Investments:

Cost

Fair Value

Certificates of Deposit Common Stock Corporate Bonds U .S. G o ve rnm e nt Se c uritie s M utual Funds Split-Inte re st Inve stm e nts Lo ng-Te rm Inve stm e nt P o o l Inve stm e nts in Re al Estate

$158,457.00 3,796,047.83 1,020,363.62
734,220.04 1,135,432.74 13,173,259.25 333,249,156.00 17,477,005.00

$158,457.00 4,130,055.00 1,026,947.00
726,907.00 1,164,501.00 14,845,294.00 386,388,421.00 17,477,005.00

To tal Inve stm e nts

$370,743,941.48

$425,917,587.00

As of June 30, 2005, the long-term investment pool consists of investments in domestic and international equities (70.6%), fixed income instruments (10.0%), private equity investments (5.4%), real estate funds (6.2%), hedge funds (7.5%) and deposits (.3%) that are held by outside investment managers.

The Long-Term Investment Pool includes assets held for the Athletic Association and the Research Foundation in the amounts of $2,273,308 and $2,220,886, respectively. These amounts are also reported as investments by those entities. The Foundation reports the liability for these investments in Deposits Held for Other Organizations.

Annual Financial Report FY2005 110

Long Term Liabilities

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are

shown below:

Beginning

Ending Principal due

Balance

Balance

within

July 1, 2004 Additions Reductions June 30, 2005 One Year

$25,620,000 bond issue--Par value of bonds outstanding
$39,155,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $20,871 and $12,135 Total $39,155,000 bonds payable
$99,860,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $239,333 and $146,083 Total $99,860,000 bonds payable
$8,215,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $14,371 and $7,341 Total $8,215,000 bonds payable
$25,970,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $9,213 and $1,274 Total $25,970,000 bonds payable
Total bonds payable
$75,000,000 revolving credit agreement $1,900,000 credit agreement $300,000 credit agreement
Total revolving credit agreements
$1,800,000 note payable $1,117,865 note payable
Total notes payable
Total Long Term Debt

$24,610,000

$0

($535,000)

$24,075,000

$0

39,155,000
138,150 39,293,150

(740,000)
(8,736) (748,736)

38,415,000
129,414 38,544,414

760,000 760,000

99,860,000
1,808,468 101,668,468

(125,000)
(93,250) (218,250)

99,735,000
1,715,218 101,450,218

1,825,000 1,825,000

8,125,000
(100,168) 8,024,832

(230,000)
7,030 (222,970)

7,895,000
(93,138) 7,801,862

240,000 240,000

25,970,000 (165,519)
25,804,481
199,400,931
11,997,170 1,636,000
200,000
13,833,170 1,357,250
831,034
2,188,284
$215,422,385

7,939 7,939
(1,717,017)

972,087 100,000 1,072,087
300,000 300,000 $1,372,087

(1,636,000) (300,000)
(1,936,000) (89,000) (31,984)
(120,984)
($3,774,001)

25,970,000 (157,580)
25,812,420
197,683,914
12,969,257

2,825,000

12,969,257 1,268,250 1,099,050 2,367,300 $213,020,471

89,000 39,288
128,288
$2,953,288

Annual Financial Report FY2005 111

The University of Georgia Foundation Debt Disclosure

$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 $75 million credit agreement discussed below. The Foundation has guaranteed the obligations, including the letter of credit, under the Real Estate Foundation's $75 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 (2.29% and 1.08% at June 30, 2005 and 2004, respectively). The loan matures in 2031, subject to certain early repayment provisions. During the years ended June 30, 2005 and 2004, principal payments of $535,000 and $515,000, respectively, were made.

During 2003, the Real Estate Foundation entered into an interest rate swap agreement effectively changing the interest rate exposure on the 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 was $48,489 and was recorded as an accrued liability in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $160,765 for the year ended June 30, 2004 as an adjustment to interest expense related to this swap. During the year ended June 30, 2005, this swap agreement expired and the related gain on the fair value of the derivative of $48,489 has been reflected in interest expense.

During 2005, the Real Estate Foundation entered into an interest rate cap agreement effectively limiting the interest rate on a portion of the 2001 Loan Agreement to a 3.5% fixed rate until November 30, 2007. The Real Estate Foundation paid a premium of $91,000 in connection with this agreement. The fair value of the interest rate cap as of June 30, 2005 was $58,311 and was recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss on the fair value of the derivative of $32,689 for the year ended June 30, 2005 as an adjustment to interest expense related to this agreement.
$ 2 5 ,6 2 0 ,0 0 0 B o nd Is sue

Ye a r En d in g Ju n e 30: 2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031

Ye a r 1 2 3 4 5 6-10 11-15 16-20 21-25 26

P rin c ip a l $0
11,659,523
12,415,477

In te re s t*

T o ta l

$551,318 284,314 284,314 284,314 284,314
1,421,572 1,421,572 1,421,572 1,421,572
284,314

$551,318 11,943,837
284,314 284,314 284,314 1,421,572 1,421,572 1,421,572 1,421,572 12,699,791

$24,075,000

$7,659,178

$31,734,178

* Inte re s t is c alc ulate d us ing rate in e ffe c t at J une 3 0 , 2 0 0 5 , whic h was 2 .2 9 % .

Annual Financial Report FY2005 112

$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, 2005 and 2004, 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 schedule of bond maturities. Principal payments are due on December 15 starting in 2004 and continuing through 2032. During the year ended June 30, 2005, a principal payment of $740,000 was made.

$39,155,000 Bond Issue

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2033

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-28

Prin c ip a l
$760,000 780,000 800,000 825,000 850,000
4,710,000 5,840,000 7,435,000 9,480,000 6,935,000

Interes t

Total

$1,728,264 1,709,014 1,688,264 1,664,889 1,639,233 7,724,501 6,601,211 5,009,541 2,946,563
530,469

$2,488,264 2,489,014 2,488,264 2,489,889 2,489,233
12,434,501 12,441,211 12,444,541 12,426,563 7,465,469

$38,415,000

$31,241,949

$69,656,949

$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 facilities. During the years ended June 30, 2005 and 2004, 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 schedule of bond maturities. Principal payments are due on December 1 starting in 2005 and continuing through 2033. During the year ended June 30, 2005, a prepayment of principal in the amount of $125,000 was made based on surplus bond proceeds as required under the bond agreement.

Annual Financial Report FY2005 113

Ye a r En d in g Ju n e 30: 2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031 th ro u g h 2034

Ye a r 1 2 3 4 5 6-10 11-15 16-20 21-25 26-29

$ 9 9 ,8 6 0 ,0 0 0 B o nd Is s ue

P rincipal

Inte re s t

To tal

$1,825,000 1,875,000 1,935,000 2,000,000 2,060,000
11,515,000 14,235,000 18,640,000 23,635,000 22,015,000

$4,764,175 4 ,7 0 8 ,6 7 5 4 ,6 5 1 ,5 2 5 4 ,5 9 0 ,0 0 0 4 ,5 1 6 ,3 0 0
21,240,800 18,231,857 13,950,456
8 ,6 0 4 ,3 7 5 2 ,2 1 4 ,2 5 0

$ 6 ,5 8 9 ,1 7 5 6 ,5 8 3 ,6 7 5 6 ,5 8 6 ,5 2 5 6 ,5 9 0 ,0 0 0 6 ,5 7 6 ,3 0 0
3 2 ,7 5 5 ,8 0 0 3 2 ,4 6 6 ,8 5 7 3 2 ,5 9 0 ,4 5 6 3 2 ,2 3 9 ,3 7 5 2 4 ,2 2 9 ,2 5 0

$99,735,000

$ 8 7 ,4 7 2 ,4 1 3

$ 1 8 7 ,2 0 7 ,4 1 3

$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 schedule of bond maturities. Principal payments are due on December 15 starting in 2003 and continuing through 2027. During the years ended June 30, 2005 and 2004, principal payments of $230,000 and $90,000, respectively, were made.

Ye a r En d in g Ju n e 30: 2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2028

Ye a r 1 2 3 4 5 6-10 11-15 16-20 21-23

$ 8 ,2 1 5 ,0 0 0 B o nd Issue

P rin c ip a l

In teres t

T o ta l

$240,000 250,000 250,000 260,000 260,000
1,420,000 1,680,000 2,065,000 1,470,000

$288,241 282,729 277,104 271,431 265,321
1,205,244 933,713 550,766 98,219

$528,241 532,729 527,104 531,431 525,321
2,625,244 2,613,713 2,615,766 1,568,219

$7,895,000

$4,172,768

$12,067,768

$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

Annual Financial Report FY2005 114

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 a portion of the facility and by the Coverdell Entity's interest in certain rents and leases derived from a portion of the facility. During the years ended June 30, 2005 and 2004, the Coverdell Entity used the proceeds of this loan to fund construction of a portion 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 schedule of bond maturities. Principal payments are due on December 15 starting in 2006 and continuing through 2034.

$25,970,000 Bond Issue

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Prin c ip a l
$0 460,000 500,000 510,000 525,000 2,915,000 3,580,000 4,505,000 5,700,000 7,275,000

Interes t

Total

$1,165,645 1,159,002 1,146,110 1,133,485 1,119,235 5,305,950 4,637,894 3,720,286 2,521,275
945,625

$1,165,645 1,619,002 1,646,110 1,643,485 1,644,235 8,220,950 8,217,894 8,225,286 8,221,275 8,220,625

$25,970,000

$22,854,507

$48,824,507

$75,000,000 Revolving Credit Agreement--During 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, 2007. 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, 2005 and 2004, amounts outstanding or issued under this agreement included borrowings of $12,969,257 and $11,997,170, respectively, and letters of credit and bank credit reserves of $24,519,347 and $25,485,347, respectively, resulting in $37,511,396 and $35,617,483, respectively, 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, 2005 and 2004, the rates applicable to the borrowings were 3.465% and 1.45%, respectively. The Foundation has guaranteed the obligations of the Real Estate Foundation under this revolving credit agreement.

The revolving credit agreement provides the bank with certain rights after a 90 day forbearance period from the date of the termination of the cooperative services agreement between the Board of Regents and the Foundation. The cooperative service agreement was terminated July 1, 2005. Those termination event rights include (1) the ability to require that the Real Estate Foundation prepay a portion of the outstanding loans which are not directly and fully supported by a lease

Annual Financial Report FY2005 115

agreement with the Board of Regents and (2) the ability to decline to make any further loans or to issue further letters of credit to the Real Estate Foundation.

In September 2005, the Real Estate Foundation entered into a forbearance agreement with the bank which expires July 31, 2006. During the forbearance period, the bank agrees not to call any borrowings or letters of credit and to continue to make loans as long as the conditions of the revolving credit agreement and the forbearance agreement are met. The balance of borrowings and letters of credit as of June 30, 2005 that is callable by the bank after the forbearance period is $18,476,566 and is included in the total principal payments due during the year ended June 30, 2007.

$1,900,000 Credit Agreement--During 2003, the Real Estate Foundation established a $1.9 million credit agreement with a bank which was to expire July 29, 2007. The credit agreement provided for direct borrowings for the purchase and improvement of a property in Cortona, Italy. At June 30, 2004, the amount outstanding under this agreement was $1,636,000, with $264,000 available as borrowing capacity. Borrowings under the credit agreement bore interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). During the year ended June 30, 2004, the rate applicable to the borrowings was 1.81%. The Foundation had guaranteed the obligations of the Real Estate Foundation under this credit agreement.

During the year ended June 30, 2005, this line of credit was repaid using funds from the $75 million revolving credit agreement described previously.

$300,000 Credit Agreement--During 2003, the Foundation established a $0.3 million credit agreement with a bank which was to expire June 30, 2009. The credit agreement provided for direct borrowings for the purchase and improvement of a property in Costa Rica. At June 30, 2004, the amount outstanding under this agreement was $200,000, with $100,000 available as borrowing capacity. Borrowings under the credit agreement bore interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). During the year ended June 30, 2004, the rate applicable to the borrowings was 1.61%.

$1,800,000 Note Payable--During 2000, the Foundation signed a $1.8 million promissory note agreement with a bank, which expires on December 31, 2019. At June 30, 2005 and 2004, $1,268,250 and $1,357,250, respectively, 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: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020

Ye ar 1 2 3 4 5 6-10 11-15

$1,800,000 Note P ayable

P rincipal Interest To tal

$ 8 9 ,0 0 0 8 9 ,0 0 0 8 9 ,0 0 0 8 9 ,0 0 0 8 9 ,0 0 0
4 4 5 ,0 0 0 3 7 8 ,2 5 0

$ 8 8 ,0 4 7 8 1 ,7 0 1 7 5 ,3 5 5 6 9 ,0 0 9 6 2 ,6 6 4
2 1 8 ,1 3 3 6 0 ,6 8 1

$ 1 7 7 ,0 4 7 1 7 0 ,7 0 1 1 6 4 ,3 5 5 1 5 8 ,0 0 9 1 5 1 ,6 6 4 6 6 3 ,1 3 3 4 3 8 ,9 3 1

$ 1 ,2 6 8 ,2 5 0

$655,590 $1,923,840

Annual Financial Report FY2005 116

$1,117,865 Note Payable--During 2002, the Foundation signed an $880,000 promissory loan agreement with a bank which was amended during 2005 to increase the borrowed amount to $1,117,865. This agreement expires on May 1, 2007. At June 30, 2005 and 2004, $1,099,050 and $831,034, respectively, was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 0.45%, or 3.56% and 1.56% at June 30, 2005 and 2004, respectively. Principal and interest are payable monthly.

At June 30, 2005, the Foundation had an outstanding interest rate swap agreement effectively changing the interest rate exposure on the $1,117,865 note payable from variable to a 5.9% fixed rate through December 2004 and a 5.75% fixed rate thereafter over the term of the note payable. The fair value of the termination cost of the interest rate swap as of June 30, 2005 and 2004 was $67,045 and $39,855, respectively, and was recorded as an accrued liability in accordance with SFAS No. 133. The Foundation recorded a loss of $27,190 and a gain of $74,474 for the years ended June 30, 2005 and 2004, respectively, as an adjustment to interest expense related to this swap.

Year Ending June 30: 2006 2007

Ye ar 1 2

$1,117,865 Note Payable

Principal Interest* Total

$ 3 9 ,2 8 8 1 ,0 5 9 ,7 6 2

$ 3 8 ,4 8 5 3 4 ,0 4 9

$ 7 7 ,7 7 3 1 ,0 9 3 ,8 1 1

$ 1 ,0 9 9 ,0 5 0

$72,534 $1,171,584

* Interest is calculated using rate in effect at June 30, 2005, which was 3.56%

Georgia Southern University
Georgia Southern University Foundation (Foundation) is a legally separate, tax-exempt component unit of Georgia Southern 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 forty-six 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

Annual Financial Report FY2005 117

During the year ended June 30, 2005, the Foundation distributed $1,551,855 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Georgia Southern Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Investments for Component Units

Georgia Southern University Foundation holds endowment investments in the amount of $150 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 Foundation, in conjunction with the donors, has an established a spending plan.

Georgia Southern University Foundation also holds investments valued at $35,044,529.00 as shown below:

Investments at Fair Market Value:
Money Market Funds Corporate Stocks Mutual Funds Cash Value of Life Insurance Investments in Real Estate Total Investments

$ 4 9 1 ,8 1 2 .0 0 1 1 ,8 7 3 ,7 8 1 .0 0 2 1 ,5 7 2 ,5 6 0 .0 0
1 0 2 ,2 2 6 .0 0 1 ,0 0 4 ,1 5 0 .0 0 $ 3 5 ,0 4 4 ,5 2 9 .0 0

Georgia Southern University Housing Foundation (Housing Foundation) is a legally separate, tax-exempt component unit of Georgia Southern University (University). The Housing Foundation constructs research and auxiliary buildings and facilities for use by the University and then leases the completed buildings to the institution. The six-member board of the Housing 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 Housing Foundation, the majority of resources or income thereon that the Housing Foundation holds and invests is restricted to the real estate activities of the University by the donors. Because these restricted resources held by the Housing Foundation can only be used by, or for the benefit of, the University, the Housing Foundation is considered a component unit of the University and is discretely presented in the University's financial statements.
The Housing 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Housing Foundation's fiscal year is July 1 through June 30.
Buildings (Construction in Progress) valued at $37 million and the associated long-term debt of $37 million, plus the net Investment in Direct Financing Lease valued at $32 million and the associated long-term receivables of $32 million along with the associated long-term debt of $77 are included in the financial statements of the Housing Foundation. The corresponding capital leases and associated long-term debt are included in the University's report. Complete financial

Annual Financial Report FY2005 118

statements for the Foundation can be obtained from Georgia Southern Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Investments for Component Units

Georgia Southern University Housing Foundation holds net investments in direct financing in the amount of $32,793,882.00.

Total Investments in Real Estate

$ 3 2 ,7 9 3 ,8 8 2 .0 0

Long-Term Liabilities for Component Units

Student Housing Bonds are issued by the Georgia Southern University Housing Foundation to finance student housing and recreation facilities on university property funded by the proceeds of the Bond Issuance. The Foundation has note payables with banks and grants a pledge and assignment of and grants a lien upon and security interest in, the loan agreement, the deed, and the development agreement as security for the bonds. The interest rate on the Bonds varies, based on the Bond and the Year; from 2.75% to 5.25%.

Changes in long-term liabilities for the Georgia Southern Housing Foundation for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable GSU Housing Foundation Note Payable-Wachovia Note Payable-BB&T

Beginning Balance July 1, 2004
$38,737,928.00 35,983,721.00

Additions

Reductions

$0.00 41,051,840.00

$395,000.00

Ending Balance June 30, 2005

Amounts due within
One Year

$38,342,928.00 77,035,561.00

$885,000.00 100,000.00

Total Long Term Debt

$74,721,649.00

$41,051,840.00

$395,000.00

$115,378,489.00

$985,000.00

Annual Financial Report FY2005 119

Debt Service Obligations:
Annual de bt s e rvic e re quire m e nts to m aturity fo r Stude nt H o us ing fo r G e o rgia So uthe rn H o us ing Fo undatio n re ve nue bo nds payable (W ac ho via) are as fo llo ws :

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031 th ro u g h 2035 2036 th ro u g h 2040 2041 th ro u g h 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipal
$885,000.00 910,000.00 955,000.00 985,000.00
1,000,000.00 5,685,000.00 7,010,000.00 8,940,000.00 11,972,928.00

Inte re st

To tal

$1,693,706.00 1,657,681.00 1,620,606.00 1,590,275.00 1,556,769.00 7,168,059.00 5,782,750.00 3,808,509.00 1,284,396.00

$2,578,706.00 2,567,681.00 2,575,606.00 2,575,275.00 2,556,769.00
12,853,059.00 12,792,750.00 12,748,509.00 13,257,324.00

$38,342,928.00

$26,162,751.00

$64,505,679.00

Annual de bt servic e require m e nts to m aturity fo r Stude nt H o using & Re c re atio n Fac ility fo r G eo rgia So uthe rn Ho using Fo undatio n re venue bo nds payable (BB& T) are as fo llo ws:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031 th ro u g h 2035 2036 th ro u g h 2040 2041 th ro u g h 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$100,000.00 875,000.00 755,000.00
1,815,000.00 1,950,000.00 11,145,000.00 13,595,000.00 17,010,000.00 21,700,000.00 8,090,561.00

Int e r e s t

To tal

$2,484,938.00 3,582,529.00 3,558,466.00 3,536,760.00 3,467,329.00
16,006,043.00 12,123,848.00
9,874,363.00 5,104,250.00
471,250.00

$2,584,938.00 4,457,529.00 4,313,466.00 5,351,760.00 5,417,329.00
27,151,043.00 25,718,848.00 26,884,363.00 26,804,250.00
8,561,811.00

$77,035,561.00

$60,209,776.00

$137,245,337.00

Georgia Southern University Research & Service Foundation (the Research Foundation) is a legally separate, tax-exempt component unit of Georgia Southern University (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 seven member board of the Foundation consists of designated University personnel, appointees of several University constituent groups, and individuals
Annual Financial Report FY2005 120

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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During fiscal year 2005, the Research Foundation transferred approximately $3.7 million in sponsored research to the University. Complete financial statements for the Research Foundation can be obtained from Georgia Southern University Provost Office, P.O. Box 8022, Statesboro, GA 30461.
Southern Boosters, Inc. (Boosters Foundation) is a legally separate, tax-exempt component unit of Georgia Southern University (University). The Boosters Foundation acts primarily as a fundraising organization to supplement resources that are available to the University in support of its athletic programs. The fifty-member board of the Boosters 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 Boosters Foundation, the majority of resources or income thereon that the Boosters Foundation holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by the Boosters 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 Boosters Foundation is considered a component unit of the University and is discretely presented in the University's financial statements.
The Boosters 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Boosters Foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Boosters Foundation distributed $728,029 to the University for the scholarships and support of University programs. Complete financial statements for the Boosters Foundation can be obtained from the Southern Boosters Cowart Building, Lanier Road, P.O. Box 8115, Statesboro, GA, 30461.
Annual Financial Report FY2005 121

Investments for Component Units

Southern Boosters Inc. holds investments valued at $6,155.

Common Stock Total Investments

$ 6 ,1 5 5 .0 0 $ 6 ,1 5 5 .0 0

Long-Term Liabilities for Component Units

Southern Boosters, Inc. has a Note Payable to Sea Island Bank, payable in annual installments of $35,220 including interest at a variable rate (6.25% at June 30, 2005) through September 14, 2013, unsecured. The original note amount was $279,000.00.

Changes in long-term liabilities for Southern Boosters for the fiscal year ended June 30, 2005 are shown below:

N ote P a ya ble Se a Isla nd B a nk, U nse c ure d

Beginning Balance July 1, 2004
$279,000.00

Additio ns
$0.00

R e duc tio ns

Ending

Amounts due

B alanc e

within

June 30, 2005 One Year

$28,447.00

$250,553.00

$19,947.00

Total Long Term D ebt

$279,000.00

$0.00

$28,447.00

$250,553.00

$19,947.00

Debt Service Obligations

Annual debt service requirements to maturity for the unsecured Sea Island Bank note payable are as follows:

Note Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Ye ar
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$19,947.00 20,807.00 22,107.00 23,489.00 24,957.00
139,246.00

Int e r e s t
$15,273.00 14,413.00 13,113.00 11,731.00 10,263.00 36,854.00

To t al
$35,220.00 35,220.00 35,220.00 35,220.00 35,220.00
176,100.00

$250,553.00

$101,647.00

$352,200.00

Annual Financial Report FY2005 122

Valdosta State University

Valdosta State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Foundation is also the sole member of VSU Foundation Real Estate I, LLC, a Georgia limited liability company (subsidiary). The Foundation and any other subsidiaries under its control act primarily as fundraising organizations to supplement the resources that are available to the University in support of its programs. The thirty-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 and its subsidiaries can only be used by, or for the benefit of, the University, the Foundation, consolidated with any subsidiaries, 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. 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.

Construction in Progress valued at 17 million and the associated long-term debt are included in the consolidated financial statements of the Foundation. The corresponding capital leases and associated long-term debt are included in the University's report.

During the year ended December 31, 2004, the Foundation distributed $1,415,275.47 to the University or on its behalf for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of University Advancement, 102 Georgia Avenue, Valdosta, Georgia 31698.

Investments for Component Units:

Valdosta State University Foundation (consolidated) holds endowment investments in the amount of $15 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended per the Foundation's spending plan and as restricted by the donors. Valdosta State University Foundation, in conjunction with the donors, has established a spending plan whereby 4.5% of the previous year's December 31 portfolio value may be expended. Valdosta State University Foundation (consolidated) also holds investments in real property valued at $6,311,456.00.

Investments:
Equi t i e s Fixed Income Alternative Mutual Funds Life Income Agreements
Endowment Investments
Investments held by Trustee Total Investments per Balance Sheet

Fair Value $ 9 ,6 4 2 ,5 1 9 .0 0
4 ,6 3 6 ,9 2 3 .0 0 1 ,0 5 9 ,6 1 9 .0 0
6 0 3 ,4 9 8 .0 0 1 5 ,9 4 2 ,5 5 9 .0 0
2 0 ,4 8 8 ,5 1 2 .0 0 $ 3 6 ,4 3 1 ,0 7 1 .0 0

Annual Financial Report FY2005 123

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%, respectfully.

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 liability. Since the University retains ownership of the facility, the University has recorded a capital asset and liability. The Foundation entry should be eliminated for consolidated reporting.

In June 2004, The Valdosta Housing Authority issued Series 2004 Student Housing Revenue Bonds and loaned the proceeds to VSU Foundation Real Estate I, LLC (a subsidiary). The bonds, serial and term, are secured by pledges of gross receipts from student housing at Valdosta State University. The bonds bear interest at rates ranging from 3.25% to 5.25%. Interest is due semiannually and principal is due annually.

Changes in Long Term Liabilities for the fiscal year ended December 31, 2004 are shown below:

Be g in n in g Balance January 1, 2004

A d d it io n s

Re d u c t io n s

En d in g Balance December 31, 2004

Amounts due within
One Year

95 Bond 98 Bond Note Payable Housing Bonds
Total Long Term Debt

$1,839,836.00 $2,605,337.00
278,083.00
$4,723,256.00

$0.00
35,904,562.00 $35,904,562.00

$652,375.00 $771,621.00
37,391.00
$1,461,387.00

$1,187,461.00 1,833,716.00
240,692.00 35,904,562.00
$39,166,431.00

$250,478.00 201,557.00 36,208.00 452,035.00
$940,278.00

Albany State University
Albany State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Albany 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 seven-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 GASB standards, including GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an

Annual Financial Report FY2005 124

amendment of GASB Statement No. 14. Therefore, there will not be a need to restate these statements in order for them to conform to the accounting convention utilized by the University. The foundation's fiscal year is July 1 through June 30, which is the same as Albany State University's fiscal year.

During the year ended June 30, 2005, the Foundation distributed $1,080,920 to the University, of which $600,408.00 was distributed as scholarships to students. The balance was for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the ASU Foundation at 131 West Oglethorpe Blvd., Albany, GA 31705.

Investments for Component Units:

Albany State University Foundation holds investments in the amount of $2,538,966. Currently all investments are restricted except for Synovus Trust Company in the amount of $116,302.

In vest men t s:
Common Stock, Bonds and Securities Certificate of Deposit Investments in Real Estate T otal Investments

$1,408,801.00 1,030,165.00 100,000.00
$2,538,966.00

Long Term Liabilities:

Beginning Balance July 1, 2004

Addit io n s

Reduct io n s

Ending Balance June 30, 2005

Amounts due wit h in
One Year

Compensated Absences Liabilities under Split Interest Agreements Other Long T erm Debt
T otal Long T erm Debt

$0.00 1,335,292.00
$1,335,292.00

$0.00 1,181,889.00
$1,181,889.00

$0.00 44,898.00

$0.00 2,472,283.00

$44,898.00

$2,472,283.00

$0.00 80,565.00
$80,565.00

Armstrong Atlantic State University
Armstrong Atlantic State University Foundation (Foundation), Inc. 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 seven-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.

Annual Financial Report FY2005 125

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. In 2004, Armstrong Atlantic State University Foundation changed its fiscal year-end from June 30 to December 31. As a result, the numbers included herein represent those for the six months ended December 31, 2004. December 31, 2005, Armstrong Atlantic State University will issue audited financial statements for the 18 month period ending December 31, 2005.

During the period ending December 31, 2004, the Foundation distributed $385,392.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Armstrong Atlantic State University.

Investments for Component Units:

Armstrong Atlantic State University Foundation, Inc. holds endowment investments in the amount of $3,287,469. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Armstrong Atlantic State University Foundation, Inc. holds no investments in real property.

Armstrong Atlantic State University Foundation Investments are comprised of the following amounts at December 31, 2004

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds

$0.00 149,745.00 1,765,628.00
2,037,907.00 14,371.00

$0.00 149,745.00 1,779,165.00
2,371,627.00 14,371.00

Total Investments

$3,967,651.00

$4,314,908.00

Educational Properties, Inc. (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 fivemember 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 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,

Annual Financial Report FY2005 126

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.

Education Properties, Inc. (Foundation) holds real estate assets that have been purchased through bonds and bridge financing. The corresponding capital leases and associated long-term debt are included in the University's report. Complete financial statements for the Foundation can be obtained from the Administrative Office at Armstrong Atlantic State University.

Investments for Component Units:

Educational Properties Foundation, Inc. Investments are comprised of the following amounts at December 31, 2004
Cost

Cash held by investment organization Equity Securities - SEE BELOW

$1,997,630.00

Total Investments

$1,997,630.00

Fair Value
$1,997,630.00 (23,181.00)
$1,974,449.00

Included in the above caption "equity securities" is the fair value of derivative instruments, which does not have a cost associated with it.
Long Term Liabilities:
Student Housing Bonds are issued by the Educational 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 Armstrong Atlantic State University. The two bond issues are variable interest rate bonds.
Changes in long-term liabilities for component units for the fiscal year ended December 31, 2004 are shown below:

Revenue Bonds Payable Real Estate Foundation Student Housing Res. Instr. & Research
Total Long Term Debt

Beginning Balance January 1, 2004

A d d itio n s

Reductions

Ending Balance December 31, 2004

Amounts due within
One Year

$17,455,000.00

$0.00

$205,000.00

$17,250,000.00

$450,000.00

$17,455,000.00

$0.00

$205,000.00

$17,250,000.00

$450,000.00

Annual Financial Report FY2005 127

De bt Se rvice O bligations

Annual debt service requirements to maturity for Student Housing (EPI Foundation) revenue bonds payable are as follows:
Bonds Payable

P rin cip al

In t erest

T otal

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

$450,000.00 475,000.00 495,000.00 520,000.00 545,000.00
3,165,000.00 4,030,000.00 5,135,000.00 2,435,000.00

$580,280.00 564,773.00 548,470.00 531,435.00 513,556.00
2,971,090.00 984,104.00 532,026.00 58,212.00

$1,030,280.00 1,039,773.00 1,043,470.00 1,051,435.00 1,058,556.00 6,136,090.00 5,014,104.00 5,667,026.00 2,493,212.00

$17,250,000.00 $7,283,946.00 $24,533,946.00

Augusta State University
Augusta State University Foundation, Inc. (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 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 the single member owner of two limited liability companies, ASU Jaguar Student Housing I, LLC and ASU Jaguar Student Center, LLC. ASU Jaguar Student Housing I, LLC is a limited liability company organized for the purpose of constructing and holding an apartment complex for the benefit of students attending Augusta State University. ASU Jaguar Student Center, LLC is a limited liability company organized for the purpose of constructing and holding the student center property located on the campus of the University for the benefit of students attending the school. The financial statements include the accounts of the Foundation and its wholly-owned limited liability companies. All significant intercompany accounts and transactions are eliminated in consolidation.

Annual Financial Report FY2005 128

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $1,013,163.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 2500 Walton Way.
Investments for Component Units:
Augusta State University Foundation holds endowment investments in the amount of $12,818,311. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.
Augusta State University Foundation also holds investments in real property valued at $20,000.

Augusta State University Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Val ue

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate

$0.00
833,696.00 1,091,100.00 7,149,935.00 2,790,014.00

$0.00
843,043.00 1,087,733.00 7,926,057.00 2,961,477.00
20,000.00

Total Investments

$11,864,745.00

$12,838,310.00

Long Term Liabilities:
Series 2004 Bonds Payable Augusta State University Jaguar Student Housing I, LLC issued revenue bonds, Series 2004, dated August 1, 2004 due in annual installments of $85,000 to $1,445,000 due through February 1, 2035 with interest at 5% to 5.375%. The bonds are secured by a deed on the University Village Apartments.
Series 2005 Bonds Payable Augusta State University Jaguar Student Center, LLC issued revenue bonds, Series 2005, dated February 1, 2005, due in annual installments of $170,000 to $705,000 due through July 1, 2034 with interest at 3.25 to 5%.

Annual Financial Report FY2005 129

Other Long Term Debt On April 23, 2003, the Foundation entered into a construction loan in the amount of $1,250,000 and increased the loan to $1,600,000 on November 10, 2003. The loan was for real estate improvements at the Forest Hills Golf Club for the benefit of the Augusta State University Athletic Association. The note carries a variable interest rate of LIBOR plus 1.20% (4.705% at June 30, 2005). The loan is secured by the Foundation's investment account with Georgia Bank and Trust.

Long-term liability activity for the year ended June 30, 2005 was as follows:

Long Term Liabilities

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

Series 2004 Bonds payable Series 2005 Bonds payable Premium on Bonds payable Other Long Term Debt
Total Long Term Debt

$0.00
1,493,332.00 $1,493,332.00

$19,515,000.00 11,145,000.00
192,518.00 15,863.00
$30,868,381.00

$0.00

$19,515,000.00

11,145,000.00

192,518.00

1,509,195.00

$0.00

$32,361,713.00

$0.00
35,500.00 $35,500.00

Debt Service Obligations:
Annual debt service requirements to maturity for Student Housing Revenue Bonds, Series 2004 (ASU Jaguar Student Housing I,LLC) bonds payable are as follows:

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Bonds Payable

Principal

Interest

$0.00 85,000.00 85,000.00 90,000.00 155,000.00 1,340,000.00 2,280,000.00 3,870,000.00 5,065,000.00 6,545,000.00

$1,011,020.00 1,011,020.00 1,007,578.00 1,003,838.00
999,563.00 3,849,713.00 4,447,013.00 3,704,719.00 2,543,363.00 2,065,748.00

$19,515,000.00

$21,643,575.00

Total
$1,011,020.00 1,096,020.00 1,092,578.00 1,093,838.00 1,154,563.00 5,189,713.00 6,727,013.00 7,574,719.00 7,608,363.00 8,610,748.00
$41,158,575.00

Annual Financial Report FY2005 130

Annual debt service requirements to maturity for Educational Facilities Revenue Bonds, Series 2005 (ASU Jaguar Student Center, LLC) bonds payable are as follows:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Principal
$0.00 170,000.00 170,000.00 175,000.00 200,000.00 1,350,000.00 1,710,000.00 2,095,000.00 2,645,000.00 2,630,000.00

Interest
$503,864.00 503,864.00 497,149.00 489,924.00 484,236.00
2,293,806.00 1,996,956.00 1,612,975.00 1,067,000.00
336,750.00

Total
$503,864.00 673,864.00 667,149.00 664,924.00 684,236.00
3,643,806.00 3,706,956.00 3,707,975.00 3,712,000.00 2,966,750.00

$11,145,000.00

$9,786,524.00

$17,964,774.00

Annual debt service requirements to maturity for construction loan (Augusta State

University Foundation) are as follows:

Principal

Interest

Total

Year Ending June 30: Year

2006

1

$35,500.00

$82,080.00

$117,580.00

2007

2

142,000.00

64,079.00

206,079.00

2008

3

142,000.00

67,984.00

209,984.00

2009

4

142,000.00

64,426.00

206,426.00

2010

5

142,000.00

60,696.00

202,696.00

2011 through 2015

6-10

941,195.00

56,787.00

997,982.00

$1,544,695.00

$396,052.00

$1,940,747.00

Augusta State University Athletic Foundation (Association) is a legally separate, tax-exempt component unit of Augusta State University (University). The Association is a nonprofit organization that promotes the educational, athletic, and physical education programs of the University. The Association leases Forest Hills Golf Club (the "Club"), an 18-hole golf course, from the Board of Regents of the University System of Georgia for a nominal fee. The Association in turn has entered into a management agreement with the Augusta Golf Association, Inc. (the "AGA") to manage, operate and maintain Forest Hills Golf Club. The income of the Association is solely derived from the revenues of the Golf Club and interest income. Because the resources held by the Association can only be used by, or for the benefit of, the University, the Association is considered a component unit of the University and is discretely presented in the University's financial statements.
The Association 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
Annual Financial Report FY2005 131

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 Association's fiscal year is July 1 through June 30.
Complete financial statements for the Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, Georgia 30904-2200.
Long Term Liabilities:
Two term notes, bearing no interest, due in monthly payments of $1,035 through 2008, secured by equipment. Note payable to ASU Foundation dated May 24, 2005 in the original amount of $1,544,695 secured by first priority security interest. Note is payable in quarterly installments of interest only through May 2006, then in consecutive quarterly payments equal to $35,500, plus accrued interest at the LIBOR rate plus 1.2% commencing on August 24, 2006 and continuing on the same day each third month thereafter, with the total remaining balance due May 24, 2011.
Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Athletic Association Athletic Facilities

Beginning Balance July 1, 2004

Additions

Reductions

Ending Amounts due

Balance

within

June 30, 2005 One Year

$1,586,665.00

$0.00

$14,557.00

$1,572,108.00

$13,450.00

Total Long Term Debt

$1,586,665.00

$0.00

$14,557.00

$1,572,108.00

$13,450.00

Debt Service Obligations:

Annual debt service requirements to maturity for Athletic Facilities (Athletic Association) revenue bonds payable are as follows:
Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015

Year
1 2 3 4 5 6-10

Principal
$13,450.00 154,416.00 143,547.00 142,000.00 142,000.00 976,695.00

Interest
$77,300.00 74,600.00 67,500.00 60,400.00 53,300.00 45,996.00

Total
$90,750.00 229,016.00 211,047.00 202,400.00 195,300.00 1,022,691.00

$1,572,108.00

$379,096.00

$1,951,204.00

Annual Financial Report FY2005 132

Clayton State University

Clayton State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Clayton 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 twenty-eight-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $313,674 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the following address: Clayton State University Foundation, Inc., Alumni Affairs Office, Harry Downs Continuing Education Building, 5900 North Lee Street, Morrow, Georgia, 30260.

Investments for Component Units

Clayton State University Foundation holds endowment investments in the amount of $1.92 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Georgia Investment Pools BOR Short Term Fund BOR Total Return Fund

$155,873.00 1,837,453.00

$154,898.00 1,922,355.00

Total Investments

$1,993,326.00 $2,077,253.00

The Walter & Emilie Spivey Foundation (Foundation) is a legally separate, tax-exempt component unit of Clayton State University (University). The Foundation provides music scholarships and sponsors programming in Spivey Hall, the University's world class music performance hall. The six-member board of the Foundation 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
Annual Financial Report FY2005 133

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. 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, 2004, the Foundation distributed $450,900 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be requested at the Administrative Office at Clayton State University, 5900 North Lee Street, Morrow, Georgia, 30260.

Investments for Component Units

The Walter & Emilie Spivey Foundation holds investments in the amount of $7.1 million. Investments consist of marketable securities, bonds and real property as follows:

Investments are comprised of the following amounts at December 31, 2004

Cost

Fair Value

Money Market Accounts Corporate Bonds Equity Securities Real Estate

$157,884.00 1,615,544.00 4,552,413.00
277,400.00

$157,884.00 1,630,589.00 5,101,116.00
277,400.00

Total Investments

$6,603,241.00 $7,166,989.00

Columbus State University

Columbus State University Foundation, Inc. (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 fifty-seven-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

Annual Financial Report FY2005 134

recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of the Foundation approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004, the Foundation distributed $78,564 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Columbus State University Foundation, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Foundation, the amount due from Columbus State University, $129,569 is not reflected as a payable on the University's Statement of Net Assets. This amount was expensed by the University before its year end, June 30, 2005.
Investments for Component Units:
Columbus State University Foundation, Inc. holds endowment investments in the amount of $10,456,481. 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, Inc., in conjunction with the donors, has established a spending plan whereby 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 purpose of spending, with the three year average being that of either calendar or fiscal year periods according to the requirements of the budgetary process.

Investments for Columbus State University Foundation were comprised of the following amounts at July 31, 2004:

Cost

Fair Value

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Georgia Investment Pools
BOR Total Return Fund

$715,000.00 4,047,953.00 5,253,991.00 9,007,618.00
4,701,676.00

$715,000.00 4,052,038.00 5,069,362.00 8,922,311.00
4,528,584.00

Total Investments

$23,726,238.00

$23,287,295.00

Columbus State University Foundation had no long-term liabilities at 7-31-04.
Foundation Properties, Inc. is a legally separate, tax-exempt component unit of Columbus State University (University). Foundation Properties, Inc. 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 eleven-member board Foundation Properties,
Annual Financial Report FY2005 135

Inc. 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 Foundation Properties, Inc., the majority of resources or income thereon that Foundation Properties, Inc. holds and invests is restricted to the real estate activities of the University by the donors. Because these restricted resources held by Foundation Properties, Inc. 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.
Foundation Properties, Inc. 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of Foundation Properties, Inc. approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004, Foundation Properties distributed $8,111 to the University for both restricted and unrestricted purposes. Complete financial statements for Foundation Properties, Inc. can be obtained from Foundation Properties, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Foundation Properties, the amount due to Columbus State University, $264,011 is not reflected as a receivable on the University's Statement of Net Assets. This amount was received by the University before its year end, June 30, 2005.
Investments for Component Units:
Foundation Properties, Inc. holds investments in the amount of $5,451,206. Investments consist of marketable securities and bonds as follows:

Investments for Foundation Properties, Inc. were comprised of the following amounts at July 31, 2004:

Cost

Fair Value

Government and Agency Securities Corporate Bonds Equity Securities

$254,883.00 1,993,798.00 3,097,774.00

$251,719.00 2,063,182.00 3,136,305.00

Total Investments

$5,346,455.00

$5,451,206.00

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.
Annual Financial Report FY2005 136

Educational Programming Bonds are issued by Foundation Properties, Inc. to finance the purchase of the One Arsenal Property to be incorporated with the future development of the Uptown Campus, as well as the construction of the Cunningham Conference Center.

Changes in long-term liabilities for Foundation Properties, Inc. for the month ended July 31,

2004 are shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2004

Additions

Reductions July 31, 2004 One Year

Revenue Bonds Payable

Foundation Properties, Inc.

Student Housing

$5,250,000.00

$6,666,000.00

$0.00

$11,916,000.00

$300,000.00

Educational Programming

7,130,000.00

$8,334,000.00

15,464,000.00

140,000.00

Total Long Term Debt

$12,380,000.00

$15,000,000.00

$0.00

$27,380,000.00

$440,000.00

Annual debt service requirements to maturity for Student Housing (Foundation Properties, Inc.) revenue bonds payable are as follows:

Bonds Payable

P rinc ipa l

Interest

Total

2005

1

2006

2

2007

3

2008

4

2009

5

Thereafter

$300,000.00 366,660.00 439,986.00 448,874.00
6,610,480.00 3,750,000.00

$215,478.00 211,157.00 205,489.00 198,273.00
190,828.00 178,547.00

$515,478.00 577,817.00 645,475.00 647,147.00
6,801,308.00 3,928,547.00

$11,916,000.00

$1,199,772.00

$13,115,772.00

Annual debt service requirements to maturity for Educational Programming (Foundation Properties, Inc.) revenue bonds payable are as follows:

2005 2006 2007 2008 2009

Year 1 2 3 4 5

Bonds Payable

P rinc ipa l

Interest

$140,000.00 7,073,340.00
175,014.00 186,126.00 7,889,520.00

$849,964.00 842,614.00 176,862.00 173,222.00 169,285.00

$15,464,000.00

$2,211,947.00

Total
$989,964.00 7,915,954.00
351,876.00 359,348.00 8,058,805.00
$17,675,947.00

Annual Financial Report FY2005 137

Columbus State University Alumni Association, Inc. (Association) is a legally separate, taxexempt component unit of Columbus State University (University). The Association seeks to promote the mission of the University through mutually beneficial relations between the University and its alumni. The twenty-member board of the Association 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 Association, the majority of resources or income thereon that the Association holds and invests is restricted to the activities of the University by the donors. 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.
The Association 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of the Association approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004, the Association distributed $12,001 to the University for both restricted and unrestricted purposes. Complete financial statements for the Association can be obtained from Columbus State University Alumni Association, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Association, the amount due from Columbus State University, $43,204 is not reflected as a payable on the University's Statement of Net Assets. This amount was expensed by the University before its year-end, June 30, 2005.
Investments for Component Units:
Columbus State University Alumni Association, Inc. holds endowment investments in the amount of $39,990. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Columbus State University Alumni Association, Inc. in conjunction with the donors, has established a spending plan whereby 5% of the 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:
Annual Financial Report FY2005 138

Investments for Columbus State University Alumni Association were comprised of the following amounts at July 31, 2004:

Cost

Fair Value

Equity Securities

$70,019.00

$39,990.00

Total Investments

$70,019.00

$39,990.00

Columbus State University Alumni Association had no long term liabilities at July 31, 2004.
Columbus State University Athletic Fund, Inc. (Athletic Fund) is a legally separate, taxexempt component unit of Columbus State University (University). The Athletic Fund supports athletic endeavors of the institution. These endeavors include but are not limited to student services and student financial aid. The thirty-three-member board of the Athletic Fund 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 Athletic Fund, the majority of resources or income thereon that the Athletic Fund holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by the Athletic Fund 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 Athletic Fund 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of the Athletic Fund approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004 the Athletic Fund distributed $37,444 to the University for both restricted and unrestricted purposes. Complete financial statements for the Athletic Fund can be obtained from Columbus State University Athletic Fund, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Foundation, the amount due to Columbus State University, $18,855 is not reflected as a receivable on the University's Statement of Net Assets. This amount was received by the University before its year-end, June 30, 2005.
Investments for Component Units:
Columbus State University Athletic Fund, Inc. holds endowment investments in the amount of $1,405,378 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 Athletic
Annual Financial Report FY2005 139

Fund, Inc., in conjunction with the donors, has established a spending plan whereby 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.

Investments for the Columbus State University Athletic Fund, Inc. were comprised of the following at July 31, 2004:

Corporate Bonds Equity Securities
Total Investments

Cost
$100,000.00 1,053,754.00
$1,153,754.00

Fair Value
$100,000.00 1,305,378.00
$1,405,378.00

Columbus State University Athletic Fund, Inc. had no long term liabilities at July 31, 2004.
Georgia College and State University
Georgia College & State University Foundation (foundation) and the 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, is restricted to the activities of the university by the donors. Because these restricted resources held by the foundation and 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 (LLCs) 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. On September 1, 2004, the bonds originally financed by the LLC I were redeemed through the issuance of bonds by Property III, LLC.
The foundation and association 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. The FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's and association's fiscal year is July 1 through June 30.

Annual Financial Report FY2005 140

During the year ended June 30, 2005, the foundation distribution $278,714 and the association distributed $186,108 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 096, Milledgeville, GA 31061.

Investments for Component Units:

The Georgia College & State University Foundation holds endowment investments of $8,745,856 and the Alumni Association holds endowment investments of $5,055,352. 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, have 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.

The Georgia College & State University Foundation also holds investments in real property and equipment, net of accumulated depreciation valued at $77,469,008.

Investments:

Georgia College & State University Foundation

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Money Market Accounts Corporate Bonds Equity Securities

$633,696.00 2,795,396.00 4,199,085.00

$633,696.00 2,787,990.00 5,324,170.00

Total Investments

$7,628,177.00

$8,745,856.00

Georgia College & State University Alumni Association

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Money Market Accounts Corporate Bonds Equity Securities

$147,182.00 2,547,903.00 1,666,494.00

$147,182.00 3,245,917.00 1,662,253.00

Total Investments

$4,361,579.00

$5,055,352.00

Annual Financial Report FY2005 141

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 Georgia College & State University 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 of Georgia.
Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Be ginning B alance July 1, 2004

Additions

Re ductions

Ending B alance June 30, 2005

Amounts due within One Ye ar

Student Housing Revenue Bonds Lease Revenue Bonds Total Long Term Debt Issuance Premium - Net Bond Discount - Net

$55,875,000.00 7,840,000.00 63,715,000.00 1,624,383.00
$65,339,383.00

$89,000,000.00
89,000,000.00
(568,217.00) $88,431,783.00

$55,875,000.00
55,875,000.00 1,612,628.00
19,538.00 $57,507,166.00

$89,000,000.00 7,840,000.00 96,840,000.00 11,755.00 (548,679.00)
$96,303,076.00

Annual debt service requirements to maturity for Housing Revenue Bonds:

$0.00 265,000.00 $265,000.00

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035
Bond Dis count - Net

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Bonds Payable

Principal

Interest

$0.00 0.00 640,000.00 835,000.00 1,045,000.00 8,955,000.00 13,315,000.00 17,415,000.00 23,010,000.00 23,785,000.00
89,000,000.00 (548,679.00)
$88,451,321.00

$4,969,600.00 4,969,600.00 4,953,600.00 4,916,725.00 4,869,725.00 23,120,088.00 20,111,688.00 16,005,139.00 10,415,156.00 2,950,069.00
97,281,390.00
$97,281,390.00

Total
$4,969,600.00 4,969,600.00 5,593,600.00 5,751,725.00 5,914,725.00 32,075,088.00 33,426,688.00 33,420,139.00 33,425,156.00 26,735,069.00
186,281,390.00 (548,679.00)
$185,732,711.00

Annual Financial Report FY2005 142

Annual debt service requirements to maturity for Student Center and Parking Lot Bonds:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035
Issuance Premium - Net

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Bonds Payable

Prin c ip a l

Interes t

$265,000.00 275,000.00 275,000.00 280,000.00 290,000.00
1,610,000.00 1,935,000.00 2,375,000.00
535,000.00 0.00
7,840,000.00 11,755.00
$7,851,755.00

$300,421.25 294,456.25 287,581.25 280,706.25 272,306.25
1,191,443.75 870,306.25 443,243.75 24,075.00 0.00
3,964,540.00
$3,964,540.00

Total
$565,421.25 569,456.25 562,581.25 560,706.25 562,306.25
2,801,443.75 2,805,306.25 2,818,243.75
559,075.00 0.00
11,804,540.00 11,755.00
$11,816,295.00

Georgia Southwestern State University
Georgia Southwestern Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Southwestern 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 thirty-seven 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $1,649,220 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1800 South Lee Street, Americus, Georgia 31709.
Investments for Component Units:
Georgia Southwestern Foundation, Inc. holds endowment investments in the amount of $22 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation has an established investment policy which is monitored by its Trustees.

Annual Financial Report FY2005 143

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fai r Value

Cash held by investment organization Money Market Accounts Equity Securities Equity Mutual Funds Fixed Income Mutual Funds

$1,800,003.00 358,094.57
7,279,061.95 6,455,387.18 5,207,338.30

$1,800,000.00 358,095.00
7,807,213.00 6,931,691.00 5,167,944.00

Total Investments

$21,099,885.00

$22,064,943.00

Georgia Southwestern Research and Development Corporation, Inc. is a legally separate, tax-exempt component unit of Georgia Southwestern State University (University). The Research and Development Corporation 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 and Development Corporation. The twelve-member board of the Corporation consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Corporation itself. Although the University does not control the timing or amount of receipts from the Research and Development Corporation, 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 and Development Corporation 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is August 1 through July 31.
Complete financial statements for the Research and Development Corporation can be obtained from the Administrative Office at 800 Wheatley Street, Americus, Georgia 31709.
Kennesaw State University
Kennesaw State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Kennesaw State University (University). The Foundation constructs research and auxiliary buildings and facilities for use by the University and then leases the completed buildings to the institution. The seven-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.

Annual Financial Report FY2005 144

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $1,725,376.00 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:
Kennesaw State University Foundation, Inc. holds endowment investments in the amount of $15,281,343. 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, Inc., in conjunction with the donors, has established a spending plan whereby 4% of the earnings may be used for academic scholarships. The remaining 96% of the earnings are set aside as a reserve.

Investments:
Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Total Investments

Estimated Cost
$ 2 ,0 4 2 ,0 8 5 .2 4 2 ,9 9 2 ,2 6 4 .3 7 1 ,0 2 3 ,1 0 1 .7 5 5 ,3 6 9 ,1 8 8 .3 6 1 ,1 4 5 ,9 3 6 .9 7 1 3 ,8 0 0 .0 0
$ 1 2 ,5 8 6 ,3 7 6 .6 9

Fair Value
$ 2 ,0 4 2 ,0 8 5 .2 4 3 ,2 7 8 ,3 9 7 .2 3 1 ,1 0 5 ,5 6 9 .5 0 7 ,4 8 8 ,0 6 0 .6 0 1 ,3 6 7 ,2 3 0 .4 3 1 3 ,8 0 0 .0 0
$ 1 5 ,2 9 5 ,1 4 3 .0 0

Investment cost is an estimate based on available information.

Long Term Liabilities
Student Housing Revenue Bonds are issued by Kennesaw State University Foundation, Inc. to finance student housing on University property. The bonds mature at term and are secured by pledges of gross receipts from student housing. The interest rate is variable.

Parking Facility Revenue Bonds are issued by the Kennesaw State University Foundation, Inc. to finance parking facilities on University property. The bonds mature at term and are secured by pledges of gross receipts from parking deck rents at Kennesaw State University. The interest rate is variable.

Annual Financial Report FY2005 145

Education Facilities Revenue Bonds are issued by the Kennesaw State University Foundation, Inc. to finance the purchase of teaching and administrative facilities. The bonds mature serially and are serviced by a pledge of gross receipts of rents from the facilities financed by the bonds. The interest rate is variable.
Lenders have provided three letters of credit to secure the bonds. The obligations of the Foundation to repay the amounts 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 its revenues.
The University Manor note payable was issued by Wachovia Bank to finance the purchase of an existing apartment complex. The note is due in monthly installments of $19,752 through March 1, 2010 with a final payment of the entire outstanding balance on April 1, 2010. The note bears interest at a rate of 8.58%.

Changes in Long-Term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

Student Housing Facilities Bonds 2003A University Facilities Bonds 2003B Education Facilities Revenue Bonds University Manor Note Payable University Facilities Taxable Senior Series 2004B Student Housing Senior Series 2004A Student Housing Subordinate Series 2004C Student Housing Subordinate Series 2004D Series 2004 Parking Bonds Series 2004 Facilities Bonds Unamortized Cost of Issuance Unamortized Bond Premium
Total Long Term Debt

$85,705,785.00 25,045,000.00 13,655,000.00 2,474,836.00
$126,880,621.00

$0.00
8,050,000.00 49,715,000.00 18,240,000.00 34,275,000.00 36,380,000.00 8,400,000.00 (5,542,973.00) 4,279,421.00 $153,796,448.00

$85,705,785.00 25,045,000.00
650,000.00 2,474,836.00
$113,875,621.00

$0.00
13,005,000.00
8,050,000.00 49,715,000.00 18,240,000.00 34,275,000.00 36,380,000.00 8,400,000.00 (5,542,973.00) 4,279,421.00
$166,801,448.00

$0.00 680,000.00 770,000.00
860,000.00
$2,310,000.00

Annual Financial Report FY2005 146

Annual debt service requirements to maturity for Student Housing, P arking, Education and Facilities bonds payable are as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipa l
$7,504,831.00 3,760,000.00 3,885,000.00 4,035,000.00 4,205,000.00
22,400,000.00 27,425,000.00 29,050,000.00 30,230,000.00 27,690,000.00 11,811,448.00
$171,996,279.00

Interest
$7,264,787.50 7,222,445.50 7,133,970.00 7,017,028.50 6,888,870.50
32,521,921.75 27,902,750.00 21,358,650.00 13,618,700.00
6,738,600.00 645,832.50
$138,313,556.25

Total
$14,769,618.50 10,982,445.50 11,018,970.00 11,052,028.50 11,093,870.50 54,921,921.75 55,327,750.00 50,408,650.00 43,848,700.00 34,428,600.00 12,457,280.50
$310,309,835.25

North Georgia College and State University

North Georgia College & State University Foundation (Foundation) is a legally separate, taxexempt component unit of North Georgia 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 twenty-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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $678,650.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 70 Alumni Drive, Dahlonega, GA 30533 or from the Foundation's website at www.ngcsu.edu.

Investments for Component Units:

North Georgia College & State University Foundation holds endowment investments in the amount of $11,320,995 dollars. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. North Georgia College & State University Foundation, in conjunction with the donors, has established a spending plan

Annual Financial Report FY2005 147

whereby 50% of the earnings may be used for academic scholarships. The remaining 50% of the earnings are set aside as a reserve.

North Georgia College & State University Foundation also holds investments in real property valued at $1,167,239.

North Georgia College & State University Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fai r Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds Real Estate

$1,209,406.00 261,198.00 700,339.00 2,119.00
11,766,166.00 1,167,239.00

$1,209,406.00 261,198.00 726,278.00 4,172.00
12,584,848.00 1,167,239.00

Total Investments

$15,106,467.00

$15,953,141.00

Long Term Liabilities:

Student Housing Bonds are issued by the North Georgia College & State University Foundation to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at North Georgia College & State University. The interest rate is 4.28%.

Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

Compensated Absences Liabilities under Split Interest Agreements Other Long Term Debt
Total Long Term Debt

$0.00 30,957.00 10,895,000.00
$10,925,957.00

$0.00 3,080.00
$3,080.00

$0.00 5,453.00 95,000.00
$100,453.00

$0.00 28,584.00 10,800,000.00
$10,828,584.00

$0.00 100,000.00 $100,000.00

Annual Financial Report FY2005 148

De bt Se rvice O bligations

Annual debt service requirements to maturity for Student Housing ( Foundation) revenue bonds payable are as follows:

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Bonds Payable

Pri n ci pa l
$100,000.00 100,000.00 100,000.00 100,000.00 200,000.00
1,400,000.00 2,700,000.00 3,500,000.00 2,600,000.00

Inte re st
$459,000.00 450,500.00 446,250.00 442,000.00 433,500.00
2,010,250.00 1,538,500.00
867,000.00 114,750.00

Total
$559,000.00 550,500.00 546,250.00 542,000.00 633,500.00
3,410,250.00 4,238,500.00 4,367,000.00 2,714,750.00

$10,800,000.00 $6,761,750.00 $17,561,750.00

Southern Polytechnic State University
Southern Polytechnic State University Foundation (Foundation) is a legally separate, taxexempt component unit of Southern Polytechnic 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $510,561 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Advancement Office, Southern Polytechnic State University, 1100 South Marietta Pkwy., Marietta, GA, 30060-2896.
Annual Financial Report FY2005 149

Investments for Component Units:

Southern Polytechnic State University Foundation holds endowment investments in the amount of $897,000. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Southern Polytechnic State University Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the rolling three year average of market value may be used for academic scholarships or other academic activities as specified by the endowment agreement.

The Southern Polytechnic State University Foundation Endowments are invested in the Board of Regents Total Return Fund. Total investments held by the Foundation held a fair value of $6,418,988.16.

Southern Polytechnic State University Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization BOR Total Return Fund

$1,230,456.03 5,140,021.77

$1,230,465.03 5,188,523.13

Total Investments

$6,370,477.80 $6,418,988.16

University of West Georgia
University of West Georgia Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of University of West Georgia (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 consists of approximately forty 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 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. 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.
In accordance with GASB 14, there was a receivable due from the University to the Foundation in the amount of $2,144. Due to the different fiscal years this transaction was not listed as a payable by the University.

Annual Financial Report FY2005 150

During the year ended December 31, 2004, the Foundation distributed $1,077,504.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Development and Alumni Services at 1901 Maple Street Carrollton Georgia 30118.

Investments for Component Units:

University of West Georgia Foundation, Inc. holds endowment investments in the amount of $12,664,768 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. University of West Georgia Foundation, in conjunction with the donors, has established a spending plan whereby up to 5% of the adjusted corpus balance at year end may be used for academic scholarships. The remaining 95% of the earnings are set aside as a reserve.

University of West Georgia Foundation, Inc. also holds investments in real property valued at $17,238,148.

Investments are comprised of the following amounts at December 31, 2004:

Investments are comprised of the following amounts at December 31, 2004:

Cash held by investment organization Short Term Investments Stocks and options Fixed income securities Managed Futures Mutual Funds
Total Investments

Cost
$375,944.00 18,684,928.00
7,079,417.00 3,319,006.00
200,000.00 5,109.00
$29,664,404.00

Fair Value
$375,944.00 18,684,928.00
8,721,878.00 3,308,193.00
253,644.00 5,109.00
$31,349,696.00

Long Term Liabilities for Component Units:
Student Housing Bonds have been issued by the University of West Georgia foundation, Inc. to finance student housing on university property. The bonds are secured by pledges of gross receipts from student housing at the University of West Georgia.
Series 2003 bonds were issued on June 30, 2003 for $13,205,000 to fund the construction of Phase 1. These bonds are variable rate bonds whose rate is the Weekly Swap Index published by the Bond Market Association, adjusted weekly, with a cap of 12.0%. The current rate is 2.09%. The fixed bond rate for the project would have been approximately 6.5%; therefore, 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.
Series 2004A bonds were issued on October 1, 2004 in the amount of $19,275,000 to fund the construction of Phase II. The bonds bear interest at rates ranging from 3.0% to 5.0%.

Annual Financial Report FY2005 151

Series 2004B bonds were issued on October 1, 2004 in the amount of $180,000 to assist in the construction of Phase II. The bonds bear interest at a rate of 3.4%.

Changes in long-term liabilities for the calendar year ended December 31, 2004 are shown below:

Mortage Payable (Brookwood) Series 2003 Bonds Bond Premium Series 2004A Bonds Series 2004B Bonds

Beginning Balance
January 1, 2004 $0.00
13,205,000.00

Additions Reductions

$5,700,000.00

$0.00

363,667.00 19,175,000.00
180,000.00

Ending Balance
December 31, 2004 $5,700,000.00 13,205,000.00 363,667.00 19,175,000.00 180,000.00

Amounts due within
One Year
$0.00 405,791.00
0.00 779,631.00
5,610.00

Total Long Term Debt

$13,205,000.00

$25,418,667.00

$0.00

$38,623,667.00

$1,191,032.00

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:
Series 2003 Bonds Payable

P r i nc i pal

Int e r e s t

To t al

Year Ending
2005 2006 2007 2008 2009 through 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029

$0 375,000 385,000 400,000 2,185,000 2,565,000 3,005,000 3,520,000 770,000

$405,791 401,018 389,366 377,337
1,692,759 1,329,763
903,774 404,923
13,860

$405,791 776,018 774,366 777,337
3,877,759 3,894,763 3,908,774 3,924,923
783,860

$13,205,000

$5,918,591

$19,123,591

Series 2004 A & B Bonds Payable

Year Ending
2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029

P r i nc i pal
$0
455,000 485,000 535,000 3,180,000 3,820,000 4,790,000 6,090,000

Int e r e s t
$785,241 856,626 856,626 842,256 827,706
3,822,730 3,178,806 2,208,375
900,883

To t al
$785,241 856,626
1,311,626 1,327,256 1,362,706 7,002,730 6,998,806 6,998,375 6,990,883

$19,355,000

$14,279,249

$33,634,249

UWG Real Estate Foundation (Foundation) is a legally separate, tax-exempt component unit of the University of West Georgia (University). The Foundation constructs research and auxiliary buildings and facilities for use by the University and then leases the completed buildings to the University. The nine-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

Annual Financial Report FY2005 152

amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to 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 the sole member of UWG Campus Center, LLC, a Georgia limited liability company, who holds title to all assets and associated conduit debt described herein in connection with the Campus Center construction project.

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

Complete financial statements for the Foundation can be obtained from the Treasurer, Office of Business and Finance 1601 Maple Street, Carrollton, Georgia 30118.

Investments for Component Units:

UWG Real Estate Foundation holds investments in the amount of $26.3 million. Investments consist of money market funds and repurchase agreements as follows:

Investments are comprised of the following amounts at June 30, 2005:

Cost

Money Market Accounts FSA-Repurchase Agreement Maturity 11/1/06 FSA-Repurchase Agreement Maturity 8/1/05 AIG-Repurchase Agreement

$127,669.00 24,117,452.00
925,387.00 1,142,106.00

Total Investments

$26,312,614.00

Fair Value
$127,669.00 24,117,452.00
925,387.00 1,142,106.00
$26,312,614.00

Annual Financial Report FY2005 153

Long Term Liabilities for Component Units:

Resident Instruction Bonds have been issued by the UWG Real Estate Foundation, Inc. to finance the Student Center facilities at the University of West Georgia. The bonds mature serially and are serviced by a pledge of a student fee and appropriations formerly used for square footage support. The interest rate can fluctuate between 3 and 5% over the term of the bonds.

Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Real Estate Foundation Premium on Issue Student Center

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

$0.00 0.00

$222,421.00 30,720,000.00

$4,569.00 0.00

$217,852.00 30,720,000.00

$7,476.00 0.00

Total Long Term Debt

$0.00

$30,942,421.00

$4,569.00

$30,937,852.00

$7,476.00

Annual debt service requirements to maturity for Student Center (Real Estate Foundation) revenue bonds payable are as follows:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035

Principal
$0.00 0.00 360,000.00 390,000.00 425,000.00 2,735,000.00 3,965,000.00 5,770,000.00 8,045,000.00 9,030,000.00

Interest

Total

$1,665,440.00 1,427,520.00 1,422,120.00 1,410,383.00 1,395,545.00 6,703,887.00 6,067,480.00 4,970,326.00 3,169,007.00 1,082,283.00

$1,665,440.00 1,427,520.00 1,782,120.00 1,800,383.00 1,820,545.00 9,438,887.00 10,032,480.00 10,740,326.00 11,214,007.00 10,112,283.00

$30,720,000.00

$29,313,991.00

$60,033,991.00

Annual Financial Report FY2005 154

Annual debt service requirements to maturity for Student Center (Real Estate Foundation) revenue bonds premium on certificates payable are as follows:

Premium on Certificates Payable

Year Ending June 30:
2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2035

Premium

Total

$7,476.00 7,476.00 7,476.00 7,476.00 37,380.00 37,380.00 37,380.00 37,380.00 38,428.00

$7,476.00 7,476.00 7,476.00 7,476.00 37,380.00 37,380.00 37,380.00 37,380.00 38,428.00

$217,852.00

$217,852.00

Dalton State College
Dalton State College Foundation (Foundation) is a legally separate, tax-exempt component unit of Dalton State College (College). The organization was incorporated as a non-profit corporation under the Non-Profit Corporation Code of the State of Georgia on December 14, 1967. The organization's purpose is to provide individual grants, scholarships, and educational programs for eligible faculty and residents of the North Georgia area in cooperation with Dalton State 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. In order to provide information to Dalton State College in a timely manner, the Board of Directors of the Foundation voted to change its year end from June 30 to March 31. The foundation's fiscal year is April 1 through March 31. For FY2005, the statements are for a nine month fiscal year.
During the year ended March 31, 2005, the Foundation distributed $279,317 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 650 College Drive, Dalton, GA 30720-3797.

Annual Financial Report FY2005 155

Investments for Component Units:

The Dalton State College Foundation holds endowment investments in the amount of $8.9 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Georgia Investment Pools
BOR Total Return Fund
Total Investments

Cost
$0.00 33,590.70 701,299.02 303,377.14 875,381.27 898,470.77
6,569,099.97
$9,381,218.87

Fair Value
$0.00 33,590.70 684,570.09 302,056.68 1,006,464.10 978,224.72
5,934,766.99
$8,939,673.28

Macon State College
Macon State College Foundation (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 incomes, as defined by Section 512(a) (1) of the Code, are subject to federal income tax.
Twenty-eight 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 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
Investments for Component Units:
Macon State College Foundation's endowment was $6,002,912 as of June 30, 2005. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Macon State College Foundation, in conjunction with the donors, has

Annual Financial Report FY2005 156

established a spending plan whereby 4-6% of the market value of the investments at year end, averaged over a rolling three year period, may be used within the parameters of the donor's restrictions.

Macon State College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Georgia Investment Pools BOR Total Return Fund
Total Investments

$5,434,120.00 $5,434,120.00

$5,407,933.00 $5,407,933.00

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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2005, the Foundation distributed $242,811 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 2802 Moore Highway - ABAC 13, Tifton, GA. 31793.

Annual Financial Report FY2005 157

Investments for Component Unit:

Abraham Baldwin Agricultural College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Val ue

Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds

$678,860.00 979,207.00
3,787,545.00 58,750.00

$682,925.00 941,676.00
4,002,795.00 57,645.00

Total Investments

$5,504,362.00 $5,685,041.00

Long Term Liabilities:
Student Housing Bonds are issued by the First ABAC, LLC., a wholly-owned subsidiary of the Abraham Baldwin Agricultural College Foundation, to finance student housing on college property. The bonds, serial and term, are secured by pledges of receipts from student housing at Abraham Baldwin Agricultural College. The interest rate is 4.5%.
Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Student Housing
Total Long Term Debt

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

$31,948,184.00

$0.00

$40,113.00

$31,908,071.00

$689,220.00

$31,948,184.00

$0.00

$40,113.00

$31,908,071.00

$689,220.00

Annual Financial Report FY2005 158

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as fo llo ws :

Bonds Payable

Principal

In teres t

Total

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030

1 2 3 4 5 6-10 11-15 16-20 21-25

$685,000.00 725,000.00 785,000.00 870,000.00 900,000.00
4,945,000.00 5,860,000.00 7,415,000.00 9,430,000.00

$1,306,344.00 1,289,394.00 1,270,519.00 1,249,831.00 1,226,581.00 5,677,703.00 4,709,394.00 3,098,812.00 1,064,744.00

$1,991,344.00 2,014,394.00 2,055,519.00 2,119,831.00 2,126,581.00
10,622,703.00 10,569,394.00 10,513,812.00 10,494,744.00

$31,615,000.00 $20,893,322.00 $52,508,322.00

The bonds were issued at a premium of $1,049,632 which is being amortized over the life of the bonds. The accumulated amortization to date is $80,227.
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 thirteen-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $13,118.90 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Communications Office, PO Box 990, Bainbridge, GA 39818-0990.

Annual Financial Report FY2005 159

Investments for Component Units:
Bainbridge College Foundation holds endowment investments in the amount of $10,000. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Bainbridge College Foundation, in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships.

Investments are comprised of the following amounts at June 30, 2005:

Cos t

Fair Value

Money Market Accounts

$10,000.00

$10,000.00

Total Investments

$10,000.00

$10,000.00

Coastal Georgia Community College

Coastal Georgia Community College Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Coastal Georgia Community 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, friends, and employees 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. 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, 2004, the Foundation distributed $488,165.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3700 Altama Avenue, Brunswick, GA 31520.

Investments for Component Units:
Coastal Georgia Community College Foundation holds endowment investments in the amount of $3.09 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation board determines the amount of earnings to be expended during its annual budgeting process.

Annual Financial Report FY2005 160

Coast al Georgia Communit y College Foundat ion Invest ment s are comprised of t he following amount s at June 30, 2005:

Cost

Cash held by invest ment organizat ion Government and Agency Securit ies Corporat e Bonds Equit y Securit ies Mut ual Funds Georgia Invest ment Pools
BOR Short T erm Fund BOR T ot al Ret urn Fund

$652,948.00 398,264.27 700,000.00 8,909.38 607,719.36
70,516.19 3,316,616.82

T ot al Invest ment s

$5,754,974.02

Darton College

Fai r Val ue
$645,575.46 395,680.00 698,900.00 13,050.00 621,800.41
69,453.92 3,321,222.30
$5,765,682.09

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 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $176,283 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Darton College Business Office, 2400 Gillionville Rd. Albany GA 31707.

Investments for Component Units

Darton College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds Real Estate

$253,449.90 75,241.07
204,243.97 166,175.61 118,315.24
5,000.00

$253,449.90 75,241.07
204,230.29 175,200.92 115,400.82
5,000.00

Total Investments

$822,425.79

$828,523.00

Annual Financial Report FY2005 161

East Georgia College

East Georgia College Foundation (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 thirty-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $25,116.00 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 Fiscal Affairs at 131 College Circle, Swainsboro, GA 30401.

Investments for Component Units

East Georgia College Foundation holds endowment investments in the amount of $654,182.00. 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. Any remaining earnings are set aside as a reserve.

Investments are comprised of the following amounts at June 30, 2005

Fair Value

Cash held by investment organization Money Market Accounts Equity Securities Georgia Investment Pools
BOR Balanced Income Fund BOR Total Return Fund

$25.60 4,094.56 37,626.64
42,129.09 570,306.11

Total Investments

$654,182.00

Annual Financial Report FY2005 162

Floyd College

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 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 Cartersville/Bartow Foundation, Inc. combined with the Floyd College Foundation, Inc., in May 2005. In future statements, this combined entity will be known as Georgia Highlands Foundation.

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30. (If Foundation has other fiscal year, please correct note).

During the year ended June 30, 2005, the Foundation distributed $141,958.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3175 Cedartown Highway, Rome, GA 30161.

Investments for Component Units:

Floyd College Foundation holds endowment investments in the amount of $580,875. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Investments are comprised of the following amounts at June 30, 2005:

Cost

Equity Securities Mutual Funds
Total Investments

$547,718.00 33,157.00
$580,875.00

Fair Value
$547,718.00 33,157.00
$580,875.00

Annual Financial Report FY2005 163

Gainesville College

Gainesville College Foundation is a legally separate, tax-exempt component unit of Gainesville 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 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. 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 June 30, 2005, the Foundation distributed $494,132.00 to the college for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at P.O. Box 1358, Gainesville, GA 30503.

Investments for Component Units:

Gainesville College Foundation holds endowment investments in the amount of $8.4 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. 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.

Gainesville College Foundation also holds investments in real property valued at $8,400.00.

Investments are comprised of the following amounts at December 31, 2004:

Cost

Fair Value

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds

$1,356,709.00 1,412,957.00 455,967.00 3,091,046.00 1,473,962.00

$1,356,709.00 1,438,903.00 466,794.00 3,425,781.00 1,713,924.00

Total Investments

$7,790,641.00 $8,402,111.00

Annual Financial Report FY2005 164

Gordon College

Gordon College Foundation (Foundation) is a legally separate, tax-exempt component unit of Gordon 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 forty 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 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. 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, 2004, the Foundation distributed $109,173 in scholarships to qualifying students of the College. Complete financial statements for the Foundation can be obtained from the Administrative Office at 419 College Drive, Barnesville, GA 30204.

Investments for Component Units:

The Gordon College Foundation adopted SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. Under SFAS No. 124, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the statement of activities.

Gordon College Foundation Investments are comprised of the following amounts at December 31, 2004

Cos t

Fair Value

The Common Fund Charles Schwab State Farm Mutual Fund Upson Bankshares Gordon College Properties Foundation, LLC

$609,588.00 2,188,790.00
1,690.00 6,000.00
130.00

$1,220,637.00 2,159,431.00
5,747.00 6,000.00
130.00

Total Investments

$2,806,198.00

$3,391,945.00

Annual Financial Report FY2005 165

Middle Georgia College

Middle Georgia College Foundation (Foundation) is a legally separate, tax-exempt component unit of Middle 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 fifty-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 Not-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 July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $96,238 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation at 1100 Second St., SE, Cochran, GA 31014.

Investments for Component Units:

Middle Georgia College Foundation holds endowment investments in the amount of $639,374. 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, in conjunction with the donors, has established a spending plan whereby 100% of the earnings is available for current and future expenditures, except where restricted by the donor.

Middle Georgia College Foundation, Inc. Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Val ue

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds

$34,572.00 74,948.00 71,478.00
322,808.00 115,494.00

$34,572.00 74,685.00 71,882.00
345,223.00 113,012.00

Total Investments

$619,300.00

$639,374.00

Annual Financial Report FY2005 166

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 thirty-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $186,115.77 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Vice President for Business Affairs at 100 West College Park Drive, Douglas, GA 31533.

Investments for Component Units:

South Georgia College 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.

South Georgia College Foundation also holds investments in real property valued at $13,500.

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization Corporate Bonds Equity Securities Real Estate Georgia Investment Pools
BOR Total Return Fund

$0.00
154,978.05 13,500.00
2,479,397.00

$0.00
154,978.05 13,500.00
2,370,098.99

Total Investments

$2,647,875.05 $2,538,577.04

Annual Financial Report FY2005 167

Waycross College

Waycross College Foundation is a legally separate, tax-exempt component unit of Waycross 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 one-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 University 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $60,083 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 2001 South Georgia Parkway Waycross, GA 31503.

Investments for Component Units:

Waycross College Foundation holds endowment investments in the amount of $1.16 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 dividend and interest earned on the corpus may be used for academic scholarships. The realized gains are set aside as a reserve.

Waycross College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Certificates of Deposit Georgia Investment Pools
BOR Total Return Fund

$29,635.00 1,191,375.00

$29,635.00 1,132,385.00

Total Investments

$1,221,010.00

$1,162,020.00

Annual Financial Report FY2005 168

Board of 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, 2005

Abraham Baldwin Agricultural College Tifton, Georgia

Mr. Thomas B. Call (Interim)
President

Floyd E. Wright
Vice President for Fiscal Affairs

ABRAHAM BALDWIN AGRICULTURAL COLLEGE ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments..................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 20 Note 5 Notes/Loans Receivable....................................................................................... 20 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 22 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28 Note 16 Component Units ........................................................................ 29

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 1908 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

FY2005 FY2004 FY2003

137

3,362

140

3,407

139

3,033

Overview of the Financial Statements and Financial Analysis

Abraham Baldwin Agricultural College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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.

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

June 30, 2005 $4,662,567.04 21,966,805.96
460,394.33 27,089,767.33
1,984,660.64 346,296.11
2,330,956.75
21,966,805.96
613,902.78
2,178,101.84 $24,758,810.58

June 30, 2004 $3,962,315.92 25,104,369.54
526,560.52 29,593,245.98
1,594,143.06 403,331.34
1,997,474.40
25,104,369.54
669,407.88
1,821,994.16 $27,595,771.58

The total assets of the institution decreased by ($2,503,478.65). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($3,137,563.58) in investment in plant, net of accumulated depreciation. This decrease was primarily due the demolition of Creswell, Branch, Fulwood and Mitchell Halls, which have been replaced by ABAC Place Apartments as our primary Student Housing Facility. ABAC Place Apartments are owned by the Abraham Baldwin Agricultural College Foundation, and therefore are not included in the College's asset listing.

The total liabilities for the year increased by $333,482.35. The primary cause for the increase was an increase in current liabilities, primarily $309,875.59 in accounts payables, which had been fully paid as of June 30, 2004 but were accrued as of June 30, 2005. The combination of the decrease in total assets of ($2,503,478.65) and the increase in total liabilities of $333,482.35 yields a decrease in total net assets of ($2,836,961.00). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($3,137,563.58).

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues

$13,408,693.43

$12,975,255.69

Operating Expenses Operating Loss

26,241,512.48 (12,832,819.05)

27,440,696.19 (14,465,440.50)

Nonoperating Revenues and Expenses

7,284,595.16

12,433,963.62

Income (Loss) Before other revenues, expenses, gains or losses

(5,548,223.89)

(2,031,476.88)

Other revenues, expenses, gains or losses

2,711,262.89

8,473,355.19

Increase in Net Assets

(2,836,961.00)

6,441,878.31

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

27,595,771.58 27,595,771.58

18,684,266.30 2,469,626.97
21,153,893.27

Net Assets at End of Year

$24,758,810.58

$27,595,771.58

Although the Statement of Revenues, Expenses, and Changes in Net Assets reflects a decline in Net Assets at the End of the Year, excluding the $3,137,563.58 reduction in Capital Assets the College actually had an increase in net assets of $300,602.58. Since the demolition was a one time event, the results from continuing operations were positive. 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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$3,156,864.79
6,414,871.89 327,994.12
3,254,595.25 254,367.38
13,408,693.43
12,056,763.74
35,621.88 (4,807,790.46) 7,284,595.16
2,661,614.89 49,648.00
2,711,262.89 $23,404,551.48

June 30, 2004
$2,520,459.74 4,296,633.72 215,984.57 5,597,080.45 345,097.21
12,975,255.69
11,617,728.07 1,826,229.37 20,137.81 (1,030,131.63)
12,433,963.62
8,473,355.19 8,473,355.19 $33,882,574.50

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$9,178,905.28
1,107,912.44 2,174,740.96 1,933,933.39 3,958,345.78 2,901,161.61 1,693,878.31 3,292,597.21
37.50
26,241,512.48

June 30, 2004
$9,319,081.26
996,293.98 2,498,146.81 1,832,781.74 3,858,625.89 2,016,252.80 1,670,572.51 5,227,984.31
20,956.89
27,440,696.19

Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

$26,241,512.48

$27,440,696.19

Revenues associated with the Housing and Food Service decreased by ($2,478,520.11) during the year. This decrease reflects the changing environment of residential life on the College's campus. During the year, the College dropped its mandatory meal plan requirement for residential students and closed the Snack Bar. At the same time, residential life constructed over 800 beds of new housing on the campus using a third party developer in a construction and leasing relationship. The net effect to the campus is that the students actually have a significantly more attractive on-campus residential life facility. 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 College's financial statements due to the activity being an off-balance sheet activity for financial reporting purposes. Since the College does not own or lease these units, the revenues and expenses are not reflected in the College's financial statements.

The compensation and employee benefits category decreased by approximately ($1,063,916.49). The decrease reflects the privatization of the College's entire Physical Plant operation and the elimination of all associated salary and benefit costs. Utilities decreased by approximately ($86,259.48) during the past year. The decrease was primarily associated with the demolition of Branch, Creswell, Fulwood and Mitchell Halls, as well as having a full year without Chandler Hall, which was demolished in FY 2004. The elimination of utilities costs for these five residential housing facilities more than offset the significant increase in utility rates experienced by the College during fiscal year 2005.

Under non-operating revenues (expenses) state appropriations increased by $439,035.67. 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. However, due to an upward trend in enrollment and gains in the area of student retention, Abraham Baldwin Agricultural

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 5

College has not suffered the drastic reductions faced by some other institutions. We are hopeful that the economy is now on an upward trend and that the entire University System will benefit.
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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($11,216,515.26) 12,098,376.64 (243,785.59) 34,042.65 672,118.44 1,744,932.47
$2,417,050.91

June 30, 2004
($13,028,276.44) 14,333,963.58 (834,235.68) 18,973.29 490,424.75 1,254,507.72
$1,744,932.47

Capital Assets

The College had three significant capital asset additions for facilities in fiscal year 2005. The Environmental Horticulture Building Project was finalized and construction of the New Agricultural Science Building was completed and that facility was placed into service early in fiscal year 2005. These resulted in Capital Asset additions of $824,074.91 and $1,079,839.66, respectively. Abraham Baldwin Agricultural College also began construction of a new Nursing Education Building, which is being jointly funded by the College, the Georgia State Finance and Investment Commission (GSFIC), and private sources. Construction Work in Progress of $1,106,677.96 was recorded for this project.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 6

Long Term Liabilities (Debt) Abraham Baldwin Agricultural College had Long-Term Liabilities (Debt) of $752,083.06 of which $405,786.95 was reflected as current liability at June 30, 2005. For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 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 FY2005. The Abraham Baldwin Agricultural College Foundation had endowment investments of $5.7 M and long term debt of $31.9 M as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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, excluding the elimination of outdated campus housing facilities. 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. Mr. Thomas B. Call, Interim President Abraham Baldwin Agricultural College
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 7

Statement of Net Assets
ABRAHAM BALDWIN AGRICULTURAL COLLEGE STATEMENT OF NET ASSETS June 30, 2005
Abrah am Bal dwi n Agri cu l tu ral C ol l e ge

AS S ETS C u rre n t Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Leases Receivable P ledges Receivable Due from ABAC Foundat ion Invent ories P repaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s

$2,417,050.91 102,743.75 845,174.40 980,558.04
4,455.00 298,930.73
13,654.21
4,662,567.04

Non cu rre n t Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s TO TAL AS S ETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue Ot her Liabilit ies Due t o ABAC Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

460,394.33
21,966,805.96 22,427,200.29 27,089,767.33
524,206.20 265,029.51
145.85 296,345.03 (14,327.97) 507,475.07 405,786.95 1,984,660.64
346,296.11
346,296.11 2,330,956.75
21,966,805.96
613,902.78 2,178,101.84 $24,758,810.58

Abrah am Bal dwi n Agri cu tu ral C ol l e ge Fou n dati on
$458,421.00
120,253.00
206,039.00 784,713.00
7,483,831.00 5,685,041.00
244,017.00 30,248,826.00 43,661,715.00 44,446,428.00
1,486,142.00
166,739.00 4,455.00
689,220.00 2,346,556.00
31,908,071.00 31,908,071.00 34,254,627.00
368,207.00 6,291,032.00 2,588,381.00
97,777.00 846,404.00 $10,191,801.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
ABRAHAM BALDWIN AGRICULTURAL CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Abraham Baldwin Agricultural College
T otal Operating Expenses Operating Income (loss)

Abraham Baldwin Ag ri cu l tu ra l College

Abraham Baldwin Agri cu l tu ral College Fo u n da ti o n

$5,439,849.33 2,282,984.54
6,017,566.69 104,345.80 292,959.40 327,994.12 24,121.00
88,546.46 1,947,355.83
164,606.17 35,437.04
410,421.14 416,317.17 191,911.44 230,246.38 13,408,693.43

$0.00 1,025,640.00 3,959,119.00
4,984,759.00

5,178,913.51 5,781,690.41 3,073,665.36
185,750.50 2,285,379.69 1,056,026.00 7,392,601.42 1,287,485.59
26,241,512.48 (12,832,819.05)

103,918.00
4,069.00 4,455.00
2,631,308.00 817,934.00 242,811.00
3,804,495.00 1,180,264.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ABRAHAM BALDWIN AGRIC ULTURAL C O LLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s 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 St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET ASS ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

Abraham Baldwin Ag ri cu l tu ra l College

Abraham Baldwin Agri cu l tu ral College Fo u n da ti o n

12,056,763.74

35,621.88
(4,807,790.46) 7,284,595.16 (5,548,223.89)
2,661,614.89 49,648.00
2,711,262.89 (2,836,961.00)
27,595,771.58
27,595,771.58 $24,758,810.58

0.00 1,180,264.00
140,185.00 140,185.00 1,320,449.00 8,871,352.00 8,871,352.00 $10,191,801.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 10

Statement of Cash Flows
AB RAHAM B ALDW IN AGRIC ULTURAL C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$3,168,959.14
6,457,483.87 241,344.24
(11,521,677.84) (11,077,469.68)
(2,285,379.69) (46,295.88) 112,462.07
60,483.72 1,993,126.70
192,464.76 35,437.04
487,327.66 414,040.17 194,524.69 356,653.77 (11,216,515.26)
12,056,763.74 41,612.90
12,098,376.64
(243,785.59)
(243,785.59)
35,621.88 (1,579.23) 34,042.65 672,118.44 1,744,932.47 $2,417,050.91

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of invest m ent s recognized as a com ponent of int erest incom e CW IP from Healt h Cent er Repairs and Maint enance Expenses paid in FY 2005 Capit al Equipm ent Expenses Addit ions from prior year lease paym ent s Capit al Const ruct ion cost s paid by t he College in P rior FY Donat ed Asset s - Capit alized Capit alized Value of Asset received in t rade for fully depreciat ed asset (s) Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($12,832,819.05)
1,287,485.59
154,776.09 27,808.13 5,918.24
188,785.03 (39,283.92) 32,814.80 (42,000.17)
($11,216,515.26)
$35,621.88 ($78,951.52) ($164,834.07) ($11,490.32) ($288,026.12) ($49,648.00)
($7,295.00) ($2,661,614.89)

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 12

ABRAHAM BALDWIN AGRICULTURAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Abraham Baldwin Agricultural College is reporting the activity for the Abraham Baldwin Agricultural College Foundation.
See Note 16. Component Units, for foundation notes.
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 13

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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 14

component of investment income in the Statement 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 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $2,661,614.89 to Abraham Baldwin Agricultural College.
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 15

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. Abraham Baldwin Agricultural College had accrued liability for compensated absences in the amount of $794,083.23 as of 7-1-2004. For FY2005, $1,277,869.89 was earned in compensated absences and employees were paid $1,319,870.06, for a net decrease of $42,000.17. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $752,083.06.
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 previously in Note 1 Capital Assets section.
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.
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 16

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:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $3,636.01
581,981.68 28,285.09
$613,902.78

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 Other Unrestricted T otal Unrestricted Net Assets

June 30, 2005 $774,240.78 622,355.48
781,505.58 $2,178,101.84

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.

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 17

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college/university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college/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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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.
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 18

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 and 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.

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.

At June 30, 2005, $1,333,016.04 of the college's deposits were uninsured. Of these uninsured deposits, $1,333,016.04 were collateralized with securities held by the financial institution's trust department or agent in the college's name

B. Investments

At June 30, 2005, the carrying value of the college's investment was $1,178,078.45, which is

materially the same as fair value. These investments were comprised entirely of funds invested

in the Board of Regents investment pools as follows:

Investment Pool

Board of Regents

Short-Term Fund

$ 1,175,606.98

$1,175,606.98

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 19

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$42,673.75 38,997.75
845,174.40
898,886.54 1,825,732.44
$1,825,732.44

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005 $298,930.73
$298,930.73

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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 2005 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$67,441.25 780,034.30 847,475.55

Additions
$0.00 1,106,677.96 1,106,677.96

Reductions
$0.00 780,034.30 780,034.30

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

35,573,245.98 607,439.00
3,402,532.32
2,718,769.51 156,200.00
42,458,186.81

1,921,914.57 132,012.91 101,254.48
2,155,181.96

4,945,000.00 182,616.40 1,763.00
5,129,379.40

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

13,366,421.00 546,695.10
1,984,281.36
2,283,908.00 19,987.36
18,201,292.82

860,486.92
329,130.10
96,491.07 1,377.50 1,287,485.59

657,258.33 138,454.46
1,763.00 797,475.79

Total Capital Assets, Being Depreciated, Net

24,256,893.99

867,696.37

4,331,903.61

Capital Assets, net

$25,104,369.54

$1,974,374.33

$5,111,937.91

Ending Balance 6/30/2005
$67,441.25 1,106,677.96 1,174,119.21
0.00 32,550,160.55
607,439.00 3,351,928.83
0.00 2,818,260.99
156,200.00 39,483,989.37
0.00 13,569,649.59
546,695.10 2,174,957.00
0.00 2,378,636.07
21,364.86 18,691,302.62
20,792,686.75
$21,966,805.96

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $46,359.00 249,986.03
$296,345.03

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

794,083.23 794,083.23

1,277,869.89 1,277,869.89

1,319,870.06 1,319,870.06

752,083.06 752,083.06

Total Long Term Obligations

$794,083.23 $1,277,869.89

$1,319,870.06

$752,083.06

Current Portion
$0.00
405,786.95 405,786.95 $405,786.95

Note 9. Significant Commitments
A new Nursing Education Building is currently under construction. The total cost of this project is estimated at $7,253,448. Of this amount, $4,700,000 is being funded from bonds being sold by the Georgia State Financing and Investment Commission (GSFIC) under the Minor Capital Project Formula. Approximately $250,000 is also being funded through GSFIC under the Major Repair and Renovation (MRR) funds. An additional $1,000,000 is being funded by private sources. The balance, approximately $1,300,000 is being funded from Auxiliary Enterprise funds.
Note 10. Lease Obligations
Abraham Baldwin Agricultural College had no outstanding noncancellable lease obligations as of June 30, 2005.
Note 11. Retirement Plans
Teachers Retirement System of Georgia
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 22

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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$700,907.88 $752,741.88 $768,875.05

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 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

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 23

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, 2005, for employees covered by ERS was $111,903.10. The College's total payroll for all employees was $11,265,777.73.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the College 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 2005 amounted to $13,385.65, of which $10,178.31 was made by the College and $3,205.80 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, 2005, 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
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 24

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $216,039.10 (9.65%) and $111,967.84 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
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
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 25

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 2005 amounted to $27,718.11 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 26

Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, 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, 2005, Abraham Baldwin Agricultural College recognized as incurred $577,744.09 of expenditures, which was net of $216,626.56 of participant contributions.
Abraham Baldwin Agricultural College Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$5,191,411.51 1,148,582.39 1,555,525.08
75,567.11 170,399.72 54,772.51 719,875.31 262,771.65

$0.00

$3,250.00 430,130.10 121,113.06
10,676.61 35,104.09 2,238.31 505,400.27

($4,248.00) 1,019,658.90
265,690.75

$0.00 1,149,922.39
288,925.24

18,627.30 0.00
5,709.62 686,170.02 183,132.37

42,689.36 30,225.00 11,675.87 410,495.53

($11,500.00) 1,595,493.63
742,883.28
29,213.84 162,359.90 191,215.10 640,210.88 608,469.15

Total Expenses

$9,178,905.28

$0.00 $1,107,912.44 $2,174,740.96 $1,933,933.39 $3,958,345.78

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 123,332.86
24,400.07 (7,386.66)
777,974.03 1,903,125.42
79,715.89

$0.00 1,693,878.31

$0.00 314,570.14
75,127.88 7,386.66 8,976.28
193,412.67 12,440.56
2,527,323.99 153,359.03

$0.00 37.50

$2,901,161.61 $1,693,878.31 $3,292,597.21

$37.50

T ot al Expenses
$5,178,913.51 5,781,690.41 3,073,665.36 0.00 185,750.50 2,285,379.69 1,056,026.00 7,392,601.42 1,287,485.59
$26,241,512.48

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 28

Note 16. Component Units

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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $242,811 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 2802 Moore Highway - ABAC 13, Tifton, GA. 31793.

Investments for Component Unit:

Abraham Baldwin Agricultural College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund
Total Investments

Cos t
$0.00
678,860.00 979,207.00 3,787,545.00
58,750.00

Fair Value
$0.00
682,925.00 941,676.00 4,002,795.00
57,645.00

$5,504,362.00

$5,685,041.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 29

Long Term Liabilities:
Student Housing Bonds are issued by the First ABAC, LLC., a wholly-owned subsidiary of the Abraham Baldwin Agricultural College Foundation, to finance student housing on college property. The bonds, serial and term, are secured by pledges of receipts from student housing at Abraham Baldwin Agricultural College. The interest rate is 4.5%.
Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Student Housing
Total Long Term Debt

Beginning Balance July 1, 2004

Additions

Reductions

$31,948,184.00

$0.00

$40,113.00

$31,948,184.00

$0.00

$40,113.00

Ending Balance June 30, 2005

Amounts due within
One Year

$31,908,071.00

$689,220.00

$31,908,071.00

$689,220.00

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as fo llo ws :

Bonds Payable

Principal

In teres t

Total

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030

1 2 3 4 5 6-10 11-15 16-20 21-25

$685,000.00 725,000.00 785,000.00 870,000.00 900,000.00
4,945,000.00 5,860,000.00 7,415,000.00 9,430,000.00

$1,306,344.00 1,289,394.00 1,270,519.00 1,249,831.00 1,226,581.00 5,677,703.00 4,709,394.00 3,098,812.00 1,064,744.00

$1,991,344.00 2,014,394.00 2,055,519.00 2,119,831.00 2,126,581.00
10,622,703.00 10,569,394.00 10,513,812.00 10,494,744.00

$31,615,000.00 $20,893,322.00 $52,508,322.00

The bonds were issued at a premium of $1,049,632 which is being amortized over the life of the bonds. The accumulated amortization to date is $80,227.

Abraham Baldwin Agricultural College Annual Financial Report FY 2005 30

ALBANY STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005
Albany State University Albany, Georgia

Dr. Julius Scott
(Interim) President

Stanley Williams
Vice President for Fiscal Affairs

ALBANY STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments..................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 19 Note 4 Inventories............................................................................................................ 19 Note 5 Notes/Loans Receivable....................................................................................... 20 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 23 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units.........................................................................30

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 3,600 students each year

Faculty

Students

FY2005 FY2004 FY2003

149

3,668

149

3,638

148

3,673

Overview of the Financial Statements and Financial Analysis

Albany State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 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

Albany State University Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Net Asse ts

June 30, 2005
$6,044,575.33 102,089,522.40
370,654.48 108,504,752.21
5,064,411.87 643,743.64
5,708,155.51
102,089,522.40
441,921.94 52,433.00
212,719.36 $102,796,596.70

June 30, 2004 $2,757,139.07 106,289,535.42
355,244.31 109,401,918.80
1,942,194.96 595,114.10
2,537,309.06
106,289,535.42
19,212.56
555,861.76 $106,864,609.74

The total assets of the institution decreased by ($897,166.59). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($4,200,013.02) 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 $3,170,846.45. The primary cause for the increase is due to the reclassification of accounts receivables to deferred revenue, of which $2,595,590.66 represents the deferred revenue portion. The combination of the decrease in total assets of ($897,166.59) and the increase in total liabilities of $3,170,846.45 yields a net decrease in total net assets of ($4,068,013.04). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($4,200,013.02).

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

Albany State University Annual Financial Report FY 2005 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
June 30, 2005

June 30, 2004

Operating Revenues

$28,491,449.59

$28,211,361.93

Operating Expenses Operating Loss

52,231,521.40 (23,740,071.81)

50,841,034.26 (22,629,672.33)

Nonoperating Revenues and Expenses

19,672,058.77

18,683,403.91

Income (Loss) Before other revenues, expenses, gains or losses

(4,068,013.04)

(3,946,268.42)

Other revenues, expenses, gains or losses

Increase in Net Assets

(4,068,013.04)

(3,946,268.42)

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

106,864,609.74 106,864,609.74

110,810,878.16 110,810,878.16

Net Assets at End of Year

$102,796,596.70

$106,864,609.74

The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with 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:

Albany State University Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$5,103,653.37 15,309,852.94
287,528.09 7,669,142.61
121,272.58 28,491,449.59
19,246,105.56
7,463.71 421,988.94 19,675,558.21
$48,167,007.80

June 30, 2004
$5,780,129.52 14,690,497.48
151,623.25 7,044,077.82
545,033.86 28,211,361.93
18,778,595.98 (1,416.13) 26,577.67
(120,353.61) 18,683,403.91
$46,894,765.84

Albany State University Annual Financial Report FY 2005 4

Expenses (by Functional Classification) For the years ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$21,740,276.13 355,319.08 541,281.25
3,323,469.78 2,508,225.94 6,022,842.95 3,098,295.82 7,415,250.88 7,226,559.57
52,231,521.40

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

Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

3,499.44 $52,235,020.84

$50,841,034.26

During the past fiscal year, grant and contract revenue increased by approximately $600,000.00. This is primarily a result of the increase in sponsored local and private grants and contracts. Additionally the Continuing Education revenue increased approximately 65% to a reported $287,528.09.

The compensation and employee benefits category increased by approximately $1,065,821.09. The increase reflects an increased cost of health insurance for the employees of the institution.

Utilities increased by approximately $292,164.20 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2005.

Under non-operating revenues (expenses) state appropriations increased by approximately $467,509.58. The increase of state appropriations system-wide was due to an improved economy, during the past fiscal year. We are hopeful that the upward trend in the economy will continue through the next fiscal year.

Albany State University Annual Financial Report FY 2005 5

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.

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($18,570,500.19) 19,407,503.12 (357,415.39) 7,463.71 487,051.25 837,849.64
$1,324,900.89

June 30, 2004
($17,052,496.56) 18,146,180.43 (282,038.67) 26,577.67 838,222.87 (373.23)
$837,849.64

Capital Assets

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Liabilities (Debt)

Albany State University had total Long-Term Liabilities (Debt) of $1,240,279.06 of which $596,535.42 was reflected as current liability at June 30, 2005.

For additional information concerning Long-Term Liabilities (Debt) see Notes 1 and 8 in the Notes to the Financial Statements.

Component Units

In compliance with GASB Statement No. 39, Albany State University has included the financial statements and notes for all required component units for FY2005. Albany State University Foundation had investments of $2.6 M and long-term liabilities of $2.5 M at June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies, and Note 16, Component Units.

Albany State University Annual Financial Report FY 2005 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. Even with a relatively flat funded year, the University experienced only a modest decrease 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. Julius Scott, Interim President Albany State University
Albany State University Annual Financial Report FY 2005 7

Statement of Net Assets

ALBANY STATE UNIVERS ITY STATEMENT OF NET AS SETS
June 30, 2005
ASS ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Federal Financial As s is tance Receivables - State General A ppropriations Allotment Receivables - Other Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other Assets Total Current As s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital As s ets , net Total Noncurrent As s ets
TOTAL ASS ETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASS ETS Inves ted in Capital As s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

Albany S tate Univers ity
$1,324,900.89
1,869,777.37 2,152,484.74
695,369.57 2,042.76
6,044,575.33
370,654.48
102,089,522.40 102,460,176.88 108,504,752.21
767,811.19 219,980.06
229,297.21 2,595,590.66
4,416.44 650,780.89 596,535.42 5,064,411.87
643,743.64
643,743.64 5,708,155.51
102,089,522.40
441,921.94 52,433.00
212,719.36 $102,796,596.70

Albany State Univers ity Foundation $909,856.00
909,856.00
2,556,935.00
7,745,073.00 10,302,008.00 11,211,864.00
292,528.00
80,565.00 373,093.00
2,391,718.00 2,391,718.00 2,764,811.00 5,272,790.00 2,952,539.00
221,724.00 $8,447,053.00

Albany State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
ALBANY S TATE UNIVERS ITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o kst o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Benefit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat io n Payments to or on behalf of Albany State University
T otal Operating Expenses Operating Income (loss)

Albany State Unive rsity

Albany State Unive rsity Fo u n da ti o n

$8,747,719.54 3,644,066.17

$0.00 639,068.00

14,063,019.32 313,411.11 933,422.51 287,528.09 22,034.50
1,796,882.25 1,526,124.53 2,063,480.20
99,059.72 369,698.49 1,659,990.35 153,907.07
99,238.08 28,491,449.59

639,068.00

9,966,430.39 14,092,986.58
6,400,854.10 3,120.01
314,680.76 5,140,792.10 1,833,608.78 10,008,819.76 4,470,228.92
52,231,521.40 (23,740,071.81)

600,408.00
65,462.00 98,914.00 480,512.00 1,245,296.00 (606,228.00)

Albany State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ALBANY S TATE UNIVERS ITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s 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 St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

Albany State Unive rsity
19,246,105.56

Albany State Unive rsity Fo u n da ti o n

7,463.71 (3,499.44) 421,988.94 19,672,058.77 (4,068,013.04)

(38,221.00) (119,092.00)
(157,313.00) (763,541.00)

0.00 (4,068,013.04)
106,864,609.74
106,864,609.74 $102,796,596.70

0.00 (763,541.00)
9,210,594.00
9,210,594.00 $8,447,053.00

Albany State University Annual Financial Report FY 2005 10

Statement of Cash Flows
ALBANY S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$5,103,653.37
15,309,852.94 287,528.09
(18,561,083.41) (24,059,416.97)
(5,140,792.10) (30,000.00)
1,796,882.25 1,526,124.53 2,063,480.20
99,059.72 369,698.49 1,659,990.35 153,907.07 850,615.28 (18,570,500.19)
19,246,105.56 161,397.56
19,407,503.12
(353,915.95)
(3,499.44) (357,415.39)
7,463.71
7,463.71 487,051.25 837,849.64 $1,324,900.89

Albany State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECO NCILIATIO N O F O PERATING LO SS TO NET C ASH PRO VIDED (USED) BY O PERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities
Dep reciat ion Change in Assets and Liabilities:
Receivables, net In v en t ories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (used) by Operating Activities

($23,740,071.81)
4,470,228.92
(2,591,672.77) (210,694.76) 1,982.52 647,104.88 2,213,742.22 278,199.12 360,681.49
($18,570,500.19)

Albany State University Annual Financial Report FY 2005 12

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Albany State University is reporting the activity for the Albany State University Foundation.
See Note 16. 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 implemented GASB
Albany State University Annual Financial Report FY 2005 13

Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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. Albany State University did not have short-term investments during this past fiscal year.
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 Statement 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. Albany State University did not have any investments during this past fiscal year.
Albany State University Annual Financial Report FY 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC did not transfer any capital additions to Albany State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Albany State University Annual Financial Report FY 2005 15

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. Albany State University had accrued liability for compensated absences in the amount of $1,208,478.83 as of 7-1-2004. For FY2005, $817,112.55 was earned in compensated absences and employees were paid $785,312.32, for a net increase of $31,800.23. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 1,240,279.06.
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 previously in Note 1 Capital Assets section.
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.
Albany State University Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $96,580.43 342,626.93 2,714.58
$441,921.94

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 Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s

June 30, 2005
$106,810.21 480,728.61 60,223.44 (435,042.90)
$212,719.36

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.

Albany State University Annual Financial Report FY 2005 17

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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.
Albany State University Annual Financial Report FY 2005 18

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 and 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.

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.

At June 30, 2005, $2,201,502.39 of the university's deposits were uninsured and uncollateralized.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$738,996.30 482,339.83
1,869,777.37
1,597,388.69 4,688,502.19
666,240.08
$4,022,262.11

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005
$695,369.57 0.00 0.00 0.00
$695,369.57

Albany State University Annual Financial Report FY 2005 19

Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $229,171.34.
Albany State University Annual Financial Report FY 2005 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$2,922,365.85
2,922,365.85
12,621,336.00 115,718,423.00
4,317,641.00 5,926,395.82
216,470.19 5,610,015.22
144,410,281.23
1,866,440.00 27,795,931.00 2,725,608.14 3,887,082.30
61,333.22 4,706,717.00
41,043,111.66
103,367,169.57
$106,289,535.42

Additions $0.15 0.15

Reductions $0.00 0.00

Ending Balance 6/30/2005
$2,922,366.00 0.00
2,922,366.00

0.04 315,407.98
38,507.93
353,915.95

75,010.00 75,010.00

12,621,336.00 115,643,413.00
4,317,641.04 6,241,803.80
216,470.19 5,648,523.15
144,689,187.18

217,978.76 3,686,379.63
271,890.61 106,996.24
182,972.00 4,011.68
4,470,228.92
(4,116,312.97)
($4,116,312.82)

13,501.74 (22,191.94)
(8,690.20) 83,700.20 $83,700.20

2,084,418.76 31,468,808.89 3,019,690.69 3,994,078.54
61,333.22 4,889,689.00
4,011.68 45,522,030.78
99,167,156.40
$102,089,522.40

Albany State University Annual Financial Report FY 2005 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $0.00
2,595,590.66 $2,595,590.66

Note 8. Long-Term Liabilities (Debt)

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

1,208,478.83 1,208,478.83

817,112.55 817,112.55

785,312.32 785,312.32

1,240,279.06 1,240,279.06

Total Long Term Obligations

$1,208,478.83

$817,112.55

$785,312.32

$1,240,279.06

Current Portion
$0.00
596,535.42 596,535.42 $596,535.42

Note 9. Significant Commitments
The University did not have significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2005.
Note 10. Lease Obligations
Albany State University's noncancellable operating leases have remaining terms of more than one year expire in various fiscal years from 2006 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.
CAPITAL LEASES
During the 2005 fiscal year, Albany State University did not enter into capital leases.

Albany State University Annual Financial Report FY 2005 22

OPERATING LEASES

Noncancellable operating lease expenditures in 2005 were $509,326.79 for real property.

Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2005, were as follows:

Year Ending June 30:

Operating Leases

2006 2007 2008 Total Minimum Lease Payments

$ 208,006.02 19,767.32 1,398.00
$ 229,171.34

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,407,598.73 $1,411,636.84 $1,505,056.28

Albany State University Annual Financial Report FY 2005 23

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. 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, 2005, for employees covered by ERS was $3,812.56. The University's total payroll for all employees was $24,011,690.51.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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
Albany State University Annual Financial Report FY 2005 24

the year ended June 30, 2005, 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 2005 amounted to $4,498.91, of which $3,844.50 was made by the University and $654.41 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, 2005, 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $530,561.04 (9.65%) and $274,784.78 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Albany State University Annual Financial Report FY 2005 25

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 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 2005 amounted to $47,221.00 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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
Albany State University Annual Financial Report FY 2005 26

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.
Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 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, 2005.
Note 14. 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
Albany State University Annual Financial Report FY 2005 27

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, 2005, there were 162 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Albany State University recognized as incurred $115,664.10 of expenditures, which was net of $50,953.72 of participant contributions.
Albany State University Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$9,360,184.82 3,033,087.68 2,930,761.90
87,439.07 335,149.00 204,425.01 1,718,560.43 4,070,668.22

$63,754.50 126,615.01 18,505.41
2,089.27 4,300.00
138,029.91 2,024.98

$58,206.60 208,160.33 36,192.04
17,090.69 28,235.71 1,137.02 192,258.86

$125,716.50 1,731,940.88
499,678.69
28,474.37
33,048.48 667,184.30 237,426.56

$200.00 1,379,897.62
380,862.74
32,795.16 49,629.00 30,737.62 630,034.36 4,069.44

$288,851.97 4,846,342.35 1,817,313.96
3,120.00 94,266.93 (3,097,292.22) 96,781.01
1,941,682.68 31,776.27

Total Expenses

$21,740,276.13 $355,319.08 $541,281.25 $3,323,469.78 $2,508,225.94 $6,022,842.95

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 1,697,151.55
506,138.15 (617,271.12)
2,882.81
1,310,624.71 114,446.65 84,323.07

$69,516.00 18,586.63 21,782.57
7,516.16 7,265,602.33
32,194.24 52.95

$0.00 1,051,204.53
189,618.64 617,271.13
42,126.30 555,168.28 156,854.93
4,574,428.33 39,887.43

$0.00

$3,098,295.82 $7,415,250.88 $7,226,559.57

$0.00

T ot al Expenses
$9,966,430.39 14,092,986.58
6,400,854.10 3,120.01
314,680.76 5,140,792.10 1,833,608.78 10,008,819.76 4,470,228.92
$52,231,521.40

Albany State University Annual Financial Report FY 2005 29

Note 16. Component Units

Albany State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Albany 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 seven-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 GASB standards, including GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of GASB Statement No. 14. Therefore, there will not be a need to restate these statements in order for them to conform to the accounting convention utilized by the University. The foundation's fiscal year is July 1 through June 30, which is the same as Albany State University's fiscal year.

During the year ended June 30, 2005, the Foundation distributed $1,080,920 to the University, of which $600,408.00 was distributed as scholarships to students. The balance was for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the ASU Foundation at 131 West Oglethrorpe Blvd., Albany, GA 31705.

Investments for Component Units:

Albany State University Foundation holds investments in the amount of $2,538,966. Currently all investments are restricted except for Synovus Trust Company in the amount of $116,302.

In v est men t s:
Common Stock, Bonds and Securities Certificate of Deposit Investments in Real Estate T otal Investments

$1,408,801.00 1,030,165.00 100,000.00
$2,538,966.00

Albany State University Annual Financial Report FY 2005 30

Long Term Liabilities:

Beginning Balance July 1, 2004

Addit io n s

Compensated Absences Liabilities under Split Interest Agreements Other Long T erm Debt

$0.00 1,335,292.00

T otal Long T erm Debt

$1,335,292.00

$0.00 1,181,889.00
$1,181,889.00

Reduct io n s

Ending Balance June 30, 2005

Amounts due within
One Year

$0.00 44,898.00

$0.00 2,472,283.00

$0.00 80,565.00

$44,898.00

$2,472,283.00

$80,565.00

Albany State University Annual Financial Report FY 2005 31

ARMSTRONG ATLANTIC STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

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 2005
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 Deposits and Investments..................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................. 23 Note 11 Retirement Plans .................................................................................................. 24 Note 12 Risk Management................................................................................................. 27 Note 13 Contingencies....................................................................................................... 28 Note 14 Post-Employment Benefits Other Than Pension Benefits ................................... 28 Note 15 Natural Classifications With Functional Classifications...................................... 29 Note 16 Component Units ........................................................................ 30

ARMSTRONG ATLANTIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Armstrong Atlantic State University is located in Savannah, within twenty-five miles of some of Georgia's most beautiful coastline. Since its founding 70 years ago by the city of Savannah, Armstrong Atlantic has become a vibrant 250-acre, urban campus of 7,000 students serving a wider community of nearly 340,000 residents. The university offers programs at two other centers in the coastal Georgia area. It is the lead institution at the Liberty Center in Hinesville an education consortium of two institutions in the University System of Georgia and is a cooperative partner at The Brunswick Center, located at Coastal Georgia Community College. Founded in 1935 as Armstrong Junior College, the institution became a two-year unit of the University System of Georgia in 1959 and a four-year college in 1966. It became Armstrong Atlantic State University in 1996. The University has become known for its state-of-the-art technology-related, health professions, and education programs. The University offers baccalaureate and masters degrees in a wide variety of subjects. The institution continues to grow as shown by the comparison numbers that follow. The student body is 32% - 68% malefemale and a mix of 21/79% non-traditional/traditional students. The average student age is 26. The average SAT for fall 2004 entering freshman was 1025.

Faculty

Students

FY2005 FY2004 FY2003

210

7,008

204

6,653

189

6,026

Overview of the Financial Statements and Financial Analysis

Armstrong Atlantic State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 non-

Armstrong Atlantic State University Annual Financial Report FY 2005 1

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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Net Asse ts

June 30, 2005
$11,104,347.01 54,219,309.02 2,249,928.60 67,573,584.63
7,539,941.53 564,023.57
8,103,965.10
54,219,309.02 2,246,743.17 107,632.40
2,895,934.94 $59,469,619.53

June 30, 2004
$11,436,980.14 48,817,241.12 2,373,504.92 62,627,726.18
8,186,872.93 468,749.59
8,655,622.52
48,817,241.12 2,023,075.79 334,280.48
2,797,506.27 $53,972,103.66

The total assets of the institution increased by $4,945,858.45. A review of the Statement of Net Assets will reveal that the increase was primarily due to a gift of $7.6 million from Educational Properties Foundation, Inc. of land and buildings along with a write-off of $3.4 million in assets as directed by the Regents' directive of April 2005. 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.

Armstrong Atlantic State University Annual Financial Report FY 2005 2

The total liabilities for the year decreased by ($551,657.42). The primary cause for the decrease was a ($1,121,573.04) decrease in deposits held for others. The combination of the increase in total assets of $4,945,858.45 and the decrease in total liabilities of ($551,657.42) yields an increase in total net assets of $5,497,515.87.

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, 2005

June 30, 2004

Operating Revenues

$29,435,342.59

$27,088,789.84

Operating Expenses Operating Loss

58,433,277.45 (28,997,934.86)

54,415,053.47 (27,326,263.63)

Nonoperating Revenues and Expenses

24,938,904.65

25,829,624.07

Income (Loss) Before other revenues, expenses, gains or losses

(4,059,030.21)

(1,496,639.56)

Other revenues, expenses, gains or losses

9,556,546.08

2,251,604.18

Increase in Net Assets

5,497,515.87

754,964.62

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

53,972,103.66 53,972,103.66

53,217,139.04 53,217,139.04

Net Assets at End of Year

$59,469,619.53

$53,972,103.66

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:

Armstrong Atlantic State University Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$14,261,802.87
8,310,689.02 1,401,004.40 5,091,210.97
370,635.33
29,435,342.59
25,743,057.40
510,052.00 238,757.30 (1,552,962.05) 24,938,904.65
1,030,569.45 8,525,976.63 9,556,546.08
$63,930,793.32

June 30, 2004
$13,332,646.14 7,520,741.13 1,225,368.22 4,505,631.77 504,402.58
27,088,789.84
25,678,920.47
171,272.55 (20,568.95) 25,829,624.07
2,251,604.18 2,251,604.18 $55,170,018.09

Armstrong Atlantic State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$24,549,178.06 25,457.23
530,814.19 6,430,867.29 3,289,213.35 5,647,255.75 7,229,188.57 3,313,504.22 4,527,264.90 2,890,533.89
58,433,277.45

June 30, 2004
$26,554,926.98
1,062,911.16 5,719,601.58 3,366,782.63 6,295,561.74 4,131,420.78 3,337,577.50 3,946,271.10
54,415,053.47

Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

$58,433,277.45

$54,415,053.47

Tuition and fees increased by $929,156.73 due to fee increases and enrollment gains. Grants and contracts increased $789.947.89 primarily due to the federal PRISM grant. Auxiliary enterprise revenue increased $585,579.20 primarily due to increased bookstore sales and student parking fees.

Residential life has approximately 700 students 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.

Utilities increased by approximately $357,730.84 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2005.

Public Service's expenses decreased $532,096.97 due to a decreased level of program activity. Plant Operation's expenses increased $3,097,767.79 due to increased utility costs and maintenance upkeep.

Armstrong Atlantic State University Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($25,417,224.92) 25,123,062.01 (857,592.01) 68,509.20 (1,083,245.72) 6,612,076.86
$5,528,831.14

June 30, 2004
($24,110,916.43) 27,653,896.53 63,959.59 221,272.22 3,828,211.91 2,783,864.95
$6,612,076.86

Capital Assets

The university completed one major project in FY2005. A new parking lot costing approximately $1.6M ($1M from university funds, and $.6M from GSFIC) was added.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long-Term Liabilities (Debt)

Armstrong Atlantic State University had total Long-Term Liabilities (debt) of $1,499,989.90 of which $935,966.33 was reflected as current liability at June 30, 2005.

For additional information concerning Long-Term Liabilities (debt) see Notes 1 and 8 in the Notes to the Financial Statements.

Armstrong Atlantic State University Annual Financial Report FY 2005 6

Component Units In compliance with GASB Statement No. 39, Armstrong Atlantic State University has included the financial statements and notes for all required component units for FY2005. The Armstrong Atlantic State University Foundation had endowment investments of $3,287,469 as of December 31, 2004. The EPI Real Estate Foundation had long-term debt of $17,250,000 in the form of two bond issues. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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 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 2005 7

Statement of Net Assets

ARMSTRO NG ATLANTIC STATE UNIVERSITY STATEMENT O F NET ASSETS June 30, 2005

AS S ETS C urre nt Asse ts Cash and Cash Equivalents Short-term Invest ments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Ot her Leases Receivable Pledges Receivable Invent ories Prepaid items Notes and Mortgages Receivable Other Assets T otal Current Assets

Armstrong Atlantic State Unive rsity
$5,528,831.14 550,000.00 770,877.26
3,724,379.32
530,259.29
11,104,347.01

Noncurrent Asse ts Noncurrent Cash Invest ments (including Real Est ate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets, net T otal Noncurrent Assets
TO TAL ASSETS
LIABILITIES C urre nt Liabiliti e s Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposit s Deferred Revenue Other Liabilities Deposits Held for Other Organizations Notes Payable (current portion) Current Portion of Long-term Debt Compensated Absences (current portion) T otal Current Liabilities Noncurre nt Liabili tie s Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Deposit s Liabilities under Split-Interest Agreements Other Long-T erm Liabilities T otal Noncurrent Liabilities TO TAL LIABILITIES
NET AS S ETS Invest ed in Capital Assets, net of related debt Rest ricted for Nonexpendable Expendable Capital Projects Unrest rict ed TO TAL NET ASSETS

2,245,715.60 4,213.00
54,219,309.02 56,469,237.62 67,573,584.63
646,296.21 128,370.27
4,698,687.53 1,130,621.19
935,966.33 7,539,941.53
564,023.57
564,023.57 8,103,965.10
54,219,309.02 2,246,743.17 107,632.40 2,895,934.94
$59,469,619.53

AAS U Fo u n da ti o n
$577,092.00
58,094.00
635,186.00 4,314,908.00
58,480.00 4,373,388.00 5,008,574.00
0.00
0.00 0.00
3,287,469.00 1,625,332.00
95,773.00 $5,008,574.00

EPI Fou n da ti on $523,116.00 1,974,449.00
49,157.00
2,546,722.00
27,163,425.00 27,163,425.00 29,710,147.00
354,856.00
99,307.00
12,532,388.00 450,000.00
13,436,551.00
16,800,000.00 16,800,000.00 30,236,551.00 (2,618,963.00)
2,092,559.00 ($526,404.00)

Armstrong Atlantic State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

ARMSTRO NG ATLANTIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES

Arm s tron g Atlantic State
Un i ve rs i ty

AAS U Fo u n da ti o n

EPI Foundation

Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Armstrong Atlantic State University
T otal Operating Expenses Operating Income (loss)

$16,672,585.33 2,410,782.46

$0.00
327,951.00 53,804.00

$0.00 3,826,329.00

6,886,129.29 262,662.53
1,161,897.20 1,401,004.40

748.55 2,992,028.58
407.75 158,774.00 127,392.02 1,758,378.36
53,481.71 370,635.33 29,435,342.59

381,755.00

3,826,329.00

15,262,987.39 13,585,212.51
6,848,261.68
296,868.73 4,450,232.56 2,716,433.87 11,814,172.57 3,459,108.14
58,433,277.45 (28,997,934.86)

77,195.00
35,642.00
385,392.00 498,229.00 (116,474.00)

281,605.00
351,315.00 1,118,231.00 1,069,324.00 2,820,475.00 1,005,854.00

Armstrong Atlantic State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

ARMSTRO NG ATLANTIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

Arm s tron g Atlantic State
Un i ve rs i ty

AAS U Fo u n da ti o n

EPI Foundation

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal 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

25,743,057.40

510,052.00 238,757.30
(1,552,962.05) 24,938,904.65 (4,059,030.21)

52,891.00
52,891.00 (63,583.00)

(1,459,693.00)
(1,459,693.00) (453,839.00)

1,030,569.45 8,525,976.63
9,556,546.08 5,497,515.87
53,972,103.66

44,616.00 44,616.00 (18,967.00)
5,027,541.00

53,972,103.66 $59,469,619.53

5,027,541.00 $5,008,574.00

0.00 (453,839.00)
(72,565.00)
(72,565.00) ($526,404.00)

Armstrong Atlantic State University Annual Financial Report FY 2005 10

Statement of Cash Flows
ARMS TRONG ATLANTIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$16,538,826.27
8,737,560.89 1,387,771.41 (21,749,777.32) (28,690,023.68) (6,861,015.02)
(857.98) 2,174.98
798.55 2,705,545.41
407.75 158,774.00 154,980.46 1,734,472.04
53,481.71 409,655.61 (25,417,224.92)
25,743,057.40 (1,130,047.39)
510,052.00 25,123,062.01
925,976.63
(1,783,568.64)
(857,592.01)
218,509.20 (150,000.00)
68,509.20 (1,083,245.72) 6,612,076.86 $5,528,831.14

Armstrong Atlantic State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO SS TO NET C ASH PRO VIDED (USED) BY O PERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities
Dep reciat ion Change in Assets and Liabilities:
Receivables, net In v en t ories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (used) by Operating Activities
** NON-CASH INVEST ING, NON-CAPIT AL FINANCING, AND CAPIT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of investments recognized as a component of interest income Gift of capital assets reducing proceeds of capital grants and gifts

($28,997,934.86)
3,459,108.14 (70,283.19) (66,169.93)
(219,761.13) 309,666.14
2,988.72 165,161.19 ($25,417,224.92)
$20,248.30 ($8,630,569.45)

Armstrong Atlantic State University Annual Financial Report FY 2005 12

ARMSTRONG ATLANTIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations Armstrong Atlantic 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 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Armstrong Atlantic State University is reporting the activity for the Educational Properties Incorporated (EPI), and the Armstrong Atlantic State University Foundation.
See Note 16. 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
Armstrong Atlantic State University Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, and the Board of Regents Total Return Fund are included under Investments.
Armstrong Atlantic State University Annual Financial Report FY 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
Educational Properties, Inc. (EPFI) donated $7.6 million in buildings and land to the Board of Regents. The property is known as Armstrong Center. The Board of Regents entered into a ground lease with EPFI for this property for $1 a year for 30 years. AASU entered into a lease with EPFI for the rental of Armstrong Center.
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, 2005, GSFIC transferred capital additions valued at approximately $600,000 to Armstrong Atlantic State University.
Armstrong Atlantic State University Annual Financial Report FY 2005 15

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. Armstrong Atlantic State University had accrued liability for compensated absences in the amount of $1,334,828.71 as of 7-1-2004. For FY2005, $1,071,669.55 was earned in compensated absences and employees were paid $906,508.36, for a net increase of $165,161.19. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $1,499,989.90.
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.
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 previously in Note 1 Capital Assets section.
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.
Armstrong Atlantic State University Annual Financial Report FY 2005 16

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:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $63,621.56 10,702.16 33,308.68
$107,632.40

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 Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s

June 30, 2005
$561,894.52 511,700.68 64,731.58
1,757,608.16 $2,895,934.94

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.

Armstrong Atlantic State University Annual Financial Report FY 2005 17

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:
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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Armstrong Atlantic State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $7,008,298.98 of the university's deposits were uninsured. Of these uninsured deposits, none were collateralized with securities held by the financial institution's trust department or agent in the university's name, $7,008,298.98 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name and none were uncollateralized.
Armstrong Atlantic State University Annual Financial Report FY 2005 19

B. Investments

At June 30, 2005, the carrying value of the university's investment was $2,245,715.60, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$0.00 252,712.21
1,993,003.39
$2,245,715.60

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$528,545.12 775,886.67 770,877.26
2,437,865.22 4,513,174.27
17,917.69
$4,495,256.58

Armstrong Atlantic State University Annual Financial Report FY 2005 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005 $465,266.03
64,993.26 $530,259.29

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program and the Federal Nursing Loan Program comprises substantially all of the loans receivable at June 30, 2005. 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.

Armstrong Atlantic State University Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$258,253.82 2,251,604.18 2,509,858.00

Additions
$4,420,000.00 353,826.30
4,773,826.30

Reductions
$0.00 2,195,627.58 2,195,627.58

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 4,329,437.13
8,601,294.99 10,500.00
72,987,510.69

1,966,837.58 2,770,000.00 2,012,719.78
535,540.01
550,842.00
7,835,939.37

516,583.00 2,589,297.00
326,906.00 491,814.07
378,865.00
4,303,465.07

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

910,669.02 14,735,616.66 1,336,268.24 3,396,271.15
6,298,940.00 2,362.50
26,680,127.57

66,120.39 2,518,594.18
43,633.33 369,807.74
460,690.00 262.50
3,459,108.14

486,548.32 1,127,742.69
265,774.61 491,572.40
378,865.00
2,750,503.02

Total Capital Assets, Being Depreciated, Net

46,307,383.12

4,376,831.23

1,552,962.05

Capital Assets, net

$48,817,241.12

$9,150,657.53

$3,748,589.63

Ending Balance 6/30/2005
$4,678,253.82 409,802.90
5,088,056.72
2,597,714.58 57,518,701.57 3,246,633.78 4,373,163.07
0.00 8,773,271.99
10,500.00 76,519,984.99
490,241.09 16,126,468.15 1,114,126.96 3,274,506.49
0.00 6,380,765.00
2,625.00 27,388,732.69
49,131,252.30
$54,219,309.02

Armstrong Atlantic State University Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $2,860,576.39
1,838,111.14 $4,698,687.53

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

1,334,828.71 1,334,828.71

1,071,669.55 1,071,669.55

906,508.36 906,508.36

1,499,989.90 1,499,989.90

Total Long Term Obligations

$1,334,828.71 $1,071,669.55

$906,508.36

$1,499,989.90

Current Portion
$0.00
935,966.33 935,966.33 $935,966.33

Note 9. Significant Commitments The University had no significant unearned, outstanding, construction or renovation contracts. Note 10. Lease Obligations Armstrong Atlantic State University had no lease obligations for FY2005.

Armstrong Atlantic State University Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,281,526.10 $1,277,277.54 $1,234,346.11

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 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain

Armstrong Atlantic State University Annual Financial Report FY 2005 24

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, 2005, for employees covered by ERS was $82,053.98. The University's total payroll for all employees was $28,769,738.19.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, 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 2005 amounted to $9,809.68, of which $8,578.89 was made by the University and $1,230.79 as 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, 2005, financial report, which may be obtained through ERS.
Armstrong Atlantic State University Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $1,067,327.77 (9.65%) and $553,021.21 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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
Armstrong Atlantic State University Annual Financial Report FY 2005 26

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 2005 amounted to $99,294.05 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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.
Armstrong Atlantic State University Annual Financial Report FY 2005 27

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 144 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Armstrong Atlantic State University recognized as incurred $561,616.16 of expenditures, which was net of $235,886.45 of participant contributions.
Armstrong Atlantic State University Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$14,866,732.61 2,622,485.29 4,032,781.05
161,119.24 157,063.00 153,743.02 2,472,064.55 83,189.30

$0.00 13,380.00
906.36
11,170.87

$32,762.80 286,039.84 62,064.60
5,116.56 7,079.50 2,144.51 130,798.18 4,808.20

$344,691.00 3,431,703.83
882,034.92

$13,125.98 1,912,227.89
449,003.56

66,002.38
161,534.87 1,073,843.09
471,057.20

7,223.71 22,191.00 41,244.04 843,668.00
529.17

$0.00 3,963,562.65 1,033,773.75
57,014.52 282,637.93 113,012.38 174,522.25 22,732.27

Total Expenses

$24,549,178.06

$25,457.23 $530,814.19 $6,430,867.29 $3,289,213.35 $5,647,255.75

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 664,302.04 204,592.22

$0.00

$5,675.00 691,510.97 183,105.22

$0.00

392.32
2,232,014.49 4,153,390.99
(25,503.49)

3,313,504.22

667,756.91 12,740.56
2,954,714.64 11,761.60

2,890,533.89

$7,229,188.57 $3,313,504.22 $4,527,264.90 $2,890,533.89

T ot al Expenses
$15,262,987.39 13,585,212.51 6,848,261.68 0.00 296,868.73 4,450,232.56 2,716,433.87 11,814,172.57 3,459,108.14
$58,433,277.45

Armstrong Atlantic State University Annual Financial Report FY 2005 29

Note 16. Component Units
Armstrong Atlantic State University Foundation, Inc.
Armstrong Atlantic State University Foundation (Foundation), Inc. 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 seven-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. In 2004, Armstrong Atlantic State University Foundation changed its fiscal year-end from June 30 to December 31. As a result, the numbers included herein represent those for the six months ended December 31, 2004. December 31, 2005, Armstrong Atlantic State University will issue audited financial statements for the 18 month period ending December 31, 2005.
During the period ending December 31, 2004, the Foundation distributed $385,392.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Armstrong Atlantic State University.
Investments for Component Units:
Armstrong Atlantic State University Foundation, Inc. holds endowment investments in the amount of $3,287,469. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.
Armstrong Atlantic State University Foundation, Inc. holds no investments in real property.
Armstrong Atlantic State University Annual Financial Report FY 2005 30

Armstrong Atlantic State University Foundation Investments are comprised of the following amounts at December 31, 2004

Cost

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR T otal Return Fund

$0.00 149,745.00 1,765,628.00
2,037,907.00 14,371.00

T otal Investments

$3,967,651.00

Fair Value $0.00
149,745.00 1,779,165.00 2,371,627.00
14,371.00
$4,314,908.00

Educational Properties, Inc.

Educational Properties, Inc. (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 fivemember 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 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. 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.

Education Properties, Inc. (Foundation) hold real estate assets that have been purchased through bonds and bridge financing. The corresponding capital leases and associated long-term debt are included in the University's report. Complete financial statements for the Foundation can be obtained from the Administrative Office at Armstrong Atlantic State University.

Armstrong Atlantic State University Annual Financial Report FY 2005 31

Investments for Component Units:

Educational Properties Foundation, Inc. Investments are comprised of the following amounts at December 31, 2004

Cost

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities - SEE BELOW Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR T otal Return Fund

$1,997,630.00

T otal Investments

$1,997,630.00

Fair Value $1,997,630.00
(23,181.00)
$1,974,449.00

Long Term Liabilities:
Student Housing Bonds are issued by the Educational 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 Armstrong Atlantic State University. The two bond issues are variable interest rate bonds.
Changes in long-term liabilities for component units for the fiscal year ended December 31, 2004 are shown below:

Revenue Bonds Payable Real Estate Foundation Student Housing Res. Instr. & Research
T otal Long Term Debt

Beginning Balance January 1, 2004

Addit io n s

Reduct ion s

Ending Balance December 31, 2004

Amounts due wit h in
One Year

$17,455,000.00

$0.00

$205,000.00

$17,250,000.00 $450,000.00

$17,455,000.00

$0.00

$205,000.00

$17,250,000.00 $450,000.00

Armstrong Atlantic State University Annual Financial Report FY 2005 32

De bt Se rvice O bligations

Annual debt service requirements to maturity for Student Housing (EPI Foundation) revenue bonds payable are as follows:
Bonds Payable

P rincip al

In t erest

T otal

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

$450,000.00 475,000.00 495,000.00 520,000.00 545,000.00
3,165,000.00 4,030,000.00 5,135,000.00 2,435,000.00

$580,280.00 564,773.00 548,470.00 531,435.00 513,556.00
2,971,090.00 984,104.00 532,026.00 58,212.00

$1,030,280.00 1,039,773.00 1,043,470.00 1,051,435.00 1,058,556.00 6,136,090.00 5,014,104.00 5,667,026.00 2,493,212.00

$17,250,000.00 $7,283,946.00 $24,533,946.00

Armstrong Atlantic State University Annual Financial Report FY 2005 33

ATLANTA METROPOLITAN COLLEGE
Financial Report
For the Year Ended June 30, 2005

Atlanta Metropolitan College Atlanta, Georgia

_____________
Harold E. Wade President

___________________________
Freddie L. Johnson Vice President for Fiscal Affairs

ATLANTA METROPOLITAN COLLEGE ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments..................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 19 Note 4 Inventories............................................................................................................ 19 Note 5 Capital Assets....................................................................................................... 20 Note 6 Deferred Revenue................................................................................................. 21 Note 7 Long-Term Liabilities .......................................................................................... 21 Note 8 Retirement Plans .................................................................................................. 21 Note 9 Risk Management................................................................................................. 23 Note 10 Contingencies...................................................................................................... 24 Note 11 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 12 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

FY2005 FY2004 FY2003

67

1,802

77

1,995

92

1,940

Overview of the Financial Statements and Financial Analysis

Atlanta Metropolitan College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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 two 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 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 Asse ts
Li abi li ti e s: Current Liabilit ies Noncurrent Liabilit ies
Total Li abi l i ti e s
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 Asse ts

June 30, 2005 $2,055,832.14 12,992,437.17 15,048,269.31
1,175,639.06 235,278.29
1,410,917.35
12,992,437.17
644,914.79 $13,637,351.96

June 30, 2004 $2,046,237.15 12,859,239.86 14,905,477.01
1,352,325.74 203,428.00
1,555,753.74
12,859,239.86
490,483.41 $13,349,723.27

The total assets of the institution increased by $142,792.30. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $133,197.31 of investment in plant, net of accumulated depreciation. The increase in capital assets was mainly due to the renovations of the Registrar's and Fiscal Affairs offices and the improvements made to the campus entryway. 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 ($144,836.39). The decrease was due in part to a decrease in accounts payable of approximately $57,000. It was a direct result of better management of the payment process. The decrease in liabilities was also due in part to the payoff of the current portion of long-term debt in the amount of $68,449.78 in accordance with the terms of the promissory note.
The combination of the increase in total assets of $142,792.30 and the decrease in total liabilities of ($144,836.39) yields an increase in total net assets of $287,628.69.

Atlanta Metropolitan College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operat ing Revenues
Operat ing Expenses Operat ing Loss
Nonoperat ing Revenues and Expenses
Incom e (Loss) Before ot her revenues, expenses, gains or losses
Ot her revenues, expenses, gains or losses
Increase in Net Asset s
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
Net Asset s at End of Year

$6,447,430.36 15,515,143.60 (9,067,713.24)
8,692,879.96
(374,833.28) 662,461.97 287,628.69 13,349,723.27 13,349,723.27 $13,637,351.96

$6,303,545.29 15,301,546.96 (8,998,001.67)
8,686,522.36
(311,479.31) 730,652.46 419,173.15 12,930,550.12 12,930,550.12 $13,349,723.27

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:

Atlanta Metropolitan College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operat ing Revenue T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s Sales and Services A ux iliar y Ot h er
T ot al Operat ing Revenue
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

$2,139,998.34
2,940,179.55 41,987.05
1,227,811.78 97,453.64
6,447,430.36
7,263,969.85 1,409,051.32
35,300.00 36,429.93 (51,871.14) 8,692,879.96
662,461.97
662,461.97
$15,802,772.29

June 30, 2004
$2,314,699.92 2,842,817.84 100,476.45 983,030.65 62,520.43 6,303,545.29
7,380,482.45 1,288,866.70
304.90 16,868.31 8,686,522.36
730,652.46 730,652.46 $15,720,720.11

Atlanta Metropolitan College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operat ing Expenses Inst ruct ion Research P ublic Service Academic 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, 2005
$4,313,864.97 1,213,353.20 716,193.98 1,607,820.97 2,759,600.09 2,057,270.77 1,607,825.92 1,239,213.70
15,515,143.60
$15,515,143.60

June 30, 2004
$4,579,065.40 2,260.82
1,071,737.19 705,784.04
1,502,929.73 2,800,056.88 1,354,943.07 1,680,850.37
950,299.59 653,619.87
15,301,546.96
$15,301,546.96

In October 2004, the College began operating a cafeteria during breakfast and lunch hours. This service was outsourced in prior years. Cafeteria sales are the primary reason for the increase in Auxiliary revenue. Personnel and operational costs, including start-up costs, required to operate and maintain the campus cafeteria contributed to an increase in overall expenditures for auxiliary enterprises.
The compensation and employee benefits category decreased by approximately ($106,510.94). The decrease was due in part to attrition. As a cost containment measure, the College elected to consolidate, where feasible, the duties of non-critical positions and elected to fill vacancies as funds become available.
Utilities increased by approximately $111,453.99 during the past year. The increase was primarily associated with an increase in water and sewer costs due to the acquisition of additional property. The College also experienced an increase in utility costs due to the rising cost of natural gas.

Atlanta Metropolitan College Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($8,694,636.01) 8,694,808.09 (82,381.84) 36,429.93 (45,779.83) 1,410,346.26
$1,364,566.43

June 30, 2004
($8,251,161.73) 8,677,916.05 (99,566.31) 16,868.31 344,056.32 1,066,289.94
$1,410,346.26

Capital Assets
The College had two significant capital asset additions for facilities in fiscal year 2005. The renovations of the Registrar's Office and the Office of Fiscal Affairs were both completed in February 2005. The Georgia State Finance and Investment Commission (GSFIC) provided approximately $400,000 in funding for these projects.
Atlanta Metropolitan College also continued work on the Campus Entry and Roadway Improvement Project. GSFIC has provided funding of approximately $900,000 to date for this project. Other projects funded by the GSFIC included $93,000 for the HVAC upgrade in the Physical Education building.
For additional information concerning Capital Assets, see Notes 1 and 5, in the notes to the financial statements.

Atlanta Metropolitan College Annual Financial Report FY 2005 6

Long-Term Liabilities (Debt) Atlanta Metropolitan College had total Long-Term Liabilities (Debt) of $518,889.28 of which $283,610.99 was reflected as current liability at June 30, 2005. For additional information concerning Long-Term Liabilities (Debt) see Notes 1 and 7 in the Notes to the Financial Statements. Economic Outlook There is good reason to be optimistic about the overall financial health of the college. Budget reductions, we hope, are a thing of the past and indicators suggest that enrollment for Fall 2005 will generate revenue sufficient to surpass projections. In addition, the college has implemented strategies to achieve efficiencies and there is campus wide understanding that only those purchases deemed to be critical to teaching and learning will escape careful scrutiny. Our biggest concern, in terms of threats to maintaining good fiscal health, is the uncertainty concerning costs associated with utilities in light of current fuel costs. Harold E. Wade, President Atlanta Metropolitan College
Atlanta Metropolitan College Annual Financial Report FY 2005 7

Statement of Net Assets
ATLANTA METRO PO LITAN C O LLEGE S TATEMENT O F NET AS S ETS June 30, 2005
AS S ETS C urre nt Assets Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Invent ories (note 4) P repaid Items Ot her Asset s T ot al Current Asset s
Noncurre nt Assets Noncurrent Cash Invest ment s Not es Receivable, net Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi l i ti e s (n ote 8) Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) and Ot her Noncurrent Liabilit ies Compensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for No n ex p en dable E x p en dable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

June 30, 2005
$1,364,566.43
213,589.63 205,014.43 270,861.65
1,800.00 2,055,832.14
12,992,437.17 12,992,437.17 15,048,269.31
314,106.29 228,273.57
38,813.44
67,503.83 5,463.67
237,867.27 283,610.99 1,175,639.06
235,278.29 235,278.29 1,410,917.35
12,992,437.17
644,914.79 $13,637,351.96

Atlanta Metropolitan College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

ATLANTA METRO PO LITAN C O LLEGE S TATEMENT of REVENUES , EXPENS ES , an d C HANGES i n NET AS S ETS
for th e Ye ar En de d Ju n e 30, 2005

REVENUES

June 30, 2005

Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Federal Appropriat ions Grant s and Cont ract s Federal St at e Other Sales and Services Rents and Royalties Auxiliary Ent erprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Operat ing Revenues T ot al Operat ing Revenues
EXPENS ES Operat ing Expenses
Salaries: Facult y St aff
Ben efit s Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Depreciat ion
T ot al Operat ing Expenses Operat ing Income (loss)

$3,214,483.49 1,074,485.15
2,875,698.24
64,481.31 41,987.05 13,050.00
739,445.18 193,343.60
273,319.65 21,703.35 84,403.64
6,447,430.36
2,705,570.55 5,154,196.36 1,898,729.65
349.87 83,482.16 1,932,140.75 649,089.35 2,479,938.41 611,646.50 15,515,143.60 (9,067,713.24)

Atlanta Metropolitan College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ATLANTA METRO PO LITAN C O LLEG E S TATEMENT of REVENUES , EXPENS ES , an d C H ANG ES i n NET AS S ETS
for th e Ye ar En de d Ju n e 30, 2005
June 30, 2005

NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Ot h er Gift s Invest m ent Incom e (endowm ent s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s Federal St at e Ot h er T ot al Ot her Revenues Increase in Net Asset s
NET AS S ETS Net Asset s-beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s-beginning of year, rest at ed
Net Asset s-End of Year

7,263,969.85
1,390,042.58 19,008.74
35,300.00 36,429.93
(51,871.14) 8,692,879.96 (374,833.28)
662,461.97
662,461.97 287,628.69 13,349,723.27
13,349,723.27 $13,637,351.96

Atlanta Metropolitan College Annual Financial Report FY 2005 10

Statement of Cash Flows
ATLANTA METRO PO LITAN C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005 $2,158,206.75
2,869,900.90 40,168.50
(5,185,128.21) (7,844,287.14) (1,932,140.75)
675,855.51 193,133.28
270,133.95 21,617.56 37,903.64
(8,694,636.01) 7,263,969.85
(13,513.08) 1,444,351.32 8,694,808.09
(82,381.84)
(82,381.84)
36,429.93 36,429.93 (45,779.83) 1,410,346.26 $1,364,566.43

Atlanta Metropolitan College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
D ep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($9,067,713.24)
611,646.50 19,473.71 (75,220.53) 372.00 (70,789.28) (69,333.53) (62,986.11) 19,914.47
($8,694,636.01)
($662,461.97)

Atlanta Metropolitan College Annual Financial Report FY 2005 12

ATLANTA METROPOLITAN COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in 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 FY2005, 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared
Atlanta Metropolitan College Annual Financial Report FY 2005 13

in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 and demand.
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 $5,000.00 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
Atlanta Metropolitan College Annual Financial Report FY 2005 14

improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $662,461.97 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 $498,974.81 as of 7-1-2004. For FY2005, $360,704.87 was earned in compensated absences and employees were paid $340,790.40, for a net increase of $19,914.47. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $518,889.28.
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 previously in Note 1 Capital Assets section.
Atlanta Metropolitan College Annual Financial Report FY 2005 15

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 Reserv e fo r E n cum bran ces Reserve for Invent ory Ot her Unrest rict ed T o t al U nrest rict ed Net Asset s

June 30, 2005
$ 0 .0 0 7 4 0 ,5 1 1 .8 2
4 8 ,6 5 2 .6 3 (1 4 4 ,2 4 9 .6 6 ) $ 6 4 4 ,9 1 4 .7 9

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, and (3) most Federal, state and local grants and contracts and Federal appropriations.

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.

Atlanta Metropolitan College Annual Financial Report FY 2005 16

Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Atlanta Metropolitan College Annual Financial Report FY 2005 17

Note 2. Deposits and Investments The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $1,596,491.44 of the college's deposits were uninsured. Of these uninsured deposits, all were uncollateralized.
Atlanta Metropolitan College Annual Financial Report FY 2005 18

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$141,091.92 5,860.97
213,589.63
75,825.04 436,367.56
17,763.50
$418,604.06

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Other
T otal

June 30, 2005
$208,788.67 9,750.97
52,322.01 $270,861.65

Atlanta Metropolitan College Annual Financial Report FY 2005 19

Note 5. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress
T ot al Capit al Asset s Not Being Depreciat ed

Beginning Balance s 7 /1 /2 0 0 4
$2,378,220.83 30,000.00
2,408,220.83

Addition s

Re ductions

$169,878.17 169,878.17

$0.00 30,000.00 30,000.00

En di n g B al an ce 6/30/2005
$2,548,099.00 0.00
2,548,099.00

Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Other Improvement s E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed

15,069,000.00 863,547.00
2,557,569.92
1,932,148.85
20,422,265.77

522,583.80 74,642.80 7,739.04
604,965.64

15,591,583.80 863,547.00
2,632,212.72 0.00
1,939,887.89 0.00
21,027,231.41

Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Other improvement s E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion

5,935,329.37 555,079.46
1,780,626.91
1,700,211.00
9,971,246.74

361,639.44 33,195.73
163,767.33
53,044.00
611,646.50

6,296,968.81 588,275.19
1,944,394.24 0.00
1,753,255.00 0.00
10,582,893.24

T ot al Capit al Asset s, Being Depreciat ed, Net 10,451,019.03

(6,680.86)

10,444,338.17

Capit al Asset s, net

$12,859,239.86

$163,197.31 $30,000.00

$12,992,437.17

Atlanta Metropolitan College Annual Financial Report FY 2005 20

Note 6. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $0.00
67,503.83 $67,503.83

Note 7. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Le as e s Lease Obligations
O ther Liabilities US Dept. of Education Settlement Compensated Absences T ot al

Beginning B al an ce
July 1, 2004
$0.00

Addi ti on s $0.00

Re du cti on s

En di n g B al an ce June 30, 2005

$0.00

$0.00

C u rre n t Porti on
$0.00

68,449.78 498,974.81 567,424.59

360,704.87 360,704.87

68,449.78 340,790.40 409,240.18

518,889.28 518,889.28

0.00 283,610.99 283,610.99

Total Long Term O bligations

$567,424.59

$360,704.87

$409,240.18

$518,889.28 $283,610.99

Note 8. 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 TRS offices or 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
Atlanta Metropolitan College Annual Financial Report FY 2005 21

accordance with State statute and as advised by their independent actuary. For fiscal year 2005, 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

2005 2004 2003

100% 100% 100%

$ 566,522.82 $ 570,996.52 $ 557,061.80

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $81,849.50 (9.65%) and $42,409.97 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.

Atlanta Metropolitan College Annual Financial Report FY 2005 22

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 2005 amounted to $33,341.34 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 9. 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 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
Atlanta Metropolitan College Annual Financial Report FY 2005 23

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 10. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 11. 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
Atlanta Metropolitan College Annual Financial Report FY 2005 24

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, 2005, there were 48 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Atlanta Metropolitan College recognized as incurred $151,395.96 of expenditures, which was net of $65,595.36 of participant contributions.
Atlanta Metropolitan College Annual Financial Report FY 2005 25

Note 12. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$2,701,055.25 548,486.68 746,032.49
10,364.82 24,135.00 45,584.35 211,582.61 26,623.77

$0.00

$0.00 660,609.24 144,255.92
19,613.26 64,557.08 6,817.16 315,291.63 2,208.91

$0.00 439,888.71 103,000.45
5,337.65
28,479.52 82,284.60 57,203.05

0.00 1,110,983.11
269,064.21 349.87
23,636.62 43,306.72 30,272.76
123,689.25 6,518.43

$4,515.30 1,443,566.41
385,303.29
21,558.06 90,001.30 40,235.22 692,710.62 81,709.89

Total Expenses

$4,313,864.97

$0.00 $1,213,353.20 $716,193.98 $1,607,820.97 $2,759,600.09

Natural Classification
Facult y St aff Ben efit s Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Others Services Dep reciat io n
T otal Expenses

P lan t Op erat io n s & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary En t erp rises

Un allo cat ed Expenses

T otal Expenses

$0.00 644,159.76 201,020.05
1,884.21
486,154.91 287,401.36 436,650.48

$0.00 1,607,825.92

$0.00 306,502.45
50,053.24
1,087.54 102,314.73
11,545.43 766,978.34
731.97

$0.00

$2,705,570.55 5,154,196.36 1,898,729.65 349.87 83,482.16 1,932,140.75 649,089.35
2,479,938.41 611,646.50

$2,057,270.77 $1,607,825.92 $1,239,213.70

$0.00 $15,515,143.60

Atlanta Metropolitan College Annual Financial Report FY 2005 26

AUGUSTA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

AUGUSTA STATE UNIVERSITY Augusta, Georgia

William A. Bloodworth, Jr
President

N. Dan Whitfield
Vice President for Business Operations

AUGUSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments..................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 24 Note 11 Retirement Plans ................................................................................................. 25 Note 12 Risk Management................................................................................................ 27 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units ........................................................................ 30

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.

Faculty

Students

FY2005 FY2004 FY2003

213

6,368

204

6,135

203

5,909

Overview of the Financial Statements and Financial Analysis

Augusta State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 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.

Augusta State University Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts

June 30, 2005
$9,457,216.11 72,334,791.91
1,338,532.23 83,130,540.25

June 30, 2004
$11,967,078.29 51,548,517.25 1,250,034.64 64,765,630.18

Liabilitie s: Current Liabilities Noncurrent Liabilities

4,813,603.24 985,949.48

7,777,137.16 505,576.70

Total Liabilitie s

5,799,552.72

8,282,713.86

Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

71,924,518.83 307,215.06
1,410,737.41
3,688,516.23 $77,330,987.53

51,548,517.25 14,231.02
1,784,075.86
3,136,092.19 $56,482,916.32

The total assets of the institution increased by $18,364,910.07. The increase was primarily in Capital Assets, up $20,786,274.66 from the addition of University Hall, a new academic building that opened in Fall semester 2004. Current Assets declined by $2,509,862.18 as a result of an accounting policy change to exclude revenue associated with early registration for Fall semester of the ensuing fiscal year. This accounting change also explains the decreased amount of Current Liabilities.

Total Net Assets increased $20,848,071.21 primarily from the addition of University Hall. Capital Assets represent 93 percent of the 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

Augusta State University Annual Financial Report FY 2005 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

June 30, 2005

June 30, 2004

Operating Revenues

$24,933,094.94

$22,823,736.81

Operating Expenses Operating Loss

51,575,471.58 (26,642,376.64)

47,564,780.57 (24,741,043.76)

Nonoperating Revenues and Expenses

25,494,988.16

24,267,075.10

Income (Loss) Before other revenues, expenses, gains or losses

(1,147,388.48)

(473,968.66)

Other revenues, expenses, gains or losses

21,995,459.69

952,913.40

Increase in Net Assets

20,848,071.21

478,944.74

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

56,482,916.32 56,482,916.32

56,003,971.58 56,003,971.58

Net Assets at End of Year

$77,330,987.53

$56,482,916.32

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:

Augusta State University Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

June 30, 2004

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er

$12,302,962.67
6,971,406.02 676,714.22
4,750,695.50 231,316.53

$11,307,523.52
6,794,815.83 58,814.05
4,414,759.28 247,824.13

T otal Operating Revenue

24,933,094.94

22,823,736.81

Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue

23,676,467.24 469,292.09
1,467,807.54 147,956.15 (266,534.86)
25,494,988.16

23,085,480.00 461,869.84 450,462.27 92,980.78 176,282.21
24,267,075.10

Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

21,570,141.27 425,318.42
21,995,459.69
$72,423,542.79

930,772.07 22,141.33
952,913.40
$48,043,725.31

Operating Revenues increased by $2,109,358.13, or nine percent. Tuition and Fee revenue was up $995,439.15, or nine percent, from a five percent increase in tuition rates and from higher enrollment. The increase in Sales and Services reflects an accounting reclassification of certain items previously included in Other Nonoperating Revenue.

Nonoperating Revenue was up $1,177,606.26 or five percent as Gifts increased by $1,017,345.27. The increase in Gifts reflects the funding received for non-capital furnishings and equipment for the new University Hall. State Appropriations increased $590,987.24 or 2.6 percent.

Capital Gifts and Grants increased substantially from the addition of the new classroom building, University Hall. The increase in Other Capital Gifts and Grants was due to foundation funding received to cover initial expenditures made by the University for the new Student Activities Center Project.

Augusta State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$19,904,870.18 91,211.03
351,747.69 5,723,785.78 3,075,857.29 5,798,253.18 8,592,949.43 3,692,624.42 4,364,026.75
(19,854.17)
51,575,471.58

June 30, 2004
$18,672,885.55 101,238.75 380,117.72
4,987,396.74 2,911,724.02 5,958,824.75 6,775,309.47 3,448,540.58 4,328,742.99
47,564,780.57

Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

$51,575,471.58

$47,564,780.57

The University's Total Operating Expenses, as shown above, increased by $4,010,691.01, or eight percent. The increase was due equally to increased operating expenses and to higher project spending. Total compensation, including employee benefits, increased by $1,041,364.70, or 3.5 percent, over last year. This increase reflects a two percent salary increase and additional faculty positions. These factors were the primary reasons for the seven percent increase in Instruction expense.

Academic Support expenses rose by $736,389.04, or 15 percent, from increased library funding, the filling of two vacant dean positions, and other academic initiatives. Institutional Support expenses decreased by $160,571.57, or three percent, primarily due to credits received towards health care premiums.

The higher project spending is the major reason for the increase shown in Plant Operations and Maintenance. The project spending was associated with non-capital expenses for University Hall and other non-capital projects. Excluding the project work, Plant Operations expense was up 6 percent due to higher utility costs and increased labor rates. Utility expense increased $223.039.23, or 13 percent, primarily due to higher electricity rates.

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 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.

Augusta State University Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($24,154,327.25) 25,907,136.13 (1,160,084.15) 54,024.62 646,749.35 5,917,257.98
$6,564,007.33

June 30, 2004
($21,304,555.96) 24,256,618.27 (1,443,715.29) 78,109.29 1,586,456.31 4,330,801.67
$5,917,257.98

Capital Assets

The University had one significant capital asset addition in fiscal year 2005 which was the opening of University Hall, a new 112,500 square foot classroom building. University Hall was the third new academic building on campus in the last five years. As a result of these new, stateof-the-art facilities, six former classroom buildings (modified arsenal facilities) were demolished.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long-Term Debt

Augusta State University had a total Long-Term Debt of $1,640,910.38 of which $654,960.90 was reflected as current liability at June 30, 2005.

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, Augusta State University has included the financial statements and notes for all required component units for FY2005. 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 16, Component Units.

Augusta State University Annual Financial Report FY 2005 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 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 2005 7

Statement of Net Assets

AUGUSTA STATE UNIVERSITY
S TATEMENT OF NET AS S ETS June 30, 2005
Augus ta State Univers ity

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Federal Financial As s is tance Receivables - State General Appropriations Allotment Receivables - Other Due from Component Unit Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other Assets Total Current As s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital As s ets , net Total Noncurrent As s ets
TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Due to Primary Government Current Portion of Long-term Debt Compens ated Abs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated Abs ences (noncurrent) Depos its Liabilities under Split-Interes t Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS
Inves ted in Capital As s ets , net of related debt Res tricted for
No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted TOTAL NET AS S ETS

$6,550,007.33
119,768.94 1,044,326.65
1,450.90
507,839.22 1,233,823.07
9,457,216.11
14,000.00 392,658.41 931,873.82
72,334,791.91 73,673,324.14 83,130,540.25
513,502.27 162,755.05
41,571.27 1,543.76
3,046,943.00 392,326.99
654,960.90 4,813,603.24
399,748.91 586,200.57
985,949.48 5,799,552.72
71,924,518.83 307,215.06
1,410,737.41 3,688,516.23 $77,330,987.53

Augus ta State Univers ity Foundation

Augus ta State Univers ity Athletic
As s ociation

$16,401,839.00

$290,130.00

48,131.00
250,563.00
35,500.00 852,409.00 17,588,442.00
12,838,311.00 1,509,195.00 684,167.00
15,706,558.00 30,738,231.00 48,326,673.00
222,169.10
1,155.00
1,450.90 35,500.00 260,275.00

6,488.00
2,847.00 5,599.00 305,064.00
2,080,565.00 2,080,565.00 2,385,629.00
174,030.00 4,724.00
16,142.00
13,450.00 208,346.00

32,361,713.00 32,361,713.00 32,621,988.00
268,804.00
11,376,055.00 1,265,443.00
2,794,383.00 $15,704,685.00

1,558,658.00 1,558,658.00 1,767,004.00
508,457.00
110,168.00 $618,625.00

Augusta State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

REVENUES

AUGUSTA STATE UNIVERSITY
S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2005

Augusta State Univers ity

Augusta State Univers ity Foundation

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks t o re Food Services Parkin g /Tran s p o rtat io n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXP ENS ES Operating Expenses
Salaries : Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Augusta State University
Total Operating Expenses Operating Income (loss)

$15,367,540.10 3,064,577.43
6,889,140.83 23,851.67 58,413.52 676,714.22 74,133.35
2,889,125.52
153,298.08
1,642,013.52 66,258.38 157,183.18
24,933,094.94

$0.00 1,343,613.00
412,730.00
1,756,343.00

13,837,023.84 12,544,722.21 6,499,363.37
3,144.00 252,231.33 4,491,695.87 1,778,091.20 9,502,996.02 2,666,203.74
51,575,471.58 (26,642,376.64)

11,897.00
57,592.00 1,013,163.00 1,082,652.00
673,691.00

Augusta State University Athletic
As s ociation $0.00
875,671.00 875,671.00
445,236.00 10,490.00
353,709.00 167,280.00 976,715.00 (101,044.00)

Augusta State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

AUGUSTA STATE UNIVERSITY
S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2005

Augusta State Univers ity

Augusta State Univers ity Foundation

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Other Gift s 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 St at e Other Additions to permanent endowments T otal 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

23,676,467.24

1,724.09 467,568.00 1,467,807.54 147,956.15
(266,534.86) 25,494,988.16 (1,147,388.48)

360,056.00 (35,864.00)
324,192.00 997,883.00

21,570,141.27 425,318.42
21,995,459.69 20,848,071.21

515,168.00 515,168.00 1,513,051.00

56,482,916.32

14,191,634.00

56,482,916.32 $77,330,987.53

14,191,634.00 $15,704,685.00

Augusta State University Athletic
As s ociation
2,511.00 (67,356.00) 38,036.00 (26,809.00) (127,853.00)
0.00 (127,853.00) 746,478.00 746,478.00 $618,625.00

Augusta State University Annual Financial Report FY 2005 10

Statement of Cash Flows

AUGUSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005

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 Scholars hips and Fellows hips Loans Is sued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterprise Charges: Res idence Halls Books tore Food Services Parkin g / Tran s p o rt at io n 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 A gency Funds Trans actions 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 As sets Purchases of Capital As sets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interes t on Investments Purchase of Inves tments Net Cas h Provided (used) by Inves ting Activities Net Increase/Decrease in Cash Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$15,444,793.56
6,575,918.71 544,762.98
(19,086,459.07) (26,313,747.09)
(7,556,273.30) (321,098.46) 326,301.38
2,878,384.51
150,349.19
1,636,037.62 67,044.68
1,499,658.04 (24,154,327.25)
23,676,467.24 1,698.85
2,228,970.04 25,907,136.13
1,610,751.85
(2,770,836.00)
(1,160,084.15)
6,068.47 147,956.15 (100,000.00) 54,024.62 646,749.35 5,917,257.98 $6,564,007.33

Augusta State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Fixed asset s acquired by incurring capit al lease obligat ions Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($26,642,376.64)
2,666,203.74 (553,987.43)
6,641.72 42,589.27 (10,533.07) 310,418.49 (41,685.13) 68,401.80 ($24,154,327.25)
$399,748.91 ($21,570,141.27)

Augusta State University Annual Financial Report FY 2005 12

AUGUSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Augusta State University is reporting the activity for the Augusta State University Foundation, and the Augusta State University Athletic Association.
See Note 16. Component Units, for foundation notes.
Augusta State University Annual Financial Report FY 2005 13

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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 2005 14

reported as a component of investment income in the Statement 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $20,563,493.96 to Augusta State University.
Augusta State University Annual Financial Report FY 2005 15

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 $1,172,759.67 as of 7-1-2004. For FY2005, $2,209,676.81 was earned in compensated absences and employees were paid $2,141,275.01 for a net increase of $68,401.81. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $1,241,161.47.
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 previously in Note 1 Capital Assets section.
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 2005 16

Expendable Restricted Net Assets include the following:

June 30, 2005

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

$293,543.58 880,097.14 237,096.69
$1,410,737.41

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 Reserv e fo r En cum bran ces Reserv e fo r Inv en t ory Ot h er Unrest rict ed T o t al Unrest rict ed Net Asset s

June 30, 2005
$ 6 4 9 ,5 6 7 .1 4 2 ,1 4 1 ,9 2 9 .7 8
3 5 ,1 2 4 .0 4 861,895.27 $ 3 ,6 8 8 ,5 1 6 .2 3

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.
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:

Augusta State University Annual Financial Report FY 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Augusta State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $3,312,655.83 of the university's deposits were uninsured. Of these uninsured deposits, $3,312,655.83 were collateralized with securities held by the financial institution's trust department or agent in the University's name.
Augusta State University Annual Financial Report FY 2005 19

B. Investments

At June 30, 2005, the carrying value of the university's investment was $3,736,961.02, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and/or Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool
Board of Regents Balanced Income Fund Short-Term Fund Total Return Fund
Office of Treasury and Fis cal Services Georgia Fund 1

$0.00 3,259,507.44
392,658.41 3,652,165.85
84,795.17 84,795.17
$3,736,961.02

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$364,402.86 260,133.28 119,768.94
581,895.63 1,326,200.71
162,105.12
$1,164,095.59

Augusta State University Annual Financial Report FY 2005 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005
$15,134.21
26,884.13 465,820.88 $507,839.22

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was $0.

Augusta State University Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$2,152,770.49 496,638.63
2,649,409.12

Additions
$3,263,733.56 2,333,117.69 5,596,851.25

Reductions
$0.00 1,875,113.99 1,875,113.99

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,792,483.12 55,824,491.65 3,805,993.83 5,705,076.45
7,162,528.20 75,006.00
74,365,579.25

16,384,239.19 1,806,639.27 1,533,789.47
399,748.91 139,432.59
20,263,849.43

2,861,000.00 238,250.00 38,162.00
18,631.00
3,156,043.00

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

215,351.27 13,827,218.56 1,240,082.35 4,161,221.94
6,022,597.00
25,466,471.12

71,240.26 1,554,520.83
188,592.76 527,672.71 59,962.18 264,215.00
2,666,203.74

2,528,418.79 37,722.92 38,162.00
18,631.00
2,622,934.71

Total Capital Assets, Being Depreciated, Net

48,899,108.13

17,597,645.69

533,108.29

Capital Assets, net

$51,548,517.25

$23,194,496.94

$2,408,222.28

Ending Balance 6/30/2005
$5,416,504.05 954,642.33
6,371,146.38
1,792,483.12 69,347,730.84 5,374,383.10 7,200,703.92
399,748.91 7,283,329.79
75,006.00 91,473,385.68
286,591.53 12,853,320.60 1,390,952.19 4,650,732.65
59,962.18 6,268,181.00
0.00 25,509,740.15
65,963,645.53
$72,334,791.91

Augusta State University Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $2,938,324.46
108,618.54 $3,046,943.00

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$0.00

Additions $399,748.91

Reductions

Ending Balance June 30, 2005

$0.00

$399,748.91

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

1,172,759.67 1,172,759.67

2,209,676.81 2,209,676.81

2,141,275.01 2,141,275.01

1,241,161.47 1,241,161.47

Total Long Term Obligations

$1,172,759.67 $2,609,425.72

$2,141,275.01

$1,640,910.38

Current Portion
$0.00
654,960.90 654,960.90 $654,960.90

Note 9. Significant Commitments None.

Augusta State University Annual Financial Report FY 2005 23

Note 10. Lease Obligations

Capital Leases

Augusta State University has an installment purchase agreement for audio/visual equipment with an outstanding balance as of June 30, 2005 of $399,748.91.

Year Ending June 30: 2006 2007 2008 2009 2010 2011 t hrough 2015 2016 t hrough 2020 2021 t hrough 2025 2026 t hrough 2030 2031 t hrough 2035 2036 t hrough 2040 2041 t hrough 2045 T ot al m inim um lease paym ent s
Less: Int erest Less: Execut ory cost s (if paid) P rincipal Out st anding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Real P roperty

Capit al Leases

Operat ing Leases

$202,994.99 196,753.92

399,748.91 $399,748.91

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 2005 24

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,271,793.79 $1,262,302.30 $1,290,111.42

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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.

Augusta State University Annual Financial Report FY 2005 25

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 accordance with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $978,850.34 (9.65%) and $507,261.88 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $62,538.04 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Augusta State University Annual Financial Report FY 2005 26

Note 12. 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 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. 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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.
Augusta State University Annual Financial Report FY 2005 27

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, 2005. Note 14. 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, 2005, there were 142 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Augusta State University recognized as incurred $557,576.70 of expenditures, which was net of $181,103.42 of participant contributions.
Augusta State University Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$13,797,399.36 1,284,362.77 3,303,661.45
85,269.76 75,210.06 115,397.49 1,018,251.21 225,318.08

$10,436.76 45,768.83 1,012.64
23,708.49 33.75 280.81
9,969.75

$0.00 132,236.32 31,367.88
3,682.44 183,358.73
1,102.32

$8,704.00 2,916,039.02
680,719.19
39,854.55 1,688.02 44,258.69 1,609,476.80 423,045.51

$1,110.00 1,718,109.18
445,813.62
32,436.68 52,343.54 51,312.11 759,689.10 15,043.06

$19,373.72 3,398,095.64 1,111,345.31
3,144.00 21,466.13 208,175.02 59,700.19
844,744.05 132,209.12

Total Expenses

$19,904,870.18

$91,211.03 $351,747.69 $5,723,785.78 $3,075,857.29 $5,798,253.18

Natural Classification
Faculty St aff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operat ions & Maintenance
$0.00 2,217,501.09
691,968.43 (72,736.79)
5,225.62
1,473,361.41 2,392,222.00 1,885,407.67
$8,592,949.43

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 1,651.75
3,690,972.67

$0.00 830,957.61 233,474.85
72,736.79 44,270.10 463,272.81 30,098.06
2,685,284.38 3,932.15

$0.00 (19,854.17)

$3,692,624.42 $4,364,026.75 ($19,854.17)

T ot al Expenses
$13,837,023.84 12,544,722.21 6,499,363.37 3,144.00 252,231.33 4,491,695.87 1,778,091.20 9,502,996.02 2,666,203.74
$51,575,471.58

Augusta State University Annual Financial Report FY 2005 29

Note 16. Component Units
Augusta State University Foundation, Inc.
Augusta State University Foundation, Inc. (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 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 the single member owner of two limited liability companies, ASU Jaguar Student Housing I, LLC and ASU Jaguar Student Center, LLC. ASU Jaguar Student Housing I, LLC is a limited liability company organized for the purpose of constructing and holding an apartment complex for the benefit of students attending Augusta State University. ASU Jaguar Student Center, LLC is a limited liability company organized for the purpose of constructing and holding the student center property located on the campus of the University for the benefit of students attending the school. The financial statements include the accounts of the Foundation and its wholly-owned limited liability companies. All significant intercompany accounts and transactions are eliminated in consolidation.
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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $1,013,163.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 2500 Walton Way.
Investments for Component Units:
Augusta State University Foundation holds endowment investments in the amount of $12,818,311. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.
Augusta State University Foundation also holds investments in real property valued at $20,000.
Augusta State University Annual Financial Report FY 2005 30

Augusta State University Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00
833,696.00 1,091,100.00 7,149,935.00 2,790,014.00

$0.00
843,043.00 1,087,733.00 7,926,057.00 2,961,477.00
20,000.00

Total Investments

$11,864,745.00

$12,838,310.00

Long Term Liabilities:
Series 2004 Bonds Payable Augusta State University Jaguar Student Housing I, LLC issued revenue bonds, Series 2004, dated August 1, 2004 due in annual installments of $85,000 to $1,445,000 due through February 1, 2035 with interest at 5% to 5.375%. The bonds are secured by a deed on the University Village Apartments.
Series 2005 Bonds Payable Augusta State University Jaguar Student Center, LLC issued revenue bonds, Series 2005, dated February 1, 2005, due in annual installments of $170,000 to $705,000 due through July 1, 2034 with interest at 3.25 to 5%.
Other Long Term Debt On April 23, 2003, the Foundation entered into a construction loan in the amount of $1,250,000 and increased the loan to $1,600,000 on November 10, 2003. The loan was for real estate improvements at the Forest Hills Golf Club for the benefit of the Augusta State University Athletic Association. The note carries a variable interest rate of LIBOR plus 1.20% (4.705% at June 30, 2005). The loan is secured by the Foundation's investment account with Georgia Bank and Trust.

Augusta State University Annual Financial Report FY 2005 31

Long-term liability activity for the year ended June 30, 2005 was as follows:

Long Term Liabilities

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

Series 2004 Bonds payable Series 2005 Bonds payable Premium on Bonds payable Other Long Term Debt
Total Long Term Debt

$0.00
1,493,332.00 $1,493,332.00

$19,515,000.00 11,145,000.00
192,518.00 15,863.00
$30,868,381.00

$0.00

$19,515,000.00

11,145,000.00

192,518.00

1,509,195.00

$0.00

$32,361,713.00

$0.00
35,500.00 $35,500.00

Debt Service Obligations:
Annual debt service requirements to maturity for Student Housing Revenue Bonds, Series 2004 (ASU Jaguar Student Housing I,LLC) bonds payable are as follows:

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Bonds Payable

Principal

Interest

$0.00 85,000.00 85,000.00 90,000.00 155,000.00 1,340,000.00 2,280,000.00 3,870,000.00 5,065,000.00 6,545,000.00

$1,011,020.00 1,011,020.00 1,007,578.00 1,003,838.00
999,563.00 3,849,713.00 4,447,013.00 3,704,719.00 2,543,363.00 2,065,748.00

$19,515,000.00

$21,643,575.00

Total
$1,011,020.00 1,096,020.00 1,092,578.00 1,093,838.00 1,154,563.00 5,189,713.00 6,727,013.00 7,574,719.00 7,608,363.00 8,610,748.00
$41,158,575.00

Augusta State University Annual Financial Report FY 2005 32

Annual debt service requirements to maturity for Educational Facilities Revenue Bonds, Series 2005 (ASU Jaguar Student Center, LLC) bonds payable are as follows:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Principal
$0.00 170,000.00 170,000.00 175,000.00 200,000.00 1,350,000.00 1,710,000.00 2,095,000.00 2,645,000.00 2,630,000.00

Interest
$503,864.00 503,864.00 497,149.00 489,924.00 484,236.00 2,293,806.00 1,996,956.00 1,612,975.00 1,067,000.00 336,750.00

Total
$503,864.00 673,864.00 667,149.00 664,924.00 684,236.00 3,643,806.00 3,706,956.00 3,707,975.00 3,712,000.00 2,966,750.00

$11,145,000.00

$9,786,524.00

$17,964,774.00

Annual debt service requirements to maturity for construction loan (Augusta State University Foundation) are as follows:

P r inc ipal

Interest

Total

Year Ending June 30: Year

2006

1

$35,500.00

$82,080.00

$117,580.00

2007

2

142,000.00

64,079.00

206,079.00

2008

3

142,000.00

67,984.00

209,984.00

2009

4

142,000.00

64,426.00

206,426.00

2010

5

142,000.00

60,696.00

202,696.00

2011 through 2015

6-10

941,195.00

56,787.00

997,982.00

2016 through 2020

11-15

2021 through 2025

16-20

2026 through 2030

21-25

2031 through 2035

26-30

2036 through 2040

31-35

2041 through 2045

36-40

$1,544,695.00

$396,052.00

$1,940,747.00

Augusta State University Annual Financial Report FY 2005 33

Augusta State University Athletic Foundation (Association)
Augusta State University Athletic Foundation (Association) is a legally separate, tax-exempt component unit of Augusta State University (University). The Association is a nonprofit organization that promotes the educational, athletic, and physical education programs of the University. The Association leases Forest Hills Golf Club (the "Club"), an 18-hole golf course, from the Board of Regents of the University System of Georgia for a nominal fee. The Association in turn has entered into a management agreement with the Augusta Golf Association, Inc. (the "AGA") to manage, operate and maintain Forest Hills Golf Club. The income of the Association is solely derived from the revenues of the Golf Club and interest income. Because the resources held by the Association can only be used by, or for the benefit of, the University, the Association is considered a component unit of the University and is discretely presented in the University's financial statements.
The Association 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Association's fiscal year is July 1 through June 30.
Complete financial statements for the Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, Georgia 30904-2200.
Long Term Liabilities:
Two term notes, bearing no interest, due in monthly payments of $1,035 through 2008, secured by equipment. Note payable to ASU Foundation dated May 24, 2005 in the original amount of $1,544,695 secured by first priority security interest. Note is payable in quarterly installments of interest only through May 2006, then in consecutive quarterly payments equal to $35,500, plus accrued interest at the LIBOR rate plus 1.2% commencing on August 24, 2006 and continuing on the same day each third month thereafter, with the total remaining balance due May 24, 2011.
Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Athletic Association Athletic Facilities
Total Long Term Debt

Beginning Balance July 1, 2004

Additions

Reductions

Ending Amounts due

Balance

within

June 30, 2005 One Year

$1,586,665.00 $1,586,665.00

$0.00

$14,557.00

$1,572,108.00

$13,450.00

$0.00

$14,557.00

$1,572,108.00

$13,450.00

Augusta State University Annual Financial Report FY 2005 34

Debt Service Obligations:

Annual debt service requirements to maturity for Athletic Facilities (Athletic Association) revenue bonds payable are as follows:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Principal
$13,450.00 154,416.00 143,547.00 142,000.00 142,000.00 976,695.00

Interest
$77,300.00 74,600.00 67,500.00 60,400.00 53,300.00 45,996.00

Total
$90,750.00 229,016.00 211,047.00 202,400.00 195,300.00 1,022,691.00

$1,572,108.00

$379,096.00

$1,951,204.00

Augusta State University Annual Financial Report FY 2005 35

BAINBRIDGE COLLEGE
Financial Report
For the Year Ended June 30, 2005

BAINBRIDGE COLLEGE Bainbridge, Georgia

Dr. Thomas Wilkerson, President

Natalie Higley, Vice President for Fiscal Affairs (Acting)

BAINBRIDGE COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments..................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 21 Note 5 Notes/Loans Receivable....................................................................................... 21 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 23 Note 8 Long-Term Liabilities .......................................................................................... 23 Note 9 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 25 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28 Note 16 Component Units ........................................................................ 29

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

Students

FY2005 FY2004 FY2003

135

2,620

126

2,354

116

1,929

Overview of the Financial Statements and Financial Analysis

Bainbridge College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$3,375,783.16 4,692,632.50 3,846.69 8,072,262.35

June 30, 2004
$3,485,940.68 4,240,579.65 577,792.63 8,304,312.96

Liabilities : Current Liabilities Noncurrent Liabilities

1,752,620.38 135,071.49

2,109,380.09 84,429.91

Total Liabilities

1,887,691.87

2,193,810.00

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

4,692,632.50 544,333.43 166,240.28
781,364.27 $6,184,570.48

4,240,579.65 476,076.27 152,987.66
1,240,859.38 $6,110,502.96

The total assets of the institution decreased by ($232,050.61). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease in accounts receivable due to greater efforts in the collections of past due 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 and public service missions of the institution.
The total liabilities for the year decreased by ($306,118.13). The primary cause for the decrease was in current liabilities, primarily ($611,672.58) in deferred revenue. The combination of the decrease in total assets of ($232,050.61) and the decrease in total liabilities of ($306,118.13) yields an increase in total net assets of $74,067.52. The increase in total net assets is primarily in

Bainbridge College Annual Financial Report FY 2005 2

the category of invested in capital assets, net of debt in the amount of $452,052.85. Bainbridge also saw an increase in the endowment corpus of $40,000.

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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$8,856,336.53 14,963,286.75 (6,106,950.22) 6,456,224.87
349,274.65 596,748.40 946,023.05 6,110,502.96 (871,955.53) 5,238,547.43 $6,184,570.48

$7,702,706.49 12,679,280.73 (4,976,574.24)
5,459,851.04
483,276.80 199,901.00 683,177.80 5,427,325.16 5,427,325.16 $6,110,502.96

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:
Bainbridge College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$1,653,635.33 5,971,940.90
310,631.63 888,228.66
31,900.01 8,856,336.53
6,511,998.44
(51,638.01) (4,135.56)
6,456,224.87
596,748.40 596,748.40 $15,909,309.80

June 30, 2004
$1,507,362.12 5,283,137.44 243,470.16 639,848.02 28,888.75 7,702,706.49
5,373,900.73 43,082.61 47,604.98 (4,737.28)
5,459,851.04
199,901.00 199,901.00 $13,362,458.53

Bainbridge College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$6,384,068.89
823,299.29 854,247.39 224,425.90 941,468.05 4,603,169.96 856,287.92 276,319.35 14,963,286.75
$14,963,286.75

June 30, 2004
$4,922,142.39
716,270.90 739,632.70 1,906,733.41 937,771.74 2,618,287.81 568,560.84 269,880.94 12,679,280.73
$12,679,280.73

All student driven revenue depicts increases. Student Tuition and Fees increased $146,273.21 while Federal Grants and Contracts increased $688,803.46, and Auxiliary Enterprises increased $248,380.64; all depicting the continued increase in enrollment. Other operating revenue also saw an increase of $3,011.26.
The compensation and employee benefits category increased by approximately $1,511,371.09. The increase reflects an increase in faculty and staff due to increase in enrollment as well as increased cost of health insurance for the employees of the institution.
Under non-operating revenues (expenses) state appropriations increased by approximately $1,138,097.71. The increase in state appropriations was due to the growth in enrollment that Bainbridge College has experienced over the past few years.
With the implementation of GASB 34 in 2002, all of the College's assets were added to the books and depreciation was calculated based on the in-service date of the asset. During an internal Board of Regents audit in FY2005 it was found during 2002 the following were capitalized assets that did not meet the capitalization threshold: Buildings/Building improvements of $361,244.00, 2 assets; Infrastructure of $961,540.00, 17 assets; and Facilities/Improvements of $318,048.00, 13 assets. These assets were removed from the College's books in FY2005 and a prior year adjustment has been recorded in the amount of $871,955.53 for the depreciation recorded on these assets.

Bainbridge College Annual Financial Report FY 2005 5

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, 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($2,873,163.00) 6,705,976.79 (2,752,586.08) (51,638.01) 1,028,589.70 886,453.32
$1,915,043.02

June 30, 2004
($4,489,436.35) 5,378,532.83 (167,919.72) 47,604.98 768,781.74 117,671.58
$886,453.32

Capital Assets
Bainbridge College has been in the process of constructing an Academic Classroom Annex in fiscal year 2005. The Georgia State Financing and Investment Commission (GSFIC) funded $396,847.40 for this project and $199,901.00 in MRR funds for renovation of the Administration Building.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt
Bainbridge College had a Long-Term Debt of $334,715.10 of which $199,643.61 is reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.

Bainbridge College Annual Financial Report FY 2005 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. Dr. Thomas Wilkerson, President Bainbridge College
Bainbridge College Annual Financial Report FY 2005 7

Statement of Net Assets

Bai nbri dge Col lege STATEMENT OF NET ASSETS
June 30, 2005
Bainbridge College

ASS ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Federal Financial As s is tance Receivables - State General Appropriations Allotment Receivables - Other Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other As sets Total Current As s ets

6/30/2005 $1,915,043.02
264,267.69 865,684.71
322,742.85 8,044.89
3,375,783.16

Component Unit B ai nbr i dg e Col l e g e Foundation 6/30/2005 $42,592.16
42,592.16

Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital As s ets , net Total Noncurrent A s s ets
TOTAL ASS ETS

3,846.69
4,692,632.50 4,696,479.19 8,072,262.35

10,000.00
10,000.00 52,592.16

LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated Abs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated Abs ences (noncurrent) Depos its Liabilities under Split-Interes t Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

674,171.61 33,931.65

68,725.65

601,448.93

174,698.93

199,643.61

1,752,620.38

0.00

135,071.49

135,071.49

0.00

1,887,691.87

0.00

NET ASS ETS Inves ted in Capital As s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET ASS ETS

4,692,632.50
544,333.43 166,240.28
781,364.27 $6,184,570.48

52,592.16 $52,592.16

Bainbridge College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
BAINBRIDGE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2005

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Res idence Halls Books tore Food Services Parkin g /Tran s p o rta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Sa la rie s : Fa c u lt y Staff
Be n e fit s Other Pers onal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Bainbridge College
Total Operating Expenses Operating Income (los s)

Bainbridge College 6/30/2005

Component Unit B ai nbr i dg e Col l e g e Foundation
6/30/2005

$3,624,221.99 1,970,586.66

$0.00 16,947.55

5,314,113.84 584,686.99 73,140.07 310,631.63 225.76
859,377.93 28,850.73

31,674.25 8,856,336.53

16,947.55

3,553,626.06 3,226,978.54 1,618,114.76
111,338.41 2,811,286.59
272,676.58 2,903,693.63
465,572.18
14,963,286.75 (6,106,950.22)

13,118.90 13,118.90
3,828.65

Bainbridge College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
BAINBRIDGE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2005

Bainbridge College

Component Unit B ai nbr i dg e Col l e g e Foundation

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments, auxiliary and other) Interest Expens e (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses , gains , or loss Capital Grants and Gifts Fe d e ra l State Other Additions to permanent endowments Total Other Revenues Increase in Net Ass ets
NET ASSETS Net Ass ets -beginning of year, as originally reported Prior Year Adjustments Net Ass ets -beginning of year, restated Net Ass ets -End of Year

6,511,998.44

(51,638.01)
(4,135.56) 6,456,224.87
349,274.65
596,748.40
596,748.40 946,023.05
6,110,502.96 (871,955.53) 5,238,547.43 $6,184,570.48

0.00 3,828.65
0.00 3,828.65 48,763.51 48,763.51 $52,592.16

Bainbridge College Annual Financial Report FY 2005 10

Statement of Cash Flows
B AINBRIDG E COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005 $3,637,289.96
6,793,966.87 308,339.13
(5,059,760.53) (6,727,100.73) (2,874,286.59)
885,286.89 23,732.16
139,369.84 (2,873,163.00) 6,511,998.44
169,207.44 24,770.91
6,705,976.79
(1,686,199.30) (1,066,386.78)
(2,752,586.08)
(51,638.01) (51,638.01) 1,028,589.70 886,453.32 $1,915,043.02

Bainbridge College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Gift of capital as s ets reducing proceeds of capital grants and gifts

($6,106,950.22)
465,572.18 1,028,450.87 (116,446.04) 1,859,364.00
262,413.05 (316,367.66)
50,800.82 ($2,873,163.00)
($596,748.40)

Bainbridge College Annual Financial Report FY 2005 12

BAINBRIDGE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations Bainbridge College serves the 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 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Bainbridge College is reporting the activity for the Bainbridge College Foundation.
See Note 16. Component Units, for foundation notes.
Bainbridge College Annual Financial Report FY 2005 13

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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 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 Statement 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 2005 14

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 on the weighted average basis. 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC did not transfer any capital additions to Bainbridge 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.
Bainbridge College Annual Financial Report FY 2005 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. Bainbridge College had accrued liability for compensated absences in the amount of $283,914.28 as of 7-1-2004. For FY2005, $135,071.49 was earned in compensated absences and employees were paid $84,270.67, for a net increase of $50,800.82 The ending balance as of 6-30-2005 in accrued liability for compensated absences was $334,715.10.
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 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 previously in Note 1 Capital Assets section.
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.
Bainbridge College Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $84,136.80 15,480.86 66,622.62
$166,240.28

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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2005
$116,857.80 526,295.30
12,731.07 125,480.10 $781,364.27

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.

Bainbridge College Annual Financial Report FY 2005 17

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 non-operating 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 scholarship allowances. Restatement of Prior Year Net Assets Bainbridge College has a restatement of prior year net assets decreasing beginning net assets by $871,955.53. This is due to removing capital assets that do not meet the capitalization threshold.
Bainbridge College Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $1,836,950.78 of the College's deposits was uninsured. Of these uninsured deposits, $1,836,950.78 were collateralized with securities held by the financial institution's trust department or agent in the College's name.
Bainbridge College Annual Financial Report FY 2005 19

NOTE 2: DEPOSITS AND INVESTMENTS

B. Investments

At June 30, 2005, the carrying value of the College's investment was $610,342.87, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$610,342.87 610,342.87

(Bainbridge College had a $5,000.00 deposit in transit at June 30, 2005, bringing the adjusted total in the Balanced Income Fund to $615,342.87).
The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$24,678.55 23,583.61
225,723.38
914,551.98 1,188,537.52
58,585.12
$1,129,952.40

Bainbridge College Annual Financial Report FY 2005 20

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005
$303,500.08 5,930.93 13,311.84
$322,742.85

Note 5. Notes/Loans Receivable
Notes/Loans receivable consists of student loans made through private loan programs, which comprise all of the loans receivable at June 30, 2005. At June 30, 2005, no provision has been made for uncollectible loans.

Bainbridge College Annual Financial Report FY 2005 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$99,269.00 204,786.35 304,055.35

Additions
$0.00 1,511,108.12 1,511,108.12

Reductions
$0.00 409,572.70 409,572.70

961,540.00 5,671,927.71
650,861.00 1,284,064.77
936,678.50
9,505,071.98

1,190,779.17 456,200.08 16,155.93
1,663,135.18

961,540.00 1,347,236.82
318,048.00 36,241.75
5,661.00
2,668,727.57

(77,122.85) 3,027,348.16
175,743.58 780,548.54
790,074.72
4,696,592.15
4,808,479.83
$5,112,535.18

80,111.72 71,529.89 59,948.49 224,581.08
29,401.00
465,572.18
1,197,563.00
$2,708,671.12

2,988.87 (79,163.60)
4,803.06 15,437.14
5,661.00
(50,273.53)
2,719,001.10
$3,128,573.80

Ending Balance 6/30/2005
$99,269.00 1,306,321.77 1,405,590.77
0.00 5,515,470.06
332,813.00 1,704,023.10
0.00 947,173.43
0.00 8,499,479.59
(0.00) 3,178,041.65
230,889.01 989,692.48
0.00 813,814.72
0.00 5,212,437.86
3,287,041.73
$4,692,632.50

Bainbridge College Annual Financial Report FY 2005 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $561,448.93
40,000.00 $601,448.93

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

283,914.28 283,914.28
$283,914.28

135,071.49 135,071.49
$135,071.49

84,270.67 84,270.67
$84,270.67

334,715.10 334,715.10
$334,715.10

199,643.61 199,643.61
$199,643.61

Note 9. Significant Commitments
The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,035,000 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.

Note 10. Lease Obligations Bainbridge College had no lease obligations as of June 30, 2005.

Bainbridge College Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$ 369,396.92 $ 311,236.18 $ 303,885.67

Employees' Retirement System of Georgia

Bainbridge College did not participate in the Employees' Retirement System of Georgia (ERS) for FY2005.

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable

Bainbridge College Annual Financial Report FY 2005 24

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 with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $146,796.74 (9.65%) and $75,986.71 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $43,009.24 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Bainbridge College Annual Financial Report FY 2005 25

Note 12. 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 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.
Bainbridge College Annual Financial Report FY 2005 26

Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 43 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Bainbridge College recognized as incurred $174,075.99 of expenditures, which was net of $54,456.54 of participant contributions.
Bainbridge College Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2005 are shown below:

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Instruction
$3,553,626.06 778,904.28 893,832.74
64,322.09 7,917.07 41,315.07
1,023,821.07 20,330.51
$6,384,068.89

Functional Classification FY2005

Research

Public Service

Academic Support

$0.00

$0.00

$0.00 445,535.70 107,897.04

10,887.96

16,566.38 207,345.85 35,066.36

$0.00

$0.00

$823,299.29

Student Services
$0.00 487,544.82 115,353.73
9,394.08 6,216.00 6,604.88 222,911.99 6,221.89
$854,247.39

Institutional Support
$0.00 1,014,693.82 365,790.65
25,231.94 (1,802,431.44)
30,197.03 476,333.76
114,610.14
$224,425.90

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Pla n t Op e ra t io n s & M aintenance

Functional Classification FY2 0 0 5

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

$0.00 433,163.78 116,404.65
(5,495.69) 375.37
176,772.78 208,081.03
12,166.13

$0.00 3,585.00 4,599,584.96

$0.00 67,136.14 15,250.95 5,495.69
1,126.97
1,220.44 765,199.93
857.80

$0.00 276,319.35

$941,468.05

$4,603,169.96

$856,287.92

$276,319.35

Total Expens es
$3,553,626.06 3,226,978.54 1,618,114.76 0.00 111,338.41 2,811,286.59 272,676.58 2,903,693.63 465,572.18
$14,963,286.75

Bainbridge College Annual Financial Report FY 2005 28

Note 16. Component Units
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 thirteen-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $13,118.90 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Communications Office, PO Box 990, Bainbridge, GA 39818-0990.

Investments for Component Units:
Bainbridge College Foundation holds endowment investments in the amount of $10,000. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Bainbridge College Foundation, in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships.

Investments are comprised of the following amounts at June 30, 2005:

Cos t

Fair Value

Money Market A ccounts

$10,000.00

$10,000.00

Total Investments

$10,000.00

$10,000.00

Bainbridge College Annual Financial Report FY 2005 29

CLAYTON STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Clayton State University Morrow, Georgia

Thomas K. Harden
President

Bruce R. Spratt
Chief Financial Officer

CLAYTON STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments.................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 21 Note 4 Inventories............................................................................................................ 22 Note 5 Notes/Loans Receivable....................................................................................... 22 Note 6 Capital Assets....................................................................................................... 22 Note 7 Deferred Revenue................................................................................................. 24 Note 8 Long-Term Liabilities .......................................................................................... 24 Note 9 Significant Commitments.................................................................24 Note 10 Lease Obligations................................................................................................ 24 Note 11 Retirement Plans ................................................................................................. 25 Note 12 Risk Management................................................................................................ 27 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units ........................................................................ 30

CLAYTON STATE UNIVERSITY
Management's Discussion and Analysis

Introduction
Clayton State University is one of the 34 universities of the University System of Georgia, a four-year state university with an enrollment exceeding 5,900. Located on 163 beautifully wooded acres with five lakes, the campus serves as a peaceful and safe environment conducive to learning. Clayton State serves the population of metropolitan Atlanta, focusing on south metro Atlanta.
As of May, 2005 Clayton College & State University has been renamed Clayton State University. This name change was approved during the monthly meeting of the Board of Regents of the University System of Georgia (USG).
Clayton State University is accredited by the Commission on Colleges of the Southern Association of Colleges and Schools to award associate and bachelor's degrees. Clayton State's accreditation was re-affirmed at the December, 2004 annual meeting of SACS/COC in Atlanta, Georgia.
Clayton State currently employs 158 full-time faculty members. Two-thirds of the faculty teaching in bachelor degree programs holds the highest degrees in their field.
Clayton State has an active athletic program, and holds membership in the NCAA Division II Peach Belt Conference. Intercollegiate teams include men's and women's basketball, soccer, track, and cross-country in addition to men's golf and women's tennis.
Enrollment at Clayton State University continues to stand strong. Enrollment for the spring 2005 semester rose to 5,920, surpassing the previous spring enrollment record mark of 5,888 in 2004. In fact, the current total marks the seventh consecutive year that Clayton State has increased its spring enrollment.

Faculty

Students

FY2005 FY2004 FY2003

310

5,920

297

5,661

293

5,212

Overview of the Financial Statements and Financial Analysis
Clayton State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

Clayton State University Annual Financial Report FY 2005 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 Clayton 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 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 university for any lawful purpose of the university.

Statement of Net Assets, Condensed
As s ets : Current As s ets Capital As s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital As s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$8,499,194.35 52,622,482.57
987,016.18 62,108,693.10
4,459,414.25 661,210.61
5,120,624.86
52,622,482.57 1,018,916.82
24,858.59
3,321,810.26 $56,988,068.24

June 30, 2004
$7,057,389.13 27,778,041.95 1,004,942.37 35,840,373.45
3,127,959.97 664,088.51
3,792,048.48
27,778,041.95 1,009,966.57
35,645.04
3,224,671.41 $32,048,324.97

The total assets of the university increased by $26,268,319.65. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $24,844,440.62 of investment in plant, net of accumulated depreciation. The university emphasizes efficiency in its
Clayton State University Annual Financial Report FY 2005 2

effort to conserve available resources and direct these resources to better serve the instruction, research and public service missions of the university.
The total liabilities for the year increased by $1,328,576.38. The primary cause for the increase was in current liabilities, primarily the result of a large increase in the university's year end accounts payable. The combination of the increase in total assets of $26,268,319.65 and the increase in total liabilities of $1,328,576.38 yields an increase in total net assets of $24,939,743.27. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $24,844,440.62.
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 university, both operating and nonoperating, and the expenses paid by the university, operating and non-operating, 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 the 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.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed
June 30, 2005

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$30,423,801.14 51,013,709.84 (20,589,908.70) 18,815,311.68
(1,774,597.02) 26,714,340.29 24,939,743.27 32,048,324.97 32,048,324.97 $56,988,068.24

June 30, 2004
$24,749,809.45 43,658,295.10 (18,908,485.65) 17,581,655.20
(1,326,830.45) 29,301.75
(1,297,528.70) 33,345,853.67 33,345,853.67 $32,048,324.97

Clayton State University Annual Financial Report FY 2005 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:

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

June 30, 2005

June 30, 2004

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$12,349,204.86
9,097,426.47 2,787,104.18 6,148,851.14
41,214.49
30,423,801.14
19,380,685.57
20,464.89 88,327.03 (674,165.81) 18,815,311.68
26,438,693.04 275,647.25
26,714,340.29
$75,953,453.11

$9,969,185.13
9,087,797.46 2,523,226.74 3,030,881.56
138,718.56
24,749,809.45
17,528,350.56 7,985.78
83,226.88 (37,908.02) 17,581,655.20
29,301.75
29,301.75 $42,360,766.40

Clayton State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$18,444,590.49
777,743.54 6,098,099.04 3,605,108.22 8,251,068.30 3,130,975.87 3,367,999.11 6,302,244.17 1,035,881.10
51,013,709.84
$51,013,709.84

June 30, 2004
$16,191,738.04 1,665,261.39 5,384,027.98 3,066,428.29 7,523,240.69 3,435,375.06 3,623,340.08 2,768,883.57
43,658,295.10
$43,658,295.10

The University's continued growth is reflected in the increases in fee revenues and instructional expenditures. Auxiliary Enterprises had large increases in expenditures associated with the opening of the new University Center.
The compensation and employee benefits category increased by approximately $3,842,285.87. The increase reflects an increased cost of health insurance for the employees of the university along with the increase in the number of employees covered by these benefits.
Utilities increased by approximately $344,993.43 during the past year. The increase was primarily associated with opening of the new University Center at the start of fiscal year 2005.
Under non-operating revenues (expenses) state appropriations increased by approximately $1,852,335.01. The increase reflects university's growth in the number of students and the needs of the university's service area.
Statement of Cash Flows
The final statement presented by the Clayton 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 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
Clayton State University Annual Financial Report FY 2005 5

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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($18,536,136.43) 21,989,213.78 (885,624.28) 103,411.12 2,670,864.19 1,543,068.73
$4,213,932.92

June 30, 2004
($15,452,767.68) 16,676,920.83 (1,086,022.53) 30,354.38 168,485.00 1,374,583.73
$1,543,068.73

Capital Assets
The University had one significant capital asset addition for facilities in fiscal year 2005. The University Center was completed and placed into service early in fiscal year 2005.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the Notes to the Financial Statements.
Long Term Liabilities (Debt)
Clayton State University had Long-Term Liabilities (Debt) of $1,442,951.74 of which $781,741.13 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
In compliance with GASB Statement No. 39, Clayton State University has included the financial statements and notes for all required component units for FY2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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

Clayton State University Annual Financial Report FY 2005 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. Dr. Thomas K. Harden, President Clayton State University
Clayton State University Annual Financial Report FY 2005 7

Statement of Net Assets

CLAYTON STATE UNIVERSITY STATEMENT OF NET ASSETS
June 30, 2005
Clayton S tate Univers ity

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations Allotment Receivables - Other Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other Assets Total Current As s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital As s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASS ETS Inves ted in Capital As s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$4,213,932.92 8,000.00
1,161,111.37 2,839,115.09
276,548.83 486.14
8,499,194.35
975,355.41 11,660.77
52,622,482.57 53,609,498.75 62,108,693.10
1,410,997.80 109,839.37
1,998,183.81 8,968.90
149,683.24 0.00
781,741.13 4,459,414.25
661,210.61
661,210.61 5,120,624.86
52,622,482.57 1,018,916.82 24,858.59 3,321,810.26
$56,988,068.24

Component Units

Clayton S tate Univers ity Foundation

The Walter & Emilie S pivey Foundation

$658,594.00 154,898.00

$738,392.00

1,097,461.00 1,942.00
10,025.00 1,922,920.00
1,922,355.00
1,922,355.00 3,845,275.00
22,131.00

29,114.00 767,506.00
7,166,989.00
13,847.00 7,180,836.00 7,948,342.00
307,636.00

22,131.00

307,636.00

0.00 22,131.00
1,355,533.00 2,384,896.00
82,715.00 $3,823,144.00

0.00 307,636.00
13,847.00
7,626,859.00 $7,640,706.00

Clayton State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

CLAYTON STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES

Clayton State Univers i ty

Component Units

Clayton State Univers i ty Foundation

The Walter & Emilie Spivey Foundation

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks t o re Food Services Parkin g /Tran s p o rt at io n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Peachtree State University
Total Operating Expenses Operating Income (loss)

$14,808,044.67 2,458,839.81
7,461,900.82 1,174,317.55
461,208.10 2,787,104.18
12,064.00
3,270,895.35 637,021.97 207,186.90
1,770,085.63 263,661.29 29,150.49
30,423,801.14

$0.00 1,498,325.00
56,777.00
29,965.00 1,585,067.00

11,827,594.95 14,347,610.94 5,869,122.95
289,277.54 4,525,780.84 1,283,322.11 11,200,727.11 1,670,273.40
51,013,709.84 (20,589,908.70)

224,774.00
183,771.00 313,674.00 722,219.00 862,848.00

$0.00
0.00 23,491.00 450,900.00 474,391.00 (474,391.00)

Clayton State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

CLAYTON STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

Component Units

Clayton State Univers i ty

Clayton State Univers ity Foundation

The Walter & Emilie Spivey Foundation

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 Additions to permanent endowments 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

19,380,685.57

20,464.89 88,327.03
(674,165.81) 18,815,311.68 (1,774,597.02)
26,438,693.04 275,647.25
26,714,340.29 24,939,743.27
32,048,324.97
32,048,324.97 $56,988,068.24

(33,011.00)
(33,011.00) 829,837.00
191,139.00 191,139.00 1,020,976.00 2,802,168.00 2,802,168.00 $3,823,144.00

494,294.00
494,294.00 19,903.00
0.00 19,903.00 7,620,803.00 7,620,803.00 $7,640,706.00

Clayton State University Annual Financial Report FY 2005 10

Statement of Cash Flows
CLAYTON STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Other Nonoperating Receipts Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$11,910,585.33
8,940,741.91 2,780,589.02 (17,750,964.16) (26,077,149.27) (4,525,780.84)
2,842.10
3,266,945.88 637,021.97 207,186.90
1,770,085.63 256,459.66 45,299.44
(18,536,136.43)
19,380,685.57 2,165,451.51 31,991.96 411,084.74
21,989,213.78
275,647.25 (1,161,271.53)
(885,624.28)
103,411.12
103,411.12 2,670,864.19 1,543,068.73 $4,213,932.92

Clayton State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($20,589,908.70)
1,670,273.40 (1,053,802.88)
(38,103.08) 102,766.06 830,049.77 457,884.29 43,403.39 41,301.32 ($18,536,136.43)
$0.00 ($15,084.89) ($26,438,693.04)

Clayton State University Annual Financial Report FY 2005 12

CLAYTON STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations Clayton 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 Clayton State University is one of thirty-four (34) State supported member universities 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 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 universities' budgets, the power to determine allotments of State funds to member universities and the authority to prescribe accounting systems and administrative policies for member universities. Clayton State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Clayton 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 State University) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 university. These statements (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Clayton State University is reporting the activity for the Clayton College & State University Foundation and the Walter & Emilie Spivey Foundation.
See Note 16. 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
Clayton State University Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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.
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 universities, 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 Statement 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
Clayton State University Annual Financial Report FY 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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 State University when complete. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $26,438,693.04 to Clayton State University.
Deposits The University does not collect deposits from students.
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.
Clayton State University Annual Financial Report FY 2005 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. Clayton State University had accrued liability for compensated absences in the amount of $1,401,650.42 as of 7-1-2004. For FY2005, $1,853,416.37 was earned in compensated absences and employees were paid $1,812,115.05, for a net increase of $41,301.32. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 1,442,951.74.
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 previously in Note 1 Capital Assets section.
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 university 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.
Clayton State University Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:
June 30, 2005

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

$10,276.39 14,582.20
$24,858.59

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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2005
$986,866.64 2,422,831.71
276,548.83 (364,436.92) $3,321,810.26

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 Clayton 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:
Clayton State University Annual Financial Report FY 2005 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 university 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Clayton State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college/university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college/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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $4,809,308.27 of Clayton State University's deposits were uninsured. Of these uninsured deposits, $4,809,308.27 were uncollateralized.
Clayton State University Annual Financial Report FY 2005 19

B. Investments

Clayton State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with the Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.

The University's investments at June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund
Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

$0.00 2,298,915.12
975,355.41 3,274,270.53
301,875.16
301,875.16 $3,576,145.69

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.
The Weighted Average Maturity of the Short-Term Fund is 1.1 years. Of the University's total investment of $2,298,915.12 in the Short-Term Fund, $2,212,668.43 is invested in debt securities.
The Weighted Average Maturity of the Total Return Fund is 4.4 years. Of the University's total investment of $975,355.41 in the Total Return Fund, $271,632.33 is invested in debt securities.
The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but
Clayton State University Annual Financial Report FY 2005 20

does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share.

The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price. Currently, Clayton State University has no investments with this investment source.

The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).

Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. Clayton State University's policy for managing interest rate risk is the same as the Board of Regents as we invest in their pools and follow their same guidelines.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. Clayton State University incurs no investments that involve any custodial credit risk.

At June 30, 2005, none of the University's applicable investments were uninsured and held by the investment's counterparty's trust department or agent, but not in the University's name.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$520,606.40 (68,630.59)
1,082,411.24
2,495,676.44 4,030,063.49
29,837.03
$4,000,226.46

Clayton State University Annual Financial Report FY 2005 21

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $259,111.11 17,437.72
$276,548.83

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $9,500.00.

Clayton State University Annual Financial Report FY 2005 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$640,501.10 418,634.81 1,059,135.91

Additions $0.00 0.00

Reductions
$0.00 418,634.81 418,634.81

34,800,521.00 631,565.00
7,228,920.90
4,454,033.25
47,115,040.15

26,801,520.05 972,536.81 244,542.52
28,018,599.38

18,998.00 2,453,808.73
36,642.34 2,509,449.07

11,237,543.10 472,542.86
5,417,414.36
3,268,633.79
20,396,134.11
26,718,906.04
$27,778,041.95

949,446.89 25,407.51 461,522.48
233,896.52
1,670,273.40
26,348,325.98
$26,348,325.98

2,453.91 2,540.75 1,382,561.52
36,642.34
1,424,198.52
1,085,250.55
$1,503,885.36

Ending Balance 6/30/2005
$640,501.10 0.00
640,501.10
0.00 61,583,043.05
631,565.00 5,747,648.98
0.00 4,661,933.43
0.00 72,624,190.46
0.00 12,184,536.08
495,409.62 4,496,375.32
0.00 3,465,887.97
0.00 20,642,208.99
51,981,981.47
$52,622,482.57

Clayton State University Annual Financial Report FY 2005 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $1,571,800.98
426,382.83 $1,998,183.81

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

1,401,650.42 1,401,650.42
$1,401,650.42

1,853,416.37 1,853,416.37
$1,853,416.37

1,812,115.05 1,812,115.05
$1,812,115.05

0.00 1,442,951.74 1,442,951.74
$1,442,951.74

Current Portion
$0.00
781,741.13 781,741.13 $781,741.13

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $2,276,500.00 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Clayton State University did not have any lease obligations during fiscal year 2005.

Clayton State University Annual Financial Report FY 2005 24

Note 11. Retirement Plans

Teachers Retirement System of Georgia

Plan Description Clayton 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 TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Clayton State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Clayton 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 2005, 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

2005 2004 2003

100% 100% 100%

$ 1,126,247.44 $ 1,205,364.77 $ 1,205,746.03

Employees' Retirement System of Georgia

Clayton State University did not have any participants in the Employees' Retirement System of Georgia (ERS) during fiscal year 2005.

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable

Clayton State University Annual Financial Report FY 2005 25

to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Clayton 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 2005, the employer contribution was 9.65% 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 State University and the covered employees made the required contributions of $ 839,270.70 (9.65%) and $434,855.29 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Georgia Defined Contribution Plan
Plan Description Clayton 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 2005 amounted to $103,325.65 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Clayton State University Annual Financial Report FY 2005 26

The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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. Clayton 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are
Clayton State University Annual Financial Report FY 2005 27

disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Clayton State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Clayton 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, 2005. Note 14. 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, 2005, there were 129 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Clayton State University recognized as incurred $642,242.26 of expenditures, which was net of $193,968.23 of participant contributions.
Clayton State University Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$11,465,114.54 1,989,017.04 2,725,118.87
132,624.79 154,449.40 115,926.91 1,838,036.23 24,302.71

$0.00

$50,155.50 526,790.61 137,861.13
6,215.70 126.88
3,438.30 53,155.42

$171,634.44 3,265,733.84
656,468.23
39,930.76 53,500.00 40,328.69 1,454,923.56 415,579.52

$3,510.13 2,166,146.47 434,747.55
30,476.13 250.00
35,519.36 928,477.75
5,980.83

$0.00 3,813,034.33 1,287,505.61
44,803.02 260,939.07
56,179.36 2,683,921.67
104,685.24

Total Expenses

$18,444,590.49

$0.00

$777,743.54

$6,098,099.04

$3,605,108.22

$8,251,068.30

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary En terpris es

Unallocated Expen s es

$0.00 1,317,007.21 338,541.27 (40,079.08)
2,231.00
1,013,803.36 486,664.31 12,807.80

$0.00 3,367,999.11

$137,180.34 1,269,881.44 288,880.29
40,079.08 32,996.14 688,516.38 18,126.13 3,755,548.17 71,036.20

$0.00 1,035,881.10

$3,130,975.87

$3,367,999.11

$6,302,244.17

$1,035,881.10

Total Exp ens es
$11,827,594.95 14,347,610.94 5,869,122.95
0.00 289,277.54 4,525,780.84 1,283,322.11 11,200,727.11 1,670,273.40
$51,013,709.84

Clayton State University Annual Financial Report FY 2005 29

Note 16. Component Units

Clayton State University Foundation

Clayton State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Clayton 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 twenty-eight-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $313,674 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the following address: Clayton State University Foundation, Inc., Alumni Affairs Office, Harry Downs Continuing Education Building, 5900 North Lee Street, Morrow, Georgia, 30260.

Investments for Component Units

Clayton State University Foundation holds endowment investments in the amount of $1.92 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Short Term Fund BOR Total Return Fund

$0.00

$0.00

155,873.00 1,837,453.00

154,898.00 1,922,355.00

Total Investments

$1,993,326.00 $2,077,253.00

Clayton State University Annual Financial Report FY 2005 30

The Walter & Emilie Spivey Foundation

The Walter & Emilie Spivey Foundation (Foundation) is a legally separate, tax-exempt component unit of Clayton State University (University). The Foundation provides music scholarships and sponsors programming in Spivey Hall, the University's world class music performance hall. The six-member board of the Foundation 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 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. 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, 2004, the Foundation distributed $450,900 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be requested at the Administrative Office at Clayton State University, 5900 North Lee Street, Morrow, Georgia, 30260.

Investments for Component Units

The Walter & Emilie Spivey Foundation holds investments in the amount of $7.1 million. Investments consist of marketable securities, bonds and real property as follows:

Investments are comprised of the following amounts at December 31, 2004

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00 157,884.00
1,615,544.00 4,552,413.00
277,400.00

$0.00 157,884.00
1,630,589.00 5,101,116.00
277,400.00

Total Investments

$6,603,241.00 $7,166,989.00

Clayton State University Annual Financial Report FY 2005 31

COASTAL GEORGIA COMMUNITY COLLEGE
Financial Report
For the Year Ended June 30, 2005

Coastal Georgia Community College Brunswick, Georgia

Dr. Dorothy L. Lord
President

Mr. C. Tom Saunders
Vice President for Business Affairs

COASTAL GEORGIA COMMUNITY COLLEGE ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments..................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 21 Note 5 Notes/Loans Receivable....................................................................................... 21 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 23 Note 12 Risk Management................................................................................................ 25 Note 13 Contingencies...................................................................................................... 25 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 15 Natural Classifications With Functional Classifications..................................... 27 Note 16 Component Units ........................................................................ 28

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

FY2005 FY2004 FY2003

64

2,879

61

2,818

56

2,398

Overview of the Financial Statements and Financial Analysis

Coastal Georgia Community College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

Coastal Georgia Community College Annual Financial Report FY 2005 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
Asse ts: Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Ne t Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Un rest rict ed Total Ne t Asse ts

June 30, 2005
$1,568,119.38 27,451,716.57
89,454.25 29,109,290.20
883,385.60 146,431.80
1,029,817.40
27,451,716.57 70,009.11 43,678.98
514,068.14 $28,079,472.80

June 30, 2004
$2,925,161.11 26,600,211.46
93,796.44 29,619,169.01
1,592,544.01 152,749.71
1,745,293.72
26,600,211.46 68,879.18 44,087.21
1,160,697.44 $27,873,875.29

The total assets of the institution decreased by ($509,878.81). A significant reduction in assets was due to the removal of receivables and the corresponding deferred revenue for the future Fall Semester, write-offs of old accounts, and reduction in GSFIC receivables. A further review of the Statement of Net Assets will reveal that the decrease was partially offset by an increase of $851,505.11 in investment in plant, net of accumulated depreciation for Camden Center projects. 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 and public service mission of the institution.

The total liabilities for the year decreased by ($715,476.32). The primary cause for the decrease was related to current liabilities, primarily ($633,959.29), which was attributed to the above decrease of Fall Semester receivables and deferred revenue. The combination of the decrease in total assets of ($509,878.81) and the decrease in total liabilities of ($715,476.32) yields an increase in total net assets of $205,597.51. The increase in total net assets is primarily in the category of investment in capital assets, net of debt in the amount of $851,505.11.

Coastal Georgia Community College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues

$7,711,005.73

$6,519,436.36

Operating Expenses Operating Loss

20,657,853.24 (12,946,847.51)

17,133,558.38 (10,614,122.02)

Nonoperating Revenues and Expenses

11,622,949.72

10,198,930.52

Income (Loss) Before other revenues, expenses, gains or losses

(1,323,897.79)

(415,191.50)

Other revenues, expenses, gains or losses

1,529,495.30

17,411,459.90

Increase in Net Assets

205,597.51

16,996,268.40

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

27,873,875.29 27,873,875.29

10,878,923.89 (1,317.00)
10,877,606.89

Net Assets at End of Year

$28,079,472.80

$27,873,875.29

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$2,452,626.54
3,450,843.30 315,660.03
1,409,360.50 82,515.36
7,711,005.73
7,837,110.00 2,569,916.17 1,215,201.85
721.70
11,622,949.72
1,529,495.30
1,529,495.30 $20,863,450.75

June 30, 2004
$2,317,018.98 3,188,780.44 256,611.77 551,227.56 205,797.61
6,519,436.36
7,769,759.01 2,406,296.62 1,349,688.13
6,963.75 1,339.20 11,534,046.71
17,411,459.90
17,411,459.90 $35,464,942.97

Coastal Georgia Community College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005

June 30, 2004

$8,274,286.16
178,639.75 920,747.32 1,296,520.83 2,473,241.32 3,352,458.14 1,925,833.40 1,613,234.23 622,892.09
20,657,853.24

$8,767,552.70
190,117.38 794,586.23 1,236,537.64 2,411,966.95 1,408,251.66 1,817,943.13 506,602.69
17,133,558.38

Nonoperating Expenses Ot h er
T otal Expenses

$20,657,853.24

1,335,116.19 $18,468,674.57

The increase in grants and contracts relates to additional Title IV funding due to increased awards to students. Auxiliary Revenues are significantly higher due to reporting revenue as gross in fiscal year 2005 versus reporting revenue net of cost of goods sold in fiscal year 2004.
Revenues for Capital Gifts and Grants dropped significantly due to the transfer of the Camden Center building in fiscal year 2004 with fiscal year 2005 only having minor additions associated with the completion of the project.
The compensation and employee benefits category increased by approximately $695,665.73. This increase was partially due to new faculty positions and higher part-time faculty costs for the Brunswick Campus and Camden Center. Furthermore, positions were added in student services, the library, and plant operations related to the staffing of the new Camden Center. Additionally, funding increased for tutors to support retention initiatives. The College also experienced higher benefits costs related to new positions. Utilities increased by approximately $86,828.77 during the past year. The increase was primarily associated with full utilization of the Camden Center in fiscal year 2005 and the continued increase in natural gas costs that were experienced in the winter of fiscal year 2005.
Under non-operating revenues (expenses) state appropriations increased by approximately $67,350.99. The minor increase of state appropriations, due to a sluggish economy, has created a challenge as the College continues to serve an increasing number of students. We are hopeful that the economy is now on an upward trend.

Coastal Georgia Community College Annual Financial Report FY 2005 5

Statement of Cash Flows The final statement presented by 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, 2005 and 2004, 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, 2005
($10,665,757.80) 11,791,422.34 (603,616.67) 2,306.89 524,354.76 87,702.47
$612,057.23

June 30, 2004
($9,634,295.88) 9,841,428.42 (220,851.54) 1,694.43 (12,024.57) 99,727.04
$87,702.47

Capital Assets

The College did not have a significant capital project in fiscal year 2005; however, additions where made to the Camden Center for final payments on the building, as well as, equipment funding from GSFIC for technical programs housed at the Center.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt

Coastal Georgia Community College had a total Long-Term Debt of $524,009.57 of which $377,667.77 was reflected as current liability at June 30, 2005.

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, Coastal Georgia Community College has included the financial statements and notes for all required component units for FY2005. The Coastal

Coastal Georgia Community College Annual Financial Report FY 2005 6

Georgia Community College Foundation, Inc. had endowment investments of $3.48 M as of December 31, 2004. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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 financially stronger than last year, but will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Dr. Dorothy L. Lord, President Coastal Georgia Community College
Coastal Georgia Community College Annual Financial Report FY 2005 7

Statement of Net Assets

C O ASTAL GEO RGIA C O MMUNITY C O LLEGE STATEMENT O F NET ASSETS June 30, 2005

AS S ETS C urre nt Asse ts Cash and Cash Equivalents Short-term Investment s Accounts Receivable, net Receivables - Federal Financial Assist ance Receivables - State General Appropriat ions Allot ment Receivables - Ot her Leases Receivable Pledges Receivable Inv en t o ries Prepaid items Notes and Mort gages Receivable Ot her Assets T otal Current Assets

C oastal Ge orgia Community C ol l e ge
$612,057.23
160,264.76 579,841.28
198,280.11 17,676.00
1,568,119.38

Noncurre nt Asse ts Noncurrent Cash Invest ments (including Real Est ate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets, net T otal Noncurrent Asset s
TO TAL ASSETS
LIABILITIES C urre nt Liabi li ti e s Accounts Payable Salaries Payable Benefit s Payable Contract s Payable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Other Organizat ions Current Port ion of Long-t erm Debt Compensated Absences (current portion) T otal Current Liabilities Noncurre nt Li abi l itie s Lease Purchase Obligations (noncurrent ) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Deposit s Liabilities under Split-Int erest Agreement s Ot her Long-T erm Liabilities T otal Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of related debt Rest rict ed for Nonexpendable Expendable Capital Projects Un rest rict ed TO TAL NET ASSETS

88,674.25 780.00
27,451,716.57 27,541,170.82 29,109,290.20
84,144.33 265,161.43
79,180.21 77,231.86 377,667.77 883,385.60
146,431.80
146,431.80 1,029,817.40
27,451,716.57 70,009.11 43,678.98
514,068.14 $28,079,472.80

Coastal Ge orgia Community College
Foundati on, Inc. $250,150.00 4,235,272.00
739,741.00
5,225,163.00
1,530,410.00 28,022.00
1,558,432.00 6,783,595.00
0.00
0.00 0.00
3,092,095.00 1,340,199.00
499,196.00 1,852,105.00 $6,783,595.00

Coastal Georgia Community College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
CO ASTAL GEO RGIA CO MMUNITY CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ende d June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookst ore Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Benefit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Coastal Georgia Community College
T otal Operating Expenses Operating Income (loss)

Coastal Georgia Community College

Coastal Georgia Community College
Foundation, Inc.

$3,952,786.64 1,500,160.10
3,450,843.30
315,660.03 26,379.63
1,193,509.75
203,631.70 12,219.05 56,135.73
7,711,005.73
3,656,843.97 5,499,929.39 2,292,173.32
161,359.32 2,127,808.78
649,245.56 4,988,886.04 1,281,606.86 20,657,853.24 (12,946,847.51)

$0.00 1,882,925.00
167,948.00
2,050,873.00
27,154.00 488,165.00 515,319.00 1,535,554.00

Coastal Georgia Community College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
CO ASTAL GEO RGIA CO MMUNITY CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated
Net Assets-End of Year

Coastal Georgia Community College
7,837,110.00
992,923.15 1,132,421.69
444,571.33 1,215,201.85
721.70

Coastal Georgia Community College
Foundation, Inc.

11,622,949.72 (1,323,897.79)

0.00 1,535,554.00

1,529,495.30
1,529,495.30 205,597.51
27,873,875.29 27,873,875.29 $28,079,472.80

1,701,277.00 1,701,277.00 3,236,831.00
3,546,764.00
3,546,764.00 $6,783,595.00

Coastal Georgia Community College Annual Financial Report FY 2005 10

Statement of Cash Flows
C O AS TAL GEO RGIA C O MMUNITY C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005 $4,061,804.71
3,899,505.12 317,648.03
(8,208,433.91) (9,174,974.82) (3,627,968.88)
102.00
1,244,022.08
204,522.65 12,219.05
605,796.17 (10,665,757.80)
7,837,110.00 169,194.32
3,785,118.02 11,791,422.34
(603,616.67)
(603,616.67)
2,306.89 2,306.89 524,354.76 87,702.47 $612,057.23

Coastal Georgia Community College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of invest m ent s recognized as a com ponent of int erest incom e Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($12,946,847.51)
1,281,606.86 811,244.68 14,704.55 (4,683.61) (139,790.31) 287,753.35 20,506.50 9,747.69
($10,665,757.80)
($1,585.19) ($1,529,495.30)

Coastal Georgia Community College Annual Financial Report FY 2005 12

COASTAL GEORGIA COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations Coastal Georgia Community College serves the state by providing its students with academic instruction that advances fundamental knowledge of Georgia citizens.
Reporting Entity Coastal Georgia Community College is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprises 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Coastal Georgia Community College is reporting the activity for the Coastal Georgia Community College Foundation, Inc.
See Note 16. 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 implemented GASB
Coastal Georgia Community College Annual Financial Report FY 2005 13

Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 days13 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 Statement 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 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $1,529,495.30 to Coastal Georgia Community College.
Deposits The College does not collect deposits.
Coastal Georgia Community College Annual Financial Report FY 2005 15

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. Coastal Georgia Community College had accrued liability for compensated absences in the amount of $514,351.88 as of 7-1-2004. For FY2005, $405,371.34 was earned in compensated absences and employees were paid $395,623.65, for a net increase of $9,747.69. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $524,099.57.
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 previously in Note 1 Capital Assets section.
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 2005 16

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $37,048.00 6,630.98
$43,678.98

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 Other Unrestricted Total Unrestricted Net Assets

June 30, 2005
$189,774.47 199,965.72 21,000.00 103,327.95
$514,068.14

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 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.

Coastal Georgia Community College Annual Financial Report FY 2005 17

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Coastal Georgia Community College Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $695,139.56 of the college's deposits were uninsured. Of these uninsured deposits, all $695,139.56 was collateralized with securities held by the financial institution, by its trust department or agency.
Coastal Georgia Community College Annual Financial Report FY 2005 19

B. Investments

At June 30, 2005, the carrying value of the college's investments was $88,674.25, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pool as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$0.00
88,674.25 $88,674.25

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student T uition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance State General Appropriations Allotment Ot h er
Less Allowance for Doubtful Accounts
Net Accounts Receivable

$81,504.69 61,058.76
160,264.76
469,949.47 772,777.68
32,671.64
$740,106.04

Coastal Georgia Community College Annual Financial Report FY 2005 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

June 30, 2005

Bookst ore Food Services Physical Plant Ot her
T ot al

$167,267.94
31,012.17 $198,280.11

Note 5. Notes/Loans Receivable

Institutional loans comprise all of the loans receivable at June 30, 2005.

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
T otal Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Infrast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated
Less: Accumulated Depreciation Infrast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation
T otal Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning B al an ce s 7/1/2004
$1,578,016.36
1,578,016.36
998,920.00 29,622,734.04
600,318.00 3,910,462.24
1,871,647.10
37,004,081.38
610,916.73 6,808,899.85
502,137.25 2,689,193.42
1,370,739.03
11,981,886.28
25,022,195.10
$26,600,211.46

Addi ti on s
$0.00 231,132.00 231,132.00

Re du cti on s $0.00 0.00

516,511.40 450,000.00 793,582.65
141,885.92
1,901,979.97
30,628.04 868,134.56
3,980.75 290,972.54
87,890.97
1,281,606.86
620,373.11
$851,505.11

28,528.00 28,528.00
28,528.00 28,528.00
0.00 $0.00

Coastal Georgia Community College Annual Financial Report FY 2005 21

En di n g B a l a n ce 6/30/2005
$1,578,016.36 231,132.00
1,809,148.36
998,920.00 30,139,245.44
1,050,318.00 4,704,044.89
0.00 1,985,005.02
0.00 38,877,533.35
641,544.77 7,677,034.41
506,118.00 2,980,165.96
0.00 1,430,102.00
0.00 13,234,965.14
25,642,568.21
$27,451,716.57

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

Prepaid T uition and Fees Research Other Deferred Revenue
T otals

June 30, 2005 $65,109.61 14,070.60 $79,180.21

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

514,351.88 514,351.88

405,371.34 405,371.34

395,623.65 395,623.65

524,099.57 524,099.57

Total Long Term Obligations

$514,351.88

$405,371.34

$395,623.65

$524,099.57

Current Portion
$0.00
377,667.77 377,667.77 $377,667.77

Note 9. Significant Commitments The College had no significant commitments as of June 30, 2005. Note 10. Lease Obligations CAPITAL LEASES The College had no capital leases. OPERATING LEASES The College had no operating leases.

Coastal Georgia Community College Annual Financial Report FY 2005 22

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$492,919.58 $453,937.33 $430,091.25

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 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

Coastal Georgia Community College Annual Financial Report FY 2005 23

Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $249,803.09 (9.65%) and $129,444.53 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $52,410.00 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Coastal Georgia Community College Annual Financial Report FY 2005 24

Note 12. 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. 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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.
Coastal Georgia Community College Annual Financial Report FY 2005 25

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, 2005. Note 14. 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, 2005, 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, 2005, Coastal Georgia Community College recognized as incurred $217,483.26 of expenditures, which was net of $84,775.22 of participant contributions.
Coastal Georgia Community College Annual Financial Report FY 2005 26

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$3,797,900.97 1,758,073.54 1,260,334.35
85,332.86 17,905.00 81,088.26 1,206,737.15 66,914.03

$0.00

($141,057.00) 202,557.19 10,099.14
896.05
69,152.88 35,253.49 1,738.00

$0.00 545,533.71 131,140.25
10,088.06
5,264.27 140,139.39 88,581.64

$0.00 709,274.23 191,044.29
24,276.60 4,125.00 15,091.39 351,448.32 1,261.00

$0.00 1,442,111.90
445,671.88 0.00
35,591.02 109,980.38 19,242.28 406,693.45 13,950.41

Total Expenses

$8,274,286.16

$0.00

$178,639.75 $920,747.32 $1,296,520.83 $2,473,241.32

Natural Classification
Facult y St aff Benefit s Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Others Services Depreciat ion
T otal Expenses

Plant Op erat ions & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary En t erprises

Unallocat ed Expenses

$0.00 659,663.49 204,983.96 (20,751.56)
632.56
453,665.24 1,578,491.56
475,772.89

$0.00 1,925,833.40

$0.00 182,715.33
48,899.45 20,751.56
4,542.17 69,965.00
5,741.24 1,270,122.68
10,496.80

$0.00 622,892.09

$3,352,458.14 $1,925,833.40 $1,613,234.23 $622,892.09

T otal Expenses
$3,656,843.97 5,499,929.39 2,292,173.32 0.00 161,359.32 2,127,808.78 649,245.56 4,988,886.04 1,281,606.86
$20,657,853.24

Coastal Georgia Community College Annual Financial Report FY 2005 27

Note 16. Component Units
Coastal Georgia Community College Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Coastal Georgia Community 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, friends, and employees 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. 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, 2004, the Foundation distributed $488,165.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3700 Altama Avenue, Brunswick, GA 31520.

Investments for Component Units:
Coastal Georgia Community College Foundation holds endowment investments in the amount of $3.09 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation board determines the amount of earnings to be expended during its annual budgeting process.

Coastal Georgia Community College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Georgia Investment Pools
BOR Short T erm Fund BOR T otal Return Fund

Cost
$652,948.00 398,264.27 700,000.00 8,909.38 607,719.36
70,516.19 3,316,616.82

Fair Value
$645,575.46 395,680.00 698,900.00 13,050.00 621,800.41
69,453.92 3,321,222.30

T otal Investments

$5,754,974.02

$5,765,682.09

Coastal Georgia Community College Annual Financial Report FY 2005 28

COLUMBUS STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Columbus State University Columbus, Georgia

Frank D. Brown
President

Charles D. Pattillo
Vice President for Business & Finance

COLUMBUS STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ...................................................... 16 Note 2 Deposits and Investments..................................................................................... 19 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 Significant Commitments.................................................................26 Note 10 Lease Obligations................................................................................................ 26 Note 11 Retirement Plans ................................................................................................. 28 Note 12 Risk Management................................................................................................ 30 Note 13 Contingencies...................................................................................................... 30 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 15 Natural Classifications With Functional Classifications..................................... 32 Note 16 Component Units ....................................................................... 33

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 nationally accredited programs in art, business, nursing, music, theatre and teacher education. 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 7,200 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

229

7,224

224

6,937

218

6,250

Overview of the Financial Statements and Financial Analysis

Columbus State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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.

Columbus State University Annual Financial Report FY 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$14,606,926.14 52,390,074.36 3,210,052.28 70,207,052.78
5,113,921.23 870,810.68
5,984,731.91
52,390,074.36 1,566,342.31 2,605,458.63
7,660,445.57 $64,222,320.87

June 30, 2004
$12,266,191.11 36,910,281.35
2,982,858.62 52,159,331.08
5,364,883.96 761,604.78
6,126,488.74
36,905,876.68 1,539,090.26 2,315,230.93
5,272,644.47 $46,032,842.34

The total assets of the institution increased by $18,047,721.70. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $15,479,793.01 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 ($141,756.83). The primary cause for the decrease was due primarily to a decrease in deferred revenue. The combination of the increase in total assets of $18,047,721.70 and the decrease in total liabilities of ($141,756.83) yields an increase in total net assets of $18,189,478.53. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $15,484,197.68.

Columbus State University Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues

$29,974,730.48

$26,708,370.70

Operating Expens es Operating Los s

62,803,487.13 (32,828,756.65)

55,998,643.62 (29,290,272.92)

Nonoperating Revenues and Expens es

34,016,578.80

29,478,546.35

Income (Los s ) Before other revenues , expens es , gains or los s es

1,187,822.15

188,273.43

Other revenues , expens es , gains or los s es

17,001,656.38

Increas e in Net A s s ets

18,189,478.53

188,273.43

Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated

46,032,842.34 46,032,842.34

45,844,568.91 45,844,568.91

Net A s s ets at End of Year

$64,222,320.87

$46,032,842.34

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:

Columbus State University Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$14,480,894.86
8,214,574.37 1,474,055.48 5,653,779.85
151,425.92
29,974,730.48
28,647,514.77 4,589,119.18 1,245,697.20
412,904.18 (878,595.84) 34,016,639.49
16,912,601.38 89,055.00
17,001,656.38
$80,993,026.35

June 30, 2004
$12,779,428.02 7,788,657.85 1,358,245.11 4,577,402.58 204,637.14
26,708,370.70
26,373,080.69 2,480,952.30 401,335.33 329,654.40 (105,731.14)
29,479,291.58
0.00 $56,187,662.28

Columbus State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$25,240,030.43
6,312,414.71 3,755,378.64 9,001,035.75 8,502,073.80 4,424,735.57 3,934,089.56 1,633,728.67
62,803,487.13
60.69 $62,803,547.82

June 30, 2004
$23,746,995.91
5,747,567.36 3,629,430.06 7,331,540.00 7,160,946.49 4,187,588.80 3,886,366.12
308,208.88
55,998,643.62
745.23 $55,999,388.85

Revenues associated with tuition and fees, net of sponsored and unsponsored scholarships, increased approximately $1,701,466.84 during the year. This increase reflects a moderate increase in fees per semester as well as an increase in enrollment.

The increase in non-operating grants and contracts of approximately $2,443,456.81 was due to an increase in scholarships provided by the Columbus State University Foundation capital campaign efforts. The capital campaign was launched in 2003 and the successful efforts have greatly benefited the institution and the students we serve.

The increase in state capital gifts, in the amount of $16,912,601.38, is the result of GSFIC bond funds utilized to construct the institutions Center for Commerce and Technology facility.

The compensation and employee benefits category increased by approximately $1,491,850.85. The increase reflects an increased cost of health insurance for the employees of the institution.

Utilities increased by approximately $63,143.25 during the past year. The increase was primarily associated with additional facilities as well as a utility rate increase.

Under non-operating revenues (expenses) state appropriations increased by approximately $2,274,434.08. The increase of state appropriations was due to a statewide economic recovery. Previously, institutions system wide experienced decreases due to a sluggish economy.

Columbus State University Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($31,839,655.07) 34,496,195.42 (1,355,089.80) 326,337.20 1,627,787.75 9,746,577.71
$11,374,365.46

June 30, 2004
($27,759,049.07) 29,074,126.08 (382,332.61) 269,866.01 1,202,610.41 8,543,967.30
$9,746,577.71

Capital Assets
The University had one significant capital asset addition for facilities in fiscal year 2005. The addition is a result of recognizing the capital gift from GSFIC utilized for construction of the Center for Commerce and Technology.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Liabilities (Debt)
Columbus State University had Long-Term Liabilities (Debt) of $1,723,711.10 of which $852,900.42 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.

Columbus State University Annual Financial Report FY 2005 6

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 FY2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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 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 2005 7

Statement of Net Assets

Columbus State Unive rsity
STATEMENT OF NET ASSETS June 30, 2005
Columbus S tate Univers ity

Component Uni ts
Columbus S tate Univers ity Foundation

AS S ETS Current As s ets Cas h an d Cas h Equ ivalents Sho rt-term Inv es tments A cco un ts Receivab le, n et Receivables - Federal Financial A s s is tan ce Receivables - State General A pp rop riatio n s A llo tmen t Receivables - Other Du e from Primary Gov ern men t Leas es Receivable Pledg es Receiv ab le In vento ries Prep aid items No tes and M o rtgag es Receiv ab le Other A s s ets Total Current A s s ets
Noncurrent As s ets No ncurrent Cas h In ves tmen ts (in clu din g Real Es tate) No tes Receivable, net Leas es Receivable Pledg es Receiv ab le Cap ital A s s ets , n et Total No ncurren t A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A cco un ts Payable Salaries Pay ab le Ben efits Payable Co ntracts Payable Depo s its Deferred Reven u e Oth er Liab ilities Depo s its Held fo r Oth er Organizatio ns Cap ital Leas e (cu rren t p ortion ) No tes Pay ab le (curren t po rtio n) Du e to Primary Gov ern men t Cu rrent Portion of Lo ng -term Deb t Co mpens ated A bs en ces (curren t po rtio n) Total Current Liab ilities Noncurrent Liabilities Leas e Purch as e Obligatio ns (n o ncurren t) Deferred Reven u e (no ncurren t) Co mpens ated A bs en ces (n on cu rren t) Depo s its Liabilities un der Split-In teres t A greemen ts No tes Pay ab le Oth er Lo n g-Term Liab ilities Total No ncurren t Liab ilities TOTAL LIABILITIES
NET AS S ETS In ves ted in Capital A s s ets , net o f related d eb t Res tricted fo r Non exp en d ab le Exp en d ab le Cap ital Pro jects Un res tricted
TOTAL NET AS S ETS

$10,972,998.15
687,997.23 2,705,396.31
240,534.45
14,606,926.14
401,367.31 1,976,717.05
831,967.92
52,390,074.36 55,600,126.64 70,207,052.78
213,854.35 156,897.16
183,625.00 3,166,809.88
67.25 539,767.17
852,900.42 5,113,921.23
870,810.68
870,810.68 5,984,731.91
52,390,074.36 1,566,342.31 2,605,458.63 7,660,445.57
$64,222,320.87

$6,239,308.00
13,329.00 129,569.00 8,532,917.00
174,695.00 15,089,818.00
23,287,295.00 20,256,348.00 43,543,643.00 58,633,461.00
61,602.00
25,282.00
86,884.00
1,158,922.00 1,158,922.00 1,245,806.00
12,454,351.00 16,516,169.00 27,775,744.00
641,391.00 $57,387,655.00

Columbus State University Annual Financial Report FY 2005 8

Statement of Net Assets, Continued

Columbus State Unive rsity

STATEMENT OF NET ASSETS

June 30, 2005

Component Uni ts

Foundation Properties ,

Columbus S tate

Inc.

Univers ity Alumni

As s ociation

Columbus S tate Univers ity
Athletic Fund

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Due from Primary Government Leas es Receivable Pledges Receivable In v en t o rie s Prepaid items Notes and M ortgages Receivable Other As s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Capital Leas e (current portion) Notes Payable (current portion) Due to Primary Government Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Notes Payable Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$9,244,488.00
127,356.00
888,112.00 10,259,956.00
5,451,206.00
59,226,546.00 64,677,752.00 74,937,708.00
2,205,348.00
214,845.00 4,926,343.00
264,011.00 440,000.00 8,050,547.00 15,115,155.00
46,538.00 284,724.00 26,940,000.00 42,386,417.00 50,436,964.00 16,231,822.00
8,268,922.00 $24,500,744.00

$166,302.00 7,703.00
2.00 43,204.00
2,978.00
150.00 220,339.00
39,990.00
4,464.00 44,454.00 264,793.00
6,625.00

$142,787.00
44,908.00 1,200.00 9,953.00 2,083.00
200,931.00
1,405,378.00
18,562.00 1,423,940.00 1,624,871.00
48,292.00

4,940.00

5,511.00

11,565.00

18,855.00 72,658.00

0.00 11,565.00
4,464.00
76,874.00 97,520.00
74,370.00 $253,228.00

0.00 72,658.00
18,562.00
1,219,724.00 372,307.00
(58,380.00) $1,552,213.00

Columbus State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets

COLUMBUS STATE UNIVERSITY
STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2005

Columbus State Univers ity

Component Units
Columbus State University Foundation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks to re Food Services Parkin g /Tran s p o rtat io n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Columbus State University Payments to Other Component Units
Total Operating Expenses Operating Income (loss)

$17,745,785.00 3,264,890.14
7,820,468.90 297,812.65 96,292.82
1,474,055.48 18,313.60
2,751,456.42 185,651.87 206,610.25 324,259.33 386,778.63
1,713,366.60 85,656.75 133,112.32
29,974,730.48
14,633,261.06 16,018,966.44 7,685,606.23
14,270.00 341,002.41 5,267,829.03 2,344,361.08 14,606,016.26 1,892,174.62
62,803,487.13 (32,828,756.65)

$0.00 454,564.00 (335,557.00)
27,361.00 146,368.00
10,451.00
212,789.00 78,564.00 54,566.00 356,370.00 (210,002.00)

Columbus State University Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued

COLUMBUS STATE UNIVERSITY
STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2005

Columbus State Univers ity

Component Units
Columbus State University Foundation

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interes t Expens e (capital as sets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Additions to permanent endowments 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

28,647,514.77
0.88 88,078.15 4,501,040.15 1,245,697.20 412,904.18
(60.69) (878,595.84) 34,016,578.80 1,187,822.15
16,912,601.38 89,055.00
17,001,656.38 18,189,478.53
46,032,842.34
46,032,842.34 $64,222,320.87

(46,643.00) (46,643.00) (256,645.00)
6,776.00 6,776.00 (249,869.00) 57,637,524.00 57,637,524.00 $57,387,655.00

Columbus State University Annual Financial Report FY 2005 11

Statement of Revenues, Expenses and Changes in Net Assets, Continued

COLUMBUS STATE UNIVERSITY
STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2005

Component Units

Foundation Properties,

Columbus State

Inc.

University Alumni

As s ociation

Columbus State University Athletic
Fund

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks to re Food Services Parkin g /Tran s p o rtatio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Columbus State University Payments to Other Component Units
Total Operating Expenses Operating Income (loss)

$0.00 191,586.00

$0.00
15,135.00 (2,045.00)

$0.00
4,075.00 (25,854.00)

82,525.00

149,993.00 424,104.00
18,081.00 2,885.00
47,557.00 90,151.00 87,445.00 8,111.00 254,230.00 169,874.00

13,090.00

52,004.00 30,225.00

4,750.00 1,217.00

821.00 60.00

4,097.00 55.00
12,001.00
22,120.00 (9,030.00)

16,923.00 30.00
37,444.00 1,297.00 56,575.00 (26,350.00)

Columbus State University Annual Financial Report FY 2005 12

Statement of Revenues, Expenses and Changes in Net Assets, Continued

COLUMBUS STATE UNIVERSITY
STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2005

Component Units

Foundation Properties,

Columbus State

Inc.

University Alumni

As s ociation

Columbus State University Athletic
Fund

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 Additions to permanent endowments 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

(92,462.00) (61,242.00)
(310.00) (154,014.00)
15,860.00

37.00
37.00 (8,993.00)

0.00 (26,350.00)

0.00 15,860.00
24,484,884.00
24,484,884.00 $24,500,744.00

0.00 (8,993.00)
262,221.00
262,221.00 $253,228.00

0.00 (26,350.00)
1,578,563.00
1,578,563.00 $1,552,213.00

Columbus State University Annual Financial Report FY 2005 13

Statement of Cash Flows
COLUMB US STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$17,899,879.56
7,175,124.81 1,452,034.28 (24,344,091.54) (30,392,634.72) (8,532,719.17) (1,252,601.00) 1,217,604.01
2,949,590.72 185,651.87 206,610.25 323,711.47 384,782.23
1,704,577.87 85,656.75
(902,832.46) (31,839,655.07)
28,647,514.77 (2,581.74)
5,851,262.39 34,496,195.42
(1,349,508.10) (5,521.01) (60.69)
(1,355,089.80)
326,337.20
326,337.20 1,627,787.75 9,746,577.71 $11,374,365.46

Columbus State University Annual Financial Report FY 2005 14

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($32,828,756.65)
1,892,174.62 (1,696,945.81)
86,640.21 154,390.62 240,823.63
68,442.94 243,575.37 ($31,839,655.07)
$86,566.98 ($17,001,656.38)

Columbus State University Annual Financial Report FY 2005 15

COLUMBUS STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Columbus State University is reporting the activity for the Columbus State University Foundation, the Columbus State University Foundation Properties, the Columbus State University Alumni Association, and the Columbus State University Athletic Foundation.
See Note 16. 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
Columbus State University Annual Financial Report FY 2005 16

by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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 2005 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 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $16,912,601.38 to Columbus State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Columbus State University Annual Financial Report FY 2005 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. Columbus State University had accrued liability for compensated absences in the amount of $1,586,676.64 as of 7-1-2004. For FY2005, $1,172,977.68 was earned in compensated absences and employees were paid $ 1,035,943.22, for a net increase of $137,034.46. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 1,723,711.10.
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 previously in Note 1 Capital Assets section.
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 2005 19

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005
$965,110.92 592,363.32 866,338.97
181,645.42 $2,605,458.63

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 Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005
$37,513.33 6,341,991.73
214,959.68 1,065,980.83 $7,660,445.57

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 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Columbus State University Annual Financial Report FY 2005 21

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $13,690,519.76 of the university's deposits were uninsured. Of these uninsured deposits, none were collateralized with securities held by the financial institution's trust department or agent in the university's name, $13,690,519.76 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name and none were uncollateralized.
Columbus State University Annual Financial Report FY 2005 22

B. Investments
Columbus State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The university's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$0.00

Less Than 1 Year
$0.00

Investment Maturity

1-5

6 - 10

Years

Years

$0.00

$0.00

More than 10 Years
$0.00

0.00

0.00

0.00

0.00

0.00

357,191.54

828,725.68 1,619,525.51

$2,805,442.73

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html

Columbus State University Annual Financial Report FY 2005 23

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$228,685.64 718,234.44 957,267.17
1,489,206.29 3,393,393.54
$3,393,393.54

Note 4. Inventories
Columbus State University had no inventories on June 30, 2005.
Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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.

Columbus State University Annual Financial Report FY 2005 24

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$1,821,881.30
1,821,881.30
1,524,544.00 49,472,902.69 2,945,631.00 6,565,671.95
47,000.00 7,017,089.00
67,572,838.64
695,798.32 18,507,333.58 1,934,648.28 4,952,863.08
17,233.33 6,376,562.00
0.00 32,484,438.59
35,088,400.05
$36,910,281.35

Additions $0.00 0.00

Reductions $0.00 0.00

16,912,601.38
1,241,757.81
85,750.29 22,000.00 18,262,109.48

(367,052.00) (6,176.00)
361,319.00 (108,593.49)
47,000.00 133,062.21
59,559.72

58,144.89 962,309.05 96,987.96 607,299.72
167,433.00
1,892,174.62
16,369,934.86
$16,369,934.86

(363,431.66) (192,842.58) 334,364.87 (30,225.09)
17,233.33 (595,681.00)
(830,582.13)
890,141.85
$890,141.85

Ending Balance 6/30/2005
$1,821,881.30 0.00
1,821,881.30
1,891,596.00 66,391,680.07 2,584,312.00 7,916,023.25
0.00 6,969,777.08
22,000.00 85,775,388.40
1,117,374.87 19,662,485.21 1,697,271.37 5,590,387.89
0.00 7,139,676.00
0.00 35,207,195.34
50,568,193.06
$52,390,074.36

Columbus State University Annual Financial Report FY 2005 25

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $2,967,673.89
199,135.99 $3,166,809.88

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$4,404.67

Additions $0.00

Reductions

Ending Balance June 30, 2005

$4,404.67

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

1,586,676.64 1,586,676.64
$1,591,081.31

1,172,977.68 1,172,977.68
$1,172,977.68

1,035,943.22 1,035,943.22
$1,040,347.89

0.00 1,723,711.10 1,723,711.10
$1,723,711.10

Current Portion
$0.00
852,900.42 852,900.42 $852,900.42

Note 9. Significant Commitments
Columbus State University had no significant commitments on June 30, 2005.
Note 10. Lease Obligations
Columbus State University is obligated under various operating leases for the use of equipment. CAPITAL LEASES
Columbus State University had no capital leases at June 30, 2005.
OPERATING LEASES
Columbus State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2007. 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

Columbus State University Annual Financial Report FY 2005 26

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 in 2005 were $93,931.80 for 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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$92,299.80 26,568.88

0.00 $0.00

$118,868.68

Columbus State University Annual Financial Report FY 2005 27

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,770,292.31 $1,762,210.92 $1,811,127.48

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable

Columbus State University Annual Financial Report FY 2005 28

to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
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 2005, the employer contribution was 9.65% 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 $706,606.23 (9.65%) and $366,118.14 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $131,920.01 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Columbus State University Annual Financial Report FY 2005 29

Note 12. 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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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.
Columbus State University Annual Financial Report FY 2005 30

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, 2005. Note 14. 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, 2005, there were 235 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Columbus State University recognized as incurred $897,493.08 of expenditures, which was net of $403,494.96 of participant contributions.
Columbus State University Annual Financial Report FY 2005 31

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$14,432,313.06 3,391,084.87 3,606,441.74
161,612.30
218,060.46 3,395,426.00
35,092.00

$0.00

$0.00

$188,798.00 3,293,799.97
760,008.97
76,157.54
102,135.23 1,632,314.29
259,200.71

$650.00 2,260,377.68
542,374.35
31,934.65
93,891.88 823,502.79
2,647.29

$11,500.00 4,390,777.99 2,094,103.41
14,270.00 17,333.83 153,625.11 251,101.23 1,968,064.12 100,260.06

Total Expenses

$25,240,030.43

$0.00

$0.00

$6,312,414.71

$3,755,378.64

$9,001,035.75

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

$0.00 2,029,277.54
518,665.88

$0.00

$0.00 653,648.39
164,011.88

$0.00

7,161.88
1,627,591.31 4,458,705.63
(139,328.44)

4,424,735.57

46,802.21 689,468.35
51,580.97 2,292,044.43
36,533.33

35,959.00 1,597,769.67

$8,502,073.80

$4,424,735.57

$3,934,089.56

$1,633,728.67

Total Exp en s es
$14,633,261.06 16,018,966.44 7,685,606.23 14,270.00 341,002.41 5,267,829.03 2,344,361.08 14,606,016.26 1,892,174.62
$62,803,487.13

Columbus State University Annual Financial Report FY 2005 32

Note 16. Component Units
Columbus State University Foundation, Inc.
Columbus State University Foundation, Inc. (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 fifty-seven-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of the Foundation approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004, the Foundation distributed $78,564 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Columbus State University Foundation, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Foundation, the amount due from Columbus State University, $129,569 is not reflected as a payable on the University's Statement of Net Assets. This amount was expensed by the University before its year end, June 30, 2005.
Investments for Component Units:
Columbus State University Foundation, Inc. holds endowment investments in the amount of $10,456,481. 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, Inc., in conjunction with the donors, has established a spending plan whereby 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 purpose 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 Annual Financial Report FY 2005 33

Investments for Columbus State University Foundation were comprised of the following amounts at July 31, 2004:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$715,000.00 4,047,953.00 5,253,991.00 9,007,618.00
4,701,676.00

$715,000.00 4,052,038.00 5,069,362.00 8,922,311.00
4,528,584.00

Total Investments

$23,726,238.00

$23,287,295.00

Columbus State University Foundation had no long-term liabilities at 7-31-04.
Foundation Properties, Inc.
Foundation Properties, Inc. is a legally separate, tax-exempt component unit of Columbus State University (University). Foundation Properties, Inc. 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 eleven-member board Foundation Properties, Inc. is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from Foundation Properties, Inc., the majority of resources or income thereon that Foundation Properties, Inc. holds and invests is restricted to the real estate activities of the University by the donors. Because these restricted resources held by Foundation Properties, Inc. 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.
Foundation Properties, Inc. 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of Foundation Properties, Inc. approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004, Foundation Properties distributed $8,111 to the University for both restricted and unrestricted purposes. Complete financial statements for

Columbus State University Annual Financial Report FY 2005 34

Foundation Properties, Inc. can be obtained from Foundation Properties, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Foundation Properties, the amount due to Columbus State University, $264,011 is not reflected as a receivable on the University's Statement of Net Assets. This amount was received by the University before its year end, June 30, 2005.
Investments for Component Units:
Foundation Properties, Inc. holds investments in the amount of $5,451,206. Investments consist of marketable securities and bonds as follows:

Investments for Foundation Properties, Inc. were comprised of the following amounts at July 31, 2004:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00
254,883.00 1,993,798.00 3,097,774.00

$0.00
251,719.00 2,063,182.00 3,136,305.00

Total Investments

$5,346,455.00

$5,451,206.00

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 Foundation Properties, Inc. to finance the purchase of the One Arsenal Property to be incorporated with the future development of the Uptown Campus, as well as the construction of the Cunningham Conference Center.

Columbus State University Annual Financial Report FY 2005 35

Changes in long-term liabilities for Foundation Properties, Inc. for the month ended July 31,

2004 are shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2004

Additions

Reductions July 31, 2004 One Year

Revenue Bonds Payable

Foundation Properties, Inc.

Student Housing

$5,250,000.00

$6,666,000.00

$0.00

$11,916,000.00

$300,000.00

Educational Programming

7,130,000.00

$8,334,000.00

15,464,000.00

140,000.00

Total Long Term Debt

$12,380,000.00

$15,000,000.00

$0.00

$27,380,000.00

$440,000.00

Annual debt service requirements to maturity for Student Housing (Foundation Properties, Inc.) revenue bonds payable are as follows:

Bonds Payable

P r inc ipal

Int e r e s t

To t al

2005 2006 2007 2008 2009 Th ereafter 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

1 2 3 4 5
7-11 11-15 16-20 21-25 26-30 31-35 36-40

$300,000.00 366,660.00 439,986.00 448,874.00
6,610,480.00 3,750,000.00
$11,916,000.00

$215,478.00 211,157.00 205,489.00 198,273.00 190,828.00 178,547.00
$1,199,772.00

$515,478.00 577,817.00 645,475.00 647,147.00
6,801,308.00 3,928,547.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00
$13,115,772.00

Annual debt service requirements to maturity for Educational Programming (Foundation Properties, Inc.) revenue bonds payable are as follows:

Bonds Payable

2005 2006 2007 2008 2009 2010 2011 th rou g h 2015 2016 th rou g h 2020 2021 th rou g h 2025 2026 th rou g h 2030 2031 th rou g h 2035 2036 th rou g h 2040 2041 th rou g h 2045

Ye ar
1 2 3 4 5
6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$140,000.00 7,073,340.00
175,014.00 186,126.00 7,889,520.00

Int e r e s t
$849,964.00 842,614.00 176,862.00 173,222.00 169,285.00

To tal
$989,964.00 7,915,954.00
351,876.00 359,348.00 8,058,805.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

$15,464,000.00

$2,211,947.00

$17,675,947.00

Columbus State University Annual Financial Report FY 2005 36

Columbus State University Alumni Association, Inc.
Columbus State University Alumni Association, Inc. (Association) is a legally separate, taxexempt component unit of Columbus State University (University). The Association seeks to promote the mission of the University through mutually beneficial relations between the University and its alumni. The twenty-member board of the Association 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 Association, the majority of resources or income thereon that the Association holds and invests is restricted to the activities of the University by the donors. 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.
The Association 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of the Association approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004, the Association distributed $12,001 to the University for both restricted and unrestricted purposes. Complete financial statements for the Association can be obtained from Columbus State University Alumni Association, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Association, the amount due from Columbus State University, $43,204 is not reflected as a payable on the University's Statement of Net Assets. This amount was expensed by the University before its year-end, June 30, 2005.
Investments for Component Units:
Columbus State University Alumni Association, Inc. holds endowment investments in the amount of $39,990. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Columbus State University Alumni Association, Inc. in conjunction with the donors, has established a spending plan whereby 5% of the 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 Annual Financial Report FY 2005 37

Investments for Columbus State University Alumni Association were comprised of the following amounts at July 31, 2004:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00 70,019.00

$0.00 39,990.00

Total Investments

$70,019.00

$39,990.00

Columbus State University Alumni Association had no long term liabilities at July 31, 2004.

Columbus State University Annual Financial Report FY 2005 38

Columbus State University Athletic Fund, Inc.
Columbus State University Athletic Fund, Inc. (Athletic Fund) is a legally separate, tax-exempt component unit of Columbus State University (University). The Athletic Fund supports athletic endeavors of the institution. These endeavors include but are not limited to student services and student financial aid. The thirty-three-member board of the Athletic Fund 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 Athletic Fund, the majority of resources or income thereon that the Athletic Fund holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by the Athletic Fund 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 Athletic Fund 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The board of the Athletic Fund approved a change to its fiscal year to August 1 through July 31. This financial statement represents activity for the month ended July 31, 2004.
During the month ended July 31, 2004 the Athletic Fund distributed $37,444 to the University for both restricted and unrestricted purposes. Complete financial statements for the Athletic Fund can be obtained from Columbus State University Athletic Fund, Inc. at 4225 University Avenue, Columbus, Georgia 31907.
Due to the difference in fiscal year ending dates between Columbus State University and the Foundation, the amount due to Columbus State University, $18,855 is not reflected as a receivable on the University's Statement of Net Assets. This amount was received by the University before its year-end, June 30, 2005.
Investments for Component Units:
Columbus State University Athletic Fund, Inc. holds endowment investments in the amount of $1,405,378 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 Athletic Fund, Inc., in conjunction with the donors, has established a spending plan whereby 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 Annual Financial Report FY 2005 39

Investments for the Columbus State University Athletic Fund, Inc. were comprised of the following at July 31, 2004:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00
100,000.00 1,053,754.00

$0.00
100,000.00 1,305,378.00

Total Investments

$1,153,754.00

$1,405,378.00

Columbus State University Athletic Fund, Inc. had no long term liabilities at July 31, 2004.

Columbus State University Annual Financial Report FY 2005 40

DALTON STATE COLLEGE
Financial Report
For the Year Ended June 30, 2005

Dalton State College Dalton, Georgia

James A. Burran, Ph.D. President

Scott Bailey Vice President for Fiscal Affairs

DALTON STATE COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments......................................................................................18 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 Significant Commitments.................................................................21 Note 10 Lease Obligations.................................................................................................21 Note 11 Retirement Plans ..................................................................................................22 Note 12 Risk Management ........................................................................24 Note 13 Contingencies.......................................................................................................25 Note 14 Post-Employment Benefits Other Than Pension Benefits ...................................25 Note 15 Natural Classifications With Functional Classifications......................................27 Note 16 Component Units ........................................................................ 28

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. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

115

4,251

115

4,201

113

4,135

Overview of the Financial Statements and Financial Analysis

Dalton State College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 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
Dalton State College Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Ne t Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Un rest rict ed Total Ne t Asse ts

June 30, 2005 $4,870,244.44 19,309,529.25 24,179,773.69
1,280,480.50 143,211.17
1,423,691.67
19,309,529.25 1,960.89
3,444,591.88 $22,756,082.02

June 30, 2004 $6,138,424.15 19,083,863.93 25,222,288.08
2,338,744.92 113,711.79
2,452,456.71
19,083,863.93 4,900.78
3,681,066.66 $22,769,831.37

The total assets of the institution decreased by ($1,042,514.39). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($1,274,889.35) in receivables. The decrease in receivables results from the USO's decision to change the way Colleges and University's report their deferred revenue.
The total liabilities for the year decreased by ($1,028,765.04). The primary cause for the decrease was due to the USO's decision for each college and university to not show uncollected deferred revenue for FY2006. The combination of the decrease in total assets of ($1,042,514.39) and the decrease in total liabilities of ($1,028,765.04) yields an decrease in total net assets of ($13,749.35).
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 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
Dalton State College Annual Financial Report FY 2005 2

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, 2005

June 30, 2004

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

$13,168,174.10 25,508,137.22 (12,339,963.12) 11,691,329.16
(648,633.96) 634,884.61 (13,749.35) 22,769,831.37 22,769,831.37 $22,756,082.02

$8,869,564.91 21,911,371.11 (13,041,806.20) 13,956,603.57
914,797.37 362,600.00 1,277,397.37 21,492,434.00 21,492,434.00 $22,769,831.37

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:

Dalton State College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot her
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot her
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$4,269,609.35
6,700,537.21 410,802.18
1,701,125.55 86,099.81
13,168,174.10
11,301,039.76
473,376.54 81,625.48
(164,712.62) 11,691,329.16
623,884.61 11,000.00
634,884.61
$25,494,387.87

June 30, 2004
$3,685,836.97 3,186,004.02 350,869.48 1,594,341.39 52,513.05 8,869,564.91
10,706,709.69 3,162,933.86 25,997.44 60,962.58
13,956,603.57
362,600.00 362,600.00 $23,188,768.48

Dalton State College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

June 30, 2005
$11,948,801.38
(26.64) 2,028,200.33 1,757,135.05 2,623,694.52 2,742,742.30 1,971,933.86 1,688,195.78
747,460.64
25,508,137.22
$25,508,137.22

June 30, 2004
$11,543,650.43 1,453.48
1,475,811.93 1,390,785.19 2,568,251.93 1,645,522.86 1,842,107.17 1,443,788.12
21,911,371.11
$21,911,371.11

Under non-operating revenues (expenses) state appropriations increased by approximately $594,330.07. The increase was primarily due to the continued growth of the student body and other academic programs at Dalton State College.
The increase in expenses from June 30, 2004 to June 30, 2005 is attributed largely to depreciation, supplies, equipment and other services in academic support and plant operations. The increase in plant operations was attributed to maintenance, repairs and rehabilitation funds (MRR) for the campus and also construction work in progress for the new continuing education building.
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 2005 5

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($10,995,414.92) 11,817,142.87 (809,765.14) 81,625.48 93,588.29 3,212,318.41
$3,305,906.70

June 30, 2004
($11,921,463.91) 13,075,698.56 (576,937.96) 25,997.44 603,294.13 2,609,024.28
$3,212,318.41

Capital Assets
The College had no significant capital asset additions for facilities in fiscal year 2005.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt
Dalton State College had Long-Term Debt which consisted of Compensated Absences totaling $449,454.45 of which $306,243.28 was reflected as a current liability at June 30, 2005.
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, Dalton State College has included the financial statements and notes for all required component units for FY2005. The Dalton State College Foundation had endowment investments of $8.9 M as of March 31, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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 the previous year. The College will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
James A. Burran, Ph.D., President
Dalton State College

Dalton State College Annual Financial Report FY 2005 6

Statement of Net Assets

DALTO N STATE C O LLEGE STATEMENT O F NET ASSETS
June 30, 2005

AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allot ment Receivables - Other Leases Receivable Pledges Receivable In ven t o ries Prepaid it ems Notes and Mortgages Receivable Ot her Assets T ot al Current Assets

Dalton State College
$3,305,906.70
372,502.41 1,032,192.14
327,431.71 (167,788.52)
4,870,244.44

Noncurre nt Asse ts Noncurrent Cash Invest ment s (including Real Estate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Asset s, net T ot al Noncurrent Assets
TO TAL ASSETS
LIABILITIES C urre nt Liabil itie s Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposit s Deferred Revenue Ot her Liabilities Deposit s Held for Other Organizat ions Current Port ion of Long-term Debt Compensat ed Absences (current portion) T ot al Current Liabilities Noncurre nt Liabil itie s Lease Purchase Obligations (noncurrent ) Deferred Revenue (noncurrent) Compensat ed Absences (noncurrent ) Deposit s Liabilities under Split-Interest Agreement s Ot her Long-T erm Liabilities T ot al Noncurrent Liabilities TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Assets, net of related debt Rest rict ed for Nonexpendable Expendable Capit al Projects Un rest rict ed TO TAL NET ASSETS

19,309,529.25 19,309,529.25 24,179,773.69
594,668.43
276,235.24 103,333.55 306,243.28 1,280,480.50
143,211.17
143,211.17 1,423,691.67
19,309,529.25
1,960.89 3,444,591.88 $22,756,082.02

Dalton State C olle ge Fou n da ti o n $1,669,138.00
161,488.00
1,830,626.00 8,939,673.00
363,016.00 9,302,689.00 11,133,315.00
90,652.00
90,652.00
0.00 90,652.00
7,134,345.00 409,942.00
1,009,961.00 2,488,415.00 $11,042,663.00

Dalton State College Annual Financial Report FY 2005 7

Statement of Revenues, Expenses and Changes in Net Assets
DALTO N STATE C O LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Dalton State College
T otal Operating Expenses Operating Income (loss)

Dalton State College
$5,504,611.97 1,235,002.62
4,769,369.24 1,402,480.42
528,687.55 410,802.18
17,475.00
1,460,351.29 240,774.26
68,624.81 13,168,174.10
6,591,421.90 5,343,961.59 3,017,515.07
155.76 114,858.92 2,206,252.19 634,889.14 6,372,737.15 1,226,345.50 25,508,137.22 (12,339,963.12)

Dalton State College
Fou n dati on $0.00
1,127,968.00 218,300.00
1,346,268.00
33,488.00 279,317.00 312,805.00 1,033,463.00

Dalton State College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
DALTO N STATE C O LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

Dalton State College
11,301,039.76
473,376.54 81,625.48
(164,712.62) 11,691,329.16
(648,633.96)
623,884.61 11,000.00
634,884.61 (13,749.35) 22,769,831.37 22,769,831.37 $22,756,082.02

Dalton State College
Fou n dati on
0.00 1,033,463.00
150,705.00 150,705.00 1,184,168.00 9,858,495.00 9,858,495.00 $11,042,663.00

Dalton State College Annual Financial Report FY 2005 9

Statement of Cash Flows

DALTO N S TATE C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005

C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart ment s P ayment s t o Suppliers P ayments to Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005 $5,308,444.43
6,958,890.54 421,484.06
(9,645,541.48) (12,635,810.47)
(3,441,254.81)
1,449,764.96 242,517.60
346,090.25 (10,995,414.92) 11,301,039.76
32,168.41 483,934.70 11,817,142.87
(809,765.14)
(809,765.14)
81,625.48 81,625.48 93,588.29 3,212,318.41 $3,305,906.70

Dalton State College Annual Financial Report FY 2005 10

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net In v en t o r ies Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($12,339,963.12)
1,226,345.50 226,656.06 (59,165.68) 66,654.51 45,318.95 102,936.78 17,541.55 (281,739.47)
($10,995,414.92)
($623,884.61)

Dalton State College Annual Financial Report FY 2005 11

DALTON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Dalton State College is reporting the activity for the Dalton State College Foundation.
See Note 16. 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 2005 12

amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 Statement 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 2005 13

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $449,417.03 to Dalton State College.
Deposits Dalton State College does not maintain any deposits.
Dalton State College Annual Financial Report FY 2005 14

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. Dalton State College had accrued liability for compensated absences in the amount of $416,793.86 as of 7-1-2004. For FY2005, $375,586.33 was earned in compensated absences and employees were paid $342,925.74, resulting in a net increase of $32,660.59. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $449,454.45.
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 previously in Note 1 Capital Assets section.
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.
Dalton State College Annual Financial Report FY 2005 15

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $1,960.89
$1,960.89

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 Other Unrestricted T otal Unrestricted Net Assets

June 30, 2005
$566,457.33 1,593,738.73
7,983.42 1,276,412.40 $3,444,591.88

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

Dalton State College Annual Financial Report FY 2005 16

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Dalton State College Annual Financial Report FY 2005 17

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, all but $100,000 of the college's deposits were uninsured. Of these uninsured deposits, no funds were collateralized with securities held by the financial institution's trust department or agent in the college's name, no funds were collateralized with securities held by the financial institution, by its trust department or agency, but not in the college's name and $2,830,941.57 were uncollateralized.
Dalton State College Annual Financial Report FY 2005 18

B. Investments

At June 30, 2005, the carrying value of the college's investment was $967,182.30, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

$967,182.30

$967,182.30

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$216,716.46 39,956.13
372,502.41
810,116.10 1,439,291.10
34,596.55
$1,404,694.55

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005
$310,304.60 9,239.82 5,453.19 2,434.10
$327,431.71

Note 5. Notes/Loans Receivable Dalton State College does not have any notes/loans receivables.

Dalton State College Annual Financial Report FY 2005 19

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$435,065.30
435,065.30

Additions
$0.00 449,417.03 449,417.03

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

1,346,095.00 22,437,770.52 1,172,871.00 3,296,069.63
4,380,560.00
32,633,366.15

476,292.08 283,280.81 759,572.89

181,944.80 (2,996.03)
178,948.77

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

925,552.72 7,058,754.98
883,129.92 1,803,595.36
3,313,535.00
13,984,567.98

29,730.17 475,202.06 26,359.27 486,062.00
208,992.00
1,226,345.50

(26,600.04) 17,677.52 406,828.65
24,064.00
421,970.13

Total Capital Assets, Being Depreciated, Net Capital Assets, net

18,648,798.17 $19,083,863.47

(466,772.61) ($17,355.58)

(243,021.36) ($243,021.36)

Ending Balance 6/30/2005
$435,065.30 449,417.03 884,482.33
1,346,095.00 22,437,770.52 1,172,871.00 3,590,416.91
0.00 4,666,836.84
0.00 33,213,990.27
955,282.89 7,560,557.08
891,811.67 1,882,828.71
0.00 3,498,463.00
0.00 14,788,943.35
18,425,046.92
$19,309,529.25

Dalton State College Annual Financial Report FY 2005 20

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $23,395.75 252,839.49
$276,235.24

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

416,793.86 416,793.86

375,586.33 375,586.33

342,925.74 342,925.74

449,454.45 449,454.45

Total Long Term Obligations

$416,793.86

$375,586.33

$342,925.74

$449,454.45

Current Portion
$0.00
306,243.28 306,243.28 $306,243.28

Note 9. Significant Commitments
The contractor of the new continuing education building (Blaine Construction) had significant unearned, outstanding, construction or renovation contracts executed in the amount of $4,217,582.97 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Dalton State College is obligated under various operating leases for the use of real property (land, buildings, and office facilities). CAPITAL LEASES
Dalton State College had no capital leases for FY 2005.

Dalton State College Annual Financial Report FY 2005 21

OPERATING LEASES
Dalton State College had only one lease for FY 2005. This facility was leased for instructional classes at the following cost: $2835.75/month, year by year lease, $34,974.00 annual lease.

Year Ending June 30: 2006 2007 2008 2009 2010 2011 t hrough 2015 2016 t hrough 2020 2021 t hrough 2025 2026 t hrough 2030 2031 t hrough 2035 2036 t hrough 2040 2041 t hrough 2045 T ot al m inim um lease paym ent s
Less: Int erest Less: Execut ory cost s (if paid) P rincipal Out st anding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Real P roperty

Capit al Leases

Operat ing Leases

$0.00

$34,974.00

0.00 $0.00

$34,974.00

Note 11. 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 TRS offices or from the Georgia Department of Audits and Accounts.

Dalton State College Annual Financial Report FY 2005 22

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 2005, 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

2005 2004 2003

100% 100% 100%

$717,455.73 $688,914.87 $739,892.52

Employees' Retirement System of Georgia

Dalton State College made no contributions to the Employees' Retirement System for FY2005.

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $282,457.23 (9.65%) and $146,362.96 (5%), respectively.

AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.

Dalton State College Annual Financial Report FY 2005 23

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 2005 amounted to $50,451.69 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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.
Dalton State College Annual Financial Report FY 2005 24

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
It is probable that litigation will be initiated against Dalton State College and The Board of Regents in the subsequent fiscal year. The amount of any claim or judgment, if any, is undetermined at the present time.
Note 14. 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
Dalton State College Annual Financial Report FY 2005 25

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, 2005, there were 76 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Dalton State College recognized as incurred $256,745.90 of expenditures, which was net of $115,168.09 of participant contributions.
Dalton State College Annual Financial Report FY 2005 26

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$6,575,872.46 1,895,445.02 1,946,961.24
64,421.62 97,618.08 95,946.23 1,195,613.20 76,923.53

$0.00

$0.00 (26.64)

$0.00 758,366.91 192,542.79
5,126.02
9,757.61 826,597.23 235,809.77

$7,348.00 757,795.06 232,731.99
22,678.78
18,186.56 713,686.28
4,708.38

$8,201.44 1,122,241.35
395,051.19 155.76
17,389.99 136,700.25 18,205.51 908,549.12 17,199.91

Total Expenses

$11,948,801.38

$0.00

($26.64) $2,028,200.33 $1,757,135.05 $2,623,694.52

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat ion
Total Expenses

Plant Operat ions & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Ent erprises

Unallocat ed Expenses

$0.00 642,782.21 205,337.09
(8,514.41) 1,356.15
488,897.78 1,277,791.25
135,092.23

$0.00 1,971,933.86

$0.00 167,331.04
44,890.77 8,514.41 3,886.36
3,895.45 1,450,526.71
9,151.04

$0.00 747,460.64

$2,742,742.30 $1,971,933.86 $1,688,195.78

$747,460.64

T ot al Expenses
$6,591,421.90 5,343,961.59 3,017,515.07 155.76 114,858.92 2,206,252.19 634,889.14 6,372,737.15 1,226,345.50
$25,508,137.22

Dalton State College Annual Financial Report FY 2005 27

Note 16. Component Units

Dalton State College Foundation (Foundation) is a legally separate, tax-exempt component unit of Dalton State College (College). The organization was incorporated as a non-profit corporation under the Non-Profit Corporation Code of the State of Georgia on December 14, 1967. The organization's purpose is to provide individual grants, scholarships, and educational programs for eligible faculty and residents of the North Georgia area in cooperation with Dalton State 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. In order to provide information to Dalton State College in a timely manner, the Board of Directors of the Foundation voted to change its year end from June 30 to March 31. The foundation's fiscal year is April 1 through March 31. For FY2005, the statements are for a nine month fiscal year.

During the year ended March 31, 2005, the Foundation distributed $279,317 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 650 College Drive, Dalton, GA 30720-3797.

Investments for Component Units:

The Dalton State College Foundation holds endowment investments in the amount of $8.9 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Dalton State College Foundation Investments are comprised of the following amounts at March 31, 2005:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR T otal Return Fund

$0.00 33,590.70 701,299.02 303,377.14 875,381.27 898,470.77

$0.00 33,590.70 684,570.09 302,056.68 1,006,464.10 978,224.72

6,569,099.97

5,934,766.99

T otal Investments

$9,381,218.87

$8,939,673.28

Dalton State College Annual Financial Report FY 2005 28

DARTON COLLEGE
Financial Report
For the Year Ended June 30, 2005

Darton College Albany, Georgia

___________________
Peter J. Sireno President

___________________
Ronnie A. Henry Vice President for Business and Financial Services

Darton College Annual Financial Report FY 2005 1

DARTON COLLEGE ANNUAL FINANCIAL REPORT
FY 2005 Table of Contents Management's Discussion and Analysis ............................................................................. 3 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets........................................... 9 Statement of Cash Flows ................................................................................................... 13 Note 1 Summary of Significant Accounting Policies ..................................................... 15 Note 2 Deposits and Investments.................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 22 Note 4 Inventories............................................................................................................ 22 Note 5 Notes/Loans Receivable....................................................................................... 22 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 24 Note 8 Long-Term Liabilities .......................................................................................... 24 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 24 Note 11 Retirement Plans ................................................................................................. 26 Note 12 Risk Management................................................................................................ 29 Note 13 Contingencies...................................................................................................... 30 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 15 Natural Classifications With Functional Classifications..................................... 31 Note 16 Component Units ........................................................................ 30
Darton College Annual Financial Report FY 2005 2

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 allied health and technology-related programs. The College offers associates degrees in a wide variety of subjects. This diverse range of educational opportunities attracts a highly qualified faculty and a student body of more than 4,000 students. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

86

4126

78

3811

64

3356

Overview of the Financial Statements and Financial Analysis

Darton College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

Darton College Annual Financial Report FY 2005 3

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 ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities

June 30, 2005 $5,005,486.63 30,038,772.31 35,044,258.94
2,110,034.92 348,394.88

June 30, 2004 $4,728,490.18 12,032,258.58 16,760,748.76
1,879,315.62 382,584.04

Total Liabilities

2,458,429.80

2,261,899.66

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

30,038,772.31
2,547,056.83 $32,585,829.14

12,032,258.58
2,466,590.52 $14,498,849.10

The total assets of the institution increased by $18,283,510.18. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $18,006,513.73 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 $196,530.14. The primary cause for the increase was in current liabilities, primarily $184,694.00 in deferred revenue. The combination of the increase in total assets of $18,283,510.18 and the increase in total liabilities of $196,530.14 yields an increase in total net assets of $18,086,980.04. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $18,006,513.73.

Darton College Annual Financial Report FY 2005 4

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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$15,700,137.10 28,421,814.03 (12,721,676.93) 12,436,523.46
(285,153.47) 18,372,133.51 18,086,980.04 14,498,849.10 14,498,849.10 $32,585,829.14

$13,148,705.92 25,356,144.11 (12,207,438.19) 12,540,414.72
332,976.53 115,580.00 448,556.53 14,050,292.57 14,050,292.57 $14,498,849.10

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:

Darton College Annual Financial Report FY 2005 5

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$4,395,178.67
8,344,085.65 311,888.34
2,558,443.39 90,541.05
15,700,137.10
12,049,614.62
366,966.53 34,205.85 (14,263.54)
12,436,523.46
18,372,133.51
18,372,133.51 $46,508,794.07

June 30, 2004
$3,853,110.55 6,453,956.41 400,309.02 2,307,206.02 134,123.92
13,148,705.92
11,567,680.57 844,394.63 107,812.05 23,538.91 (3,011.44)
12,540,414.72
115,580.00
115,580.00 $25,804,700.64

Darton College Annual Financial Report FY 2005 6

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$11,801,811.52 2,567.46
295,320.75 2,026,685.69 2,199,086.08 2,671,016.15 3,111,745.57 4,056,877.50 2,256,703.31
28,421,814.03
$28,421,814.03

June 30, 2004
$10,849,588.99 13,048.49 293,576.93
1,650,841.14 1,907,017.93 2,988,324.29 2,140,988.03 3,373,684.06 2,139,074.25
25,356,144.11
$25,356,144.11

Tuition and Fee revenue increased by $542,068.12, which was primarily driven by the increase in the number of students attending the College. Darton also implemented a modest increase in tuition as approved by the Board of Regents of the University System of Georgia. Additionally, the College's Grant and Contract revenue increased by $1,890,129.24 which reflects an increase in the revenue generated by the Pell grant of over $800,000.
The most significant increase in Total Revenue is in the area of Capital Gifts and Grants. The increase of over $18,200,000 reflects the addition of the Physical Education Building and the addition of the new Math and Science Building. These projects will be discussed fully in the Capital Asset section.
The compensation and employee benefits category increased by approximately $937,335.43. The increase reflects an increased cost of health insurance for the employees of the institution as well as salary increases which went into effect January 1, 2005.
Utilities increased by approximately $55,106.53 during the past year. The increase was primarily associated with the full utilization of the new Physical Education Building.
Under non-operating revenues (expenses) state appropriations increased by approximately $481,934.05. The increased revenues were a result of the increased number of students attending Darton College. Formula funding created an increase in appropriations, but the budget cuts of the past few years reduced some of these gains. We are hopeful that there will be no additional funding cuts in the future, and the College will be able to utilize all of the gains created by the funding formula.

Darton College Annual Financial Report FY 2005 7

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 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($11,447,872.12) 12,557,198.75 (468,552.07) 34,205.85 674,980.41 2,265,004.92
$2,939,985.33

June 30, 2004
($11,390,807.56) 12,402,408.48 (258,877.53) 23,538.91 776,262.30 1,488,742.62
$2,265,004.92

Capital Assets
The College had two significant capital asset additions in fiscal year 2005. The Physical Education Building expansion was completed and placed into full service early in fiscal year 2005. The Physical Education Building is a beautiful addition to the Darton College campus, and it was completed at a cost of $13,701,862.26.
In addition to the Physical Education Building, an adjustment was made in the Capital Ledger to clarify the addition of the Science and Math Building renovation completed in 2001.The Science and Math Building was completed at a cost of $4,934,996.94 and $4,489,795.94 of this expenditure is being added to Investment in Plant this year. Both the Physical Education Building and the Science and Math Building renovation were 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.

Darton College Annual Financial Report FY 2005 8

Long Term Debt Darton College had a Long-Term Debt obligation of $679,231.90 of which $330,837.02 was reflected as current liability at June 30, 2005. 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, Darton College has included the financial statements and notes for all required component units for FY2005. The Darton College Foundation had endowment investments of over $860,000 as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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, and we anticipate that with a fully funded Fiscal Year 2006, the College will be able to produce a slight increase in the overall Net Assets of the College. As always, the College will maintain a close watch over resources to insure the College's ability to react to unknown internal and external issues. Peter J. Sireno, President Darton College
Darton College Annual Financial Report FY 2005 9

Statement of Net Assets

Darton College STATEMENT OF NET ASSETS
June 30, 2005
Darton College

AS S ETS Current Ass ets Cas h and Cash Equivalents Short-term Investments A ccounts Receivable, net Receivables - Federal Financial A ssistance Receivables - State General Appropriations Allotment Receivables - Other Leases Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurrent Ass ets Noncurrent Cash Investments (including Real Es tate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Ass ets, net Total Noncurrent As sets TOTAL AS SETS
LIABILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable De p o s its Deferred Revenue Other Liabilities Deposits Held for Other Organizations Current Portion of Long-term Debt Compensated Abs ences (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Abs ences (noncurrent) De p o s its Liabilities under Split-Interest Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Capital A ssets, net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Un res t rict ed TOTAL NET ASS ETS

$2,939,985.33 438,146.71
1,410,250.79 217,103.80
5,005,486.63
30,038,772.31 30,038,772.31 35,044,258.94
380,112.88 542,991.22
648,925.31 207,168.49 330,837.02 2,110,034.92
348,394.88
348,394.88 2,458,429.80 30,038,772.31
2,547,056.83 $32,585,829.14

Darton College Foundation
$1,081,271.00
56,000.00 1,137,271.00
828,523.00 828,523.00 1,965,794.00
1,092,802.00 224,746.00 574,925.00 73,321.00
$1,965,794.00

Darton College Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets

DARTON COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005

REVENUES

Darton College

Darton College Foundation

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Gifts and Contributions Endowment Income (per s pending plan) Federal A ppropriations Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Darton College
Total Operating Expens es Operating Income (los s )

$6,510,951.67 2,115,773.00
7,049,939.27 360,686.94 933,459.44 311,888.34 35,098.75
1,778,880.42 183,229.90 8,467.07
542,200.71 45,665.29 55,442.30
15,700,137.10
6,517,938.06 6,450,573.21 2,991,895.17
1,320.00 104,097.59 4,335,183.47 937,091.22 6,249,269.13 834,446.18
28,421,814.03 (12,721,676.93)

$0.00 850,504.00
18,530.00
869,034.00
153,252.00 176,283.00 329,535.00 539,499.00

Darton College Annual Financial Report FY 2005 11

Statement of Revenues, Expenses and Changes in Net Assets, Continued

DARTON COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005

Darton College

Darton College Foundation

NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Other A dditions to permanent endowments Total Other Revenues Increas e in Net A s s ets
NET AS S ETS Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated Net A s s ets -End of Year

12,049,614.62

366,966.53 34,205.85
(14,263.54) 12,436,523.46
(285,153.47)
18,372,133.51
18,372,133.51 18,086,980.04 14,498,849.10
14,498,849.10 $32,585,829.14

6,101.00
6,101.00 545,600.00
51,000.00 51,000.00 596,600.00 1,369,194.00 1,369,194.00 $1,965,794.00

Darton College Annual Financial Report FY 2005 12

Statement of Cash Flows
DARTON COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$6,654,388.64
8,453,073.93 308,741.44
(10,484,574.58) (12,910,504.16)
(6,450,956.47)
1,864,631.04 199,057.98 8,467.07
650,312.68 45,665.29 213,825.02 (11,447,872.12)
12,049,614.62 140,617.60 366,966.53
12,557,198.75
(468,552.07)
(468,552.07)
34,205.85
34,205.85 674,980.41 2,265,004.92 $2,939,985.33

Darton College Annual Financial Report FY 2005 13

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Gift of capital as s ets reducing proceeds of capital grants and gifts

($12,721,676.93)
834,446.18 711,667.81 (40,038.00) (280,970.94)
13,606.10 (2,263.67) 37,357.33 ($11,447,872.12)
(18,372,133.51)

Darton College Annual Financial Report FY 2005 14

DARTON COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Darton College is reporting the activity for the Darton College Foundation.
See Note 16. Component Units, for foundation notes.
Darton College Annual Financial Report FY 2005 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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
Darton College Annual Financial Report FY 2005 16

component of investment income in the Statement 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 recorded on the consumption method and are valued at cost using the weighted average method. Resale Inventories are valued at cost 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 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $18,372,133.51 to Darton College.
Darton College Annual Financial Report FY 2005 17

Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. For FY 2005 the College had no residence halls.
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 accrued liability for compensated absences in the amount of $692,968.65 as of 7-1-2004. For FY2005, $480,193.15 was earned in compensated absences and employees were paid $493,929.90, for a net decrease of $13,736.75. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $679,231.90.
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.
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 previously in Note 1 Capital Assets section.
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.
Darton College Annual Financial Report FY 2005 18

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 Expendable Restricted Net Assets at June 30, 2005.

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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2005
$510,088.25 1,317,086.67
44,652.50 675,229.41 $2,547,056.83

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
Darton College Annual Financial Report FY 2005 19

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Darton College Annual Financial Report FY 2005 20

Note 2: Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $3,026,294.04 of the college's deposits were uninsured. Of these uninsured deposits, $3,026,294.04 were collateralized with securities held by the financial institution's trust department or agent in the college's name.
B. Investments
At June 30, 2005, the College had no investments.
Darton College Annual Financial Report FY 2005 21

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$181,980.86 134,071.41 438,146.71
1,364,340.08 2,118,539.06
270,141.56
$1,848,397.50

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $173,006.31
44,097.49 $217,103.80

Note 5. Notes/Loans Receivable
As of June 30, 2005 the College had no Federal Perkins Loans on the books. Therefore, at June 30, 2005 the allowance for uncollectible loans was 0 due to the fact that the College has no Perkins loans outstanding.

Darton College Annual Financial Report FY 2005 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$989,112.76 115,580.00 1,104,692.76

Additions
$0.00 180,475.31 180,475.31

Reductions $0.00

Ending Balance 6/30/2005
$989,112.76 296,055.31 1,285,168.07

16,131,212.80 1,490,909.28 2,545,752.70
216,751.12 2,942,824.87
23,327,450.77

18,294,888.20 287,225.27 78,096.80
18,660,210.27

95,690.60 9,715.67 105,406.27

34,426,101.00 1,490,909.28 2,737,287.37
216,751.12 3,011,206.00
41,882,254.77

6,934,561.60 875,584.16
2,002,582.93 148,113.26
2,439,043.00
12,399,884.95
10,927,565.82
$12,032,258.58

395,417.93 68,275.21 227,349.83 43,350.21 100,053.00
834,446.18
17,825,764.09
$18,006,239.40

95,690.60 9,990.00 105,680.60 (274.33) ($274.33)

7,329,979.53 943,859.37
2,134,242.16 191,463.47
2,529,106.00
13,128,650.53
28,753,604.24
$30,038,772.31

Darton College Annual Financial Report FY 2005 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $0.00
648,925.31 $648,925.31

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

692,968.65 692,968.65
$692,968.65

480,193.15 480,193.15
$480,193.15

493,929.90 493,929.90
$493,929.90

679,231.90 679,231.90
$679,231.90

Current Portion
$0.00
330,837.02 330,837.02 $330,837.02

Note 9. Significant Commitments
The College did not have any significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2005.
Note 10. Lease Obligations
Darton 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. 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. There were no expenditures for fiscal
Darton College Annual Financial Report FY 2005 24

year 2005. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Equipment Total Assets Held Under Capital Lease

216,751.12 $216,751.12

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.
OPERATING LEASES
Darton College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 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 has no real property operating leases at this time.

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$0.00

$4,325.16 131,437.38
40,020.23

$0.00

$175,782.77

Darton College Annual Financial Report FY 2005 25

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$692,494.74 $673,712.33 $657,862.44

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 2005 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, 2005, for employees covered by ERS was $32,186.34. The College's total payroll for all employees was $15,960,406.44.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the College 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 2005 amounted to $3,833.40, of which $3,350.58 was made by the College and $482.82 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, 2005, financial report, which may be obtained through ERS.
Darton College Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $209,322.94 (9.65%) and $108,457.66 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
Darton College Annual Financial Report FY 2005 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 2005 amounted to $148,608.35 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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
Darton College Annual Financial Report FY 2005 29

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 92 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Darton College recognized as incurred $361,898.42 of expenditures, which was net of $113,143.16 of participant contributions.
Darton College Annual Financial Report FY 2005 30

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$6,511,958.06 1,766,228.36 1,781,220.93
35,767.26 18,424.00
961.09 1,008,732.29
678,519.53

$1,480.00 21.46
1,066.00

$0.00 144,084.04 47,401.80
10,664.95
4,910.17 88,259.79

$0.00 $1,042,682.30
286,667.89
17,572.25
3,606.10 527,661.92 148,495.23

$0.00 1,145,009.10 267,910.26
18,771.22 71,912.17
695,483.33

$0.00 1,358,116.18 426,265.73
1,320.00 16,759.34
191,352.23 714,844.45 (37,641.78)

Total Expenses

$11,801,811.52

$2,567.46

$295,320.75

$2,026,685.69

$2,199,086.08

$2,671,016.15

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2005

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

$0.00 733,605.55 118,809.70 (16,748.28)
706.39
736,261.63 1,498,175.28
40,935.30

$0.00 4,056,877.50

$4,500.00 260,847.68
63,597.40 16,748.28
3,856.18 187,969.80
1,715,046.07 4,137.90

$0.00

$3,111,745.57

$4,056,877.50

$2,256,703.31

$0.00

Total Expens es
$6,517,938.06 6,450,573.21 2,991,895.17 1,320.00 104,097.59 4,335,183.47 937,091.22 6,249,269.13 834,446.18
$28,421,814.03

Darton College Annual Financial Report FY 2005 31

Note 16. 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 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $176,283 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Darton College Business Office, 2400 Gillionville Rd. Albany GA 31707.

Investments for Component Units

Darton College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund
Total Inves tments

$253,449.90 75,241.07 204,243.97
166,175.61 118,315.24
5,000.00

$253,449.90 75,241.07 204,230.29
175,200.92 115,400.82
5,000.00

$822,425.79

$828,523.00

Darton College Annual Financial Report FY 2005 32

EAST GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2005

Dr. John Black
President

East Georgia College Swainsboro, Georgia
Adriance M. Galloway
Vice President for Fiscal Affairs

EAST GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 23 Note 8 Long-Term Liabilities .......................................................................................... 23 Note 9 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 25 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units ........................................................................ 30

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 exceeds 1,300 students each year. The institution's enrollment decreased in Fiscal Year 2005 due to a change by the Board of Regents disallowing the College's participation in the Liberty Center collaborative program and full-time faculty positions decreased due to reduced allocations in state appropriation due to reduced State revenues.

Faculty

Students

FY2005 FY2004 FY2003

32

1,318

35

1,420

38

1,499

Overview of the Financial Statements and Financial Analysis

East Georgia College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

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 Capital Projects Unrestricted Total Net Assets

June 30, 2005
$1,260,928.11 11,942,810.78
367,012.24 13,570,751.13
615,209.17 122,983.91
738,193.08
11,933,116.32 37,100.00 39,410.54
822,931.19 $12,832,558.05

June 30, 2004
$1,413,998.55 11,335,461.91
370,148.84 13,119,609.30
799,998.42 134,314.78
934,313.20
11,327,310.07 37,100.00 40,864.85
780,021.18 $12,185,296.10

The total assets of the institution increased by $451,141.83. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $607,348.87 of investment in plant, net of accumulated depreciation. This increase in Capital Assets is explained more thoroughly in Footnote 6 of the financial statement. This increase in net assets follows the institutional philosophy to utilize the available resources to acquire and improve all areas of the institution to better serve the instruction and public service missions of the institution.
The total liabilities for the year decreased by ($196,120.12). The primary cause for the decrease was in current liabilities, primarily ($128,897.12) in deferred revenue not earned or received prior to the end of the fiscal year. In addition, deposits held for other organizations decreased by ($110,787.13). The combination of the increase in total assets of $451,141.83 and the decrease in total liabilities of ($196,120.12) yields an increase in total net assets of $647,261.95. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $605,806.25.

East Georgia College Annual Financial Report FY 2005 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, 2005

June 30, 2004

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

$3,254,217.68 8,754,759.48 (5,500,541.80) 5,101,944.47
(398,597.33) 1,045,859.28
647,261.95 12,185,296.10 12,185,296.10 $12,832,558.05

$3,108,589.02 8,463,413.76 (5,354,824.74) 5,019,274.95
(335,549.79) 278,852.60 (56,697.19) 12,316,093.74 (74,100.45) 12,241,993.29 $12,185,296.10

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:

East Georgia College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$1,102,847.80
2,050,110.34 43,233.45 26,092.00 31,934.09
3,254,217.68
4,931,197.37 92,010.53 43,012.50 44,347.60 (7,867.63)
5,102,700.37
1,045,859.28
1,045,859.28
$9,402,777.33

June 30, 2004
$1,072,666.45
1,921,957.61 47,180.55 17,537.72 49,246.69
3,108,589.02
4,812,568.37 131,800.99 49,632.00 26,454.25
5,020,455.61
265,922.60 12,930.00
278,852.60 $8,407,897.23

East Georgia College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)
Total Expenses

June 30, 2005
$2,549,702.61
726,977.72 930,207.39 622,132.27 1,249,746.19 1,456,878.62 1,202,582.94
16,531.74
8,754,759.48
755.90 $8,755,515.38

June 30, 2004
$2,785,579.86
588,150.07 829,133.65 602,382.36 1,211,684.00 1,291,638.41 1,139,047.82
15,797.59
8,463,413.76
1,180.66 $8,464,594.42

Operating revenues increased by $145,628.66 which included an increase in student tuition and fees of $56,107.23. Even though the College experienced a reduction in student head count for the year, full-time equivalents (FTE) continued to increase as students increased the credit hours taken. Operating expenses increased overall by $291,345.72 which included an increase in scholarships of $70,427.52.

East Georgia College is a commuter institution without a residential population. Revenues associated with auxiliary services increased by $8,554.28 during the year. This increase reflects the addition of vehicle registration fees to Auxiliary Enterprises offset by an overall reduction in commission revenue received from privatized operations that include the snack bar, the bookstore, and vending operations.

The compensation and employee benefits category decreased by ($136,117.58). The decrease reflects the institutional portion allocated from the Board of Regents Health Insurance Reserve as well as the decreased number of faculty positions at the institution.

Utilities increased by $415.57 during the past year. This minimal increase was primarily associated with the increased electricity and water costs that were experienced over the entire fiscal year 2005. East Georgia College is a total electric campus with no usage of natural gas for utilities.

Under non-operating revenues (expenses) there was a slight increase of $118,629.00 in State Appropriations. There was also an increase of $779,936.68 in state capital gifts and grants.

East Georgia College Annual Financial Report FY 2005 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.

Cash Flows for the Years Ended June 30, 2005 and 2004, 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, 2005
($4,926,186.37) 4,989,042.57 (122,905.60) (10,855.43) (70,904.83) 1,038,588.02
$967,683.19

June 30, 2004
($4,587,134.49) 5,072,886.98 (60,627.20) (24,559.10) 400,566.19 638,021.83
$1,038,588.02

Capital Assets
The College had two capital asset additions for facilities in fiscal year 2005. Although both of these buildings were completed and occupied before this fiscal year, payments to contractors and architects were recorded by the Georgia State Finance and Investment Commission in the current fiscal year. The Luck Flanders Gambrell Center increased by $506,809.53 and the Classroom Addition/Activity Center Renovation project increased by $146,949.85.
East Georgia College also completed two major renovation and repair projects to campus infrastructure in FY2005, both of which were funded by the Georgia State Finance and Investment Commission (GSFIC). The refurbishment of the campus electrical duct banks project began in Fiscal Year 2004 and was completed this year with a total capitalized value of $132,199.50. The campus sewage lift station replacement project also was completed this year with a capitalized value of $139,400.00.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
East Georgia College Annual Financial Report FY 2005 6

Long Term Debt East Georgia College had a Long-Term Debt of $244,288.14 of which $121,304.23 was reflected as current liability at June 30, 2005. 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, East Georgia College has included the financial statements and notes for all required component units for FY2005. The East Georgia College Foundation had total net assets of $1,035,477.00 as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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. Dr. John Black President East Georgia College
East Georgia College Annual Financial Report FY 2005 7

Statement of Net Assets

EAST GEORGIA COLLEGE STATEMENT OF NET ASSETS
June 30, 2005

ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Leases Receivable Pledges Receivable Inventories Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets, net Total Noncurrent Assets TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable 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 Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Deposits Liabilities under Split-Interest Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS

East Georgia College
$937,683.19
5,929.72 185,979.47
1,122.36 130,213.37
1,260,928.11
30,000.00 337,012.24
11,942,810.78 12,309,823.02 13,570,751.13
24,620.48 23,978.98
1,320.00 120,827.16 205,699.39 117,458.93
7,876.46 113,427.77 615,209.17
1,818.00 121,165.91
122,983.91 738,193.08
11,933,116.32 37,100.00 39,410.54
822,931.19 $12,832,558.05

Component Unit East Georgia College
Foundation
$90,431.00
1,650.00 17,094.00
8,413.00 3,978.00 106,340.00 227,906.00
654,182.00
153,600.00 807,782.00 1,035,688.00
211.00
211.00
0.00 211.00 153,600.00 796,483.00 85,394.00 $1,035,477.00

East Georgia College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

EAST GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES

East Georgia College

Component Unit
East Georgia College
Foundation

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties 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 Payments to or on behalf of Peachtree State University
Total Operating Expenses Operating Income (loss)

$1,913,566.86 810,719.06

$0.00 268,550.00

2,050,110.34 43,233.45

13,502.41 1,138.87 9,044.23
2,406.49 31,934.09 3,254,217.68

12,925.00 281,475.00

1,731,588.24 1,987,301.61 1,013,055.12
43,709.95 1,267,623.14
395,063.98 1,722,459.91
593,957.53
8,754,759.48 (5,500,541.80)

126,269.00
25,116.00 151,385.00 130,090.00

East Georgia College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

EAST GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

East Georgia College

Component Unit
East Georgia College
Foundation

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 Additions to permanent endowments 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

4,931,197.37

68,500.55 23,509.98 43,012.50 44,347.60
(755.90) (7,867.63) 5,101,944.47 (398,597.33)

19,173.00
19,173.00 149,263.00

1,045,859.28

1,045,859.28 647,261.95
12,185,296.10
12,185,296.10 $12,832,558.05

0.00 149,263.00
886,214.00
886,214.00 $1,035,477.00

East Georgia College Annual Financial Report FY 2005 10

Statement of Cash Flows

EAST GEORGIA COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005

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, 2005
$1,113,631.17
2,038,489.69 37,559.80
(3,186,220.59) (3,746,118.93) (1,267,623.14)
30,490.50 1,138.87
28,226.70
2,406.49 21,833.07 (4,926,186.37)
4,931,197.37 (105,789.20) 163,634.40 4,989,042.57
392,099.90
(510,338.22) (3,911.38) (755.90)
(122,905.60)
(51,154.28) 40,298.85
(10,855.43) (70,904.83) 1,038,588.02 $967,683.19

East Georgia College Annual Financial Report FY 2005 11

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
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS
Fixed assets acquired by incurring capital lease obligations Change in fair value of investments recognized as a component of interest income Gift of capital assets reducing proceeds of capital grants and gifts

($5,500,541.80)
593,957.53 (552,127.63)
(105.96) (16,785.56) 11,384.49 496,257.69 66,911.44 (25,136.57) ($4,926,186.37)
($5,454.00) $4,048.75 ($653,759.38)

East Georgia College Annual Financial Report FY 2005 12

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, East Georgia College is reporting the activity for the East Georgia College Foundation.
See Note 16. 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 implemented GASB
East Georgia College Annual Financial Report FY 2005 13

Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 Statement 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.
East Georgia College Annual Financial Report FY 2005 14

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. East Georgia College has no resale inventories included on 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $665,703.38 to East Georgia College.
Deposits Deposits represent good faith deposits from students to reserve lab kits for on-line Chemistry courses and deposits from outside organizations who will utilize College space after June 30, 2005.
East Georgia College Annual Financial Report FY 2005 15

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 $259,730.25 as of 7-1-2004. For FY2005, $156,165.79 was earned in compensated absences and employees were paid $ 181,302.36, for a net decrease of ($25,136.57). The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 234,593.68.
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 previously in Note 1 Capital Assets section.
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 2005 16

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments Total Restricted Expendable

June 30, 2005 $34,841.04 4,569.50
$39,410.54

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.

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 Other Unrestricted Total Unrestricted Net Assets

June 30, 2005
$46,122.15 919,697.11
450.00 (143,338.07) $822,931.19

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 2005 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. 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 non-operating 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 scholarship allowances.
East Georgia College Annual Financial Report FY 2005 18

Note 2: Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $792,373.99 of the college's deposits were uninsured. Of these uninsured deposits, $792,373.99 were collateralized with securities held by the financial institution's trust department or agent in the college's name.
East Georgia College Annual Financial Report FY 2005 19

Investments

At June 30, 2005, the carrying value of the college's investment was $618,789.04, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$319,975.96
281,776.80 17,036.28
$618,789.04

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.

East Georgia College Annual Financial Report FY 2005 20

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

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

$8,683.61 2,338.30 5,929.72
187,679.67 204,631.30
12,722.11
$191,909.19

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookstore Food Services Physical Plant Other
Total

June 30, 2005 $0.00
1,122.36 $1,122.36

Note 5. Notes/Loans Receivable
Notes/loans receivable consist of student loans made through the Student Government Association Loan Fund. This loan fund comprises all of the notes receivable at June 30, 2005. 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 education. In fiscal year 2005, no new loans were made to students. 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, 2005 the allowance for uncollectible loans was $4,038.50.

East Georgia College Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$221,959.45 72,234.00 294,193.45

Additions
$0.00 185,511.00 185,511.00

Reductions
$0.00 72,234.00 72,234.00

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,444,596.00 12,686,428.36
421,017.00 1,322,240.82
11,638.46 1,068,042.19

271,599.50 653,759.38
130,807.32 5,454.00 26,409.20

16,953,962.83

1,088,029.40

0.00

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

1,110,767.32 2,502,431.53
373,283.87 1,004,703.60
1,939.74 919,568.31
0.00 5,912,694.37
11,041,268.46
$11,335,461.91

55,554.52 375,038.33
8,120.70 123,064.90
2,347.08 29,832.00
593,957.53
494,071.87
$679,582.87

0.00 0.00 $72,234.00

Ending Balance 6/30/2005
$221,959.45 185,511.00 407,470.45
1,716,195.50 13,340,187.74
421,017.00 1,453,048.14
17,092.46 1,094,451.39
0.00 18,041,992.23
1,166,321.84 2,877,469.86
381,404.57 1,127,768.50
4,286.82 949,400.31
0.00 6,506,651.90
11,535,340.33
$11,942,810.78

East Georgia College Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Research Other Deferred Revenue
Totals

June 30, 2005 $99,929.65
20,897.51 $120,827.16

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$8,151.84

Additions $5,454.00

Reductions

Ending Balance June 30, 2005

$3,911.38

$9,694.46

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

259,730.25 259,730.25
$267,882.09

156,165.79 156,165.79
$161,619.79

181,302.36 181,302.36
$185,213.74

0.00 234,593.68 234,593.68
$244,288.14

Current Portion
$7,876.46
113,427.77 113,427.77 $121,304.23

Note 9. Significant Commitments
The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $208,463.00 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
East Georgia College did not have any operating leases in fiscal year 2005. East Georgia College is obligated under capital leases and installment purchase agreements for the acquisition of equipment.

East Georgia College Annual Financial Report FY 2005 23

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. East Georgia College had three capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $9,694.46.
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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum lease payments
Less: Interest Less: Executory costs (if paid) Principal Outstanding

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

$7,876.46 1,818.00

$0.00

9,694.46 $9,694.46

$0.00

East Georgia College Annual Financial Report FY 2005 24

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$231,234.41 $231,409.51 $239,158.11

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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.

East Georgia College Annual Financial Report FY 2005 25

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 2005, the employer contribution was 9.65% 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 $86,646.15 (9.65%) and $44,894.66 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $8,439.20 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
East Georgia College Annual Financial Report FY 2005 26

Note 12. 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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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.
East Georgia College Annual Financial Report FY 2005 27

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, 2005. Note 14. 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, 2005, there were 28 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, East Georgia College recognized as incurred $125,035.72 of expenditures, which was net of $46,883.04 of participant contributions.
East Georgia College Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$1,713,375.74

$0.00

$7,472.50

127,894.46

121,825.17

455,281.87

36,006.86

$10,740.00 387,566.19 92,424.73

$0.00 353,414.61 105,909.26

3,025.85 6,819.59 29,345.34 177,060.60 36,899.16

9,173.20
2,537.50 549,962.49
0.00

12,997.98 2,529.82 9,850.44 334,782.53 79,315.70

9,428.64 6,148.15 8,470.25 137,326.95 1,434.41

$0.00 712,887.64 224,766.45
8,940.88 49,542.64 21,146.54 258,697.87 (26,235.83)

Total Expenses

$2,549,702.61

$0.00

$726,977.72

$930,207.39

$622,132.27

$1,249,746.19

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 283,713.54 98,665.95

$0.00

$0.00

$0.00

143.40
322,501.91 258,601.06 493,252.76

1,202,582.94

1,212.00 6,028.41 9,291.33

$1,456,878.62

$1,202,582.94

$16,531.74

$0.00

Total Expenses
$1,731,588.24 1,987,301.61 1,013,055.12
0.00 43,709.95 1,267,623.14 395,063.98 1,722,459.91 593,957.53
$8,754,759.48

East Georgia College Annual Financial Report FY 2005 29

Note 16. Component Units

East Georgia College Foundation (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 thirty-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $25,116.00 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 Fiscal Affairs at 131 College Circle, Swainsboro, GA 30401.

Investments for Component Units

East Georgia College Foundation holds endowment investments in the amount of $654,182.00. 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. Any remaining earnings are set aside as a reserve.

Investments are comprised of the following amounts at June 30, 2005

Fair Value

Cash held by investment organization Money Market Accounts Equity Securities Georgia Investment Pools
BOR Balanced Income Fund BOR Total Return Fund
Total Investments

$25.60 4,094.56 37,626.64
42,129.09 570,306.11
$654,182.00

East Georgia College Annual Financial Report FY 2005 30

FLOYD COLLEGE
Financial Report
For the Year Ended June 30, 2005

Floyd College Rome, Georgia

Dr. John Randolph Pierce
President

Wilbur Shuler
Senior Vice President for Fiscal Affairs

FLOYD COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 27 Note 13 Contingencies...................................................................................................... 28 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 15 Natural Classifications With Functional Classifications..................................... 30 Note 16 Component Units ........................................................................ 31

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 arts 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 3,900 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

89

4,915

84

4,709

79

3,984

Overview of the Financial Statements and Financial Analysis

Floyd College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

Floyd College Annual Financial Report FY 2005 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

As se ts : Current Asset s Capit al Asset s, net Ot her Asset s Total Asse ts
Li abil itie s: Current Liabilit ies Noncurrent Liabilit ies
Total Li abi l i ti e s
Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t Asse ts

June 30, 2005
$2,364,460.05 11,821,954.64
26,753.71 14,213,168.40
1,372,006.06 280,044.29
1,652,050.35
11,821,954.64 26,875.19
299,167.12 (225,836.89) 638,957.99 $12,561,118.05

June 30, 2004
$2,864,593.53 11,604,551.65
26,926.41 14,496,071.59
2,444,213.34 258,553.04
2,702,766.38
11,604,551.65 20,000.00 13,709.44
155,044.12 $11,793,305.21

The total assets of the institution decreased by ($282,903.19). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($500,133.48) of Current Assets, primarily due to some write-offs of old accounts and reserves of more recent accounts, which offset an increase of $217.402.99 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 decreased by ($1,050,716.03). The primary cause for the decrease was in current liabilities, primarily ($925,610.89) in deferred revenue, due to a change in accounting proposed by the state auditors. The combination of the decrease in total assets of ($282,903.19) and the decrease in total liabilities of ($1,050,716.03) yields an increase in total net assets of $767,812.84. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $217,402.99, and unrestricted net assets, $483,913.87.

Floyd College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operat ing Revenues
Operat ing Expenses Operat ing Loss

$9,226,924.76
20,691,723.00 (11,464,798.24)

$9,087,410.10
20,110,030.42 (11,022,620.32)

Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s

11,656,260.04
191,461.80 576,351.04 767,812.84

10,713,906.55
(308,713.77) 368,563.12
59,849.35

Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed
Net Asset s at End of Year

11,793,305.21 11,793,305.21 $12,561,118.05

11,733,455.86 11,733,455.86 $11,793,305.21

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:

Floyd College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operat ing Revenue T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s Sales and Services A ux ilia r y Other
T ot al Operat ing Revenue
Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other
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

$4,439,210.75
2,799,353.98 192,805.18
1,634,055.48 161,499.37
9,226,924.76
10,834,130.00 656,605.07
14,731.81 150,793.16 11,656,260.04
576,351.04
576,351.04 $21,459,535.84

June 30, 2004
$4,259,753.18 3,025,967.02 17,266.00 1,713,293.10 71,130.80 9,087,410.10
9,514,112.95 1,015,416.52
178,561.96 25,667.18 (19,852.06)
10,713,906.55
368,563.12
368,563.12 $20,169,879.77

Floyd College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

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 at ient Care (MCG only)
T ot al Operat ing Expenses

June 30, 2005
$8,223,624.93
1,435,707.85 1,399,972.88 3,594,799.74 1,672,377.14 2,138,655.53 1,510,854.45
715,730.48
20,691,723.00

June 30, 2004
$8,495,774.44
1,417,890.22 1,320,580.99 3,157,961.79 2,048,183.27 2,091,444.59 1,578,195.12
20,110,030.42

Nonoperat ing Expenses Int erest Expense (Capit al Asset s)
T ot al Expenses

$20,691,723.00

$20,110,030.42

Revenues associated with student tuition and fees, net of sponsored and unsponsored scholarships, category increased by $179,457.57 during the year. This increase reflects the increase in enrollment during the fiscal year, a trend that will accelerate with the addition of more campus space during the upcoming fiscal year.

The compensation and employee benefits category increased by $273,390.47. The increase reflects an increased cost of staffing both faculty and administrative personnel to handle the increased volume and locations of the students of the institution.

Utilities decreased by approximately ($110,152.16) during the past year. The decrease was primarily associated with a return to normalcy from the increased gas costs that were experienced in the winter of fiscal year 2004.

Under non-operating revenues (expenses) state appropriations increased by approximately $1,320,017.05. This increase of state appropriations for our institution came at an opportune time, given our tremendous growth and need for expansion.

Statement of Cash Flows

The final statement presented by the 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

Floyd College Annual Financial Report FY 2005 5

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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($10,168,453.88) 11,399,083.90 (329,068.94) 14,731.81 916,292.89 196,510.39
$1,112,803.28

June 30, 2004
($10,032,703.99) 9,602,576.68 (256,941.22) 25,545.70 (661,522.83) 858,033.22
$196,510.39

Capital Assets

The College had several capital asset additions for facilities in fiscal year 2005. Several of the renovations that were completed were funded through the Georgia State Finance and Investment Commission (GSFIC) as Minor Repair and Renovation (MR&R) funds. These additions were:

Renovation of the Admission & Registration area; renovation of the Bell Tower; upgrade of the boiler system; upgrade to the exterior doors for the McCorkle Building and the F Wing; replacement of the F Wing roof; replacement of the gym floor; installation of the Fire Alarm system in Heritage Hall; replacement of carpet in the Library; renovation of Library classrooms; renovation of the Plant Operations storage building; and renovation of the Administrative Offices. Additionally, the College replaced the sidewalks on the Floyd Campus.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Liabilities (Debt)

Floyd College had total Long-Term Liabilities (Debt) of $633,561.83 of which $353,517.54 was reflected as current liability at June 30, 2005.

For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.

Floyd College Annual Financial Report FY 2005 6

Component Units In compliance with GASB Statement No. 39, Floyd College has included the financial statements and notes for all required component units for FY2005. The Floyd Foundation had endowment investments of $580,875 as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The opening of the new campus in Cartersville, as well as the College's new presence on the campus of Southern Polytechnic State University, should have a significant effect on the financial position and results of operations during this fiscal year, as well as in subsequent years. The College's overall financial position is strong. Even with the strain that growth brings upon operations, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be successful 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 2005 7

Statement of Net Assets

FLO YD C O LLEGE S TATEMENT O F NET AS S ETS
June 30, 2005

Fl oyd C ol l e ge

AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Due From Component Unit s Leases Receivable P ledges Receivable Invent ories P repaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s

$1,112,803.28
381,880.70 168,913.81
5,278.00
246,820.99 448,763.27
2,364,460.05

Noncurre nt Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s
TO TAL AS SETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Due t o Floyd College Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

26,753.71
11,821,954.64 11,848,708.35 14,213,168.40
(52,208.25) 390,031.64
541,546.94 139,118.19
353,517.54 1,372,006.06
280,044.29
280,044.29 1,652,050.35
11,821,954.64 26,875.19
299,167.12 (225,836.89) 638,957.99 $12,561,118.05

Fl oyd C ol l e ge Foun dati on , In c.
$253,971.00 580,875.00
834,846.00
300,786.00 300,786.00 1,135,632.00
5,278.00 5,278.00
0.00 5,278.00 300,786.00 443,000.00 167,250.00 336,626.00 (117,308.00) $1,130,354.00

Floyd College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

FLO YD CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

Floyd C ollege

Floyd Colle ge Foundation, Inc.

REVENUES

Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o kst o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat io n Payments to or on behalf of Floyd College
T otal Operating Expenses Operating Income (loss)

$4,999,804.22 560,593.47
2,799,353.98
192,805.18 17,895.00
1,449,515.80 59,800.99
124,738.69 143,604.37 9,226,924.76
5,114,301.61 5,313,384.67 2,530,743.52
1,404.00 146,221.30 2,258,535.53 794,973.42 3,774,362.57 757,796.38 20,691,723.00 (11,464,798.24)

$0.00 70,440.00
33,600.00 104,040.00
113,641.00 10,742.00
141,958.00 266,341.00 (162,301.00)

Floyd College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

FLO YD CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

Floyd Colle ge

Floyd C olle ge Foundation, Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s 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 St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

10,834,130.00
491,686.53 164,918.54
14,731.81 150,793.16 11,656,260.04 191,461.80
576,351.04
576,351.04 767,812.84 11,793,305.21 11,793,305.21 $12,561,118.05

42,044.00
42,044.00 (120,257.00)
0.00 (120,257.00) 1,250,611.00 1,250,611.00 $1,130,354.00

Floyd College Annual Financial Report FY 2005 10

Statement of Cash Flows

FLO YD C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005

C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005 $4,983,570.81
3,067,901.48 195,988.98
(7,393,990.94) (10,089,090.88)
(2,819,129.00)
1,802,013.33 62,962.48
(163,920.21) 185,240.07 (10,168,453.88) 10,834,130.00 (91,836.42) 656,790.32 11,399,083.90
(329,068.94)
(329,068.94)
14,731.81 14,731.81 916,292.89 196,510.39 $1,112,803.28

Floyd College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of invest m ent s recognized as a com ponent of int erest incom e Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($11,464,798.24)
757,796.38 502,907.11
15,671.90 118,664.84
(4,405.87) (18,226.18) (90,372.23) 14,308.41 ($10,168,453.88)
($51.22) ($576,351.04)

Floyd College Annual Financial Report FY 2005 12

FLOYD COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Floyd College is reporting the activity for the Floyd Foundation.
See Note 16. 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
Floyd College Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 Statement 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 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC did not transfer any capital additions to Floyd College.
Floyd College Annual Financial Report FY 2005 15

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. Floyd College had accrued liability for compensated absences in the amount of $619,253.42 as of 7-1-2004. For FY2005, $413,734.54 was earned in compensated absences and employees were paid $399,426.13, for a net increase of $14,308.41. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $633,561.83.
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 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 previously in Note 1 Capital Assets section.
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.
Floyd College Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $299,167.12
$299,167.12

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 Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s

June 30, 2005
$94,227.46 740,260.79 (10,132.58) (185,397.68) $638,957.99

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.

Floyd College Annual Financial Report FY 2005 17

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Floyd College Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $1,556,724.41 of the college's deposits were uninsured and were collateralized with securities held by the financial institution's trust department or agent in the college's name.
Floyd College Annual Financial Report FY 2005 19

B. Investments:
At June 30, 2005, the carrying value of the college's investment was $26,753.71, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$26,753.71

$26,753.71

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.

Floyd College Annual Financial Report FY 2005 20

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

($520,757.06) 41,723.52
381,880.70
445,274.08 348,121.24 (202,673.27)
$550,794.51

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005
$240,963.94 1,151.65
4,705.40 $246,820.99

Note 5. Notes/Loans Receivable Floyd College had no notes or loans receivable at June 30, 2005.

Floyd College Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$569,490.00
569,490.00

Additions
$0.00 246,304.94 246,304.94

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

1,356,385.00 18,425,847.12 1,350,008.00 1,977,671.99
2,012,274.83
25,122,186.94

491,820.55 128,755.30 115,844.13 736,419.98

160,105.61 5,414.00
165,519.61

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

968,621.77 8,636,371.72 1,070,973.89 1,705,291.43
1,705,866.48
14,087,125.29

48,979.64 448,223.65 27,641.04 102,142.51
130,809.54
757,796.38

152,580.06 5,414.00
157,994.06

Total Capital Assets, Being Depreciated, Net

11,035,061.65

(21,376.40)

7,525.55

Capital Assets, net

$11,604,551.65

$224,928.54

$7,525.55

Ending Balance 6/30/2005
$569,490.00 246,304.94 815,794.94
1,356,385.00 18,917,667.67 1,350,008.00 1,946,321.68
0.00 2,122,704.96
0.00 25,693,087.31
1,017,601.41 9,084,595.37 1,098,614.93 1,654,853.88
0.00 1,831,262.02
0.00 14,686,927.61
11,006,159.70
$11,821,954.64

Floyd College Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $50,370.30 491,176.64
$541,546.94

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

619,253.42 619,253.42

413,734.54 413,734.54

399,426.13 399,426.13

633,561.83 633,561.83

353,517.54 353,517.54

Total Long Term Obligations

$619,253.42 $413,734.54

$399,426.13

$633,561.83

$353,517.54

Note 9. Significant Commitments

Floyd College had no significant commitments at June 30, 2005.

Note 10. Lease Obligations

Floyd College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment.

Operating Leases

Floyd College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2009. 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 2005 23

Noncancellable operating lease expenditures in 2005 were $111,716.00 for 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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 t hrough 2015 2016 t hrough 2020 2021 t hrough 2025 2026 t hrough 2030 2031 t hrough 2035 2036 t hrough 2040 2041 t hrough 2045 T ot al m inim um lease paym ent s
Less: Int erest Less: Execut ory cost s (if paid) P rincipal Out st anding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Real P roperty

Capit al Leases

Operat ing Leases

$68,945.34 8,208.00 8,208.00

0.00 $0.00

$85,361.34

Note 11. 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 TRS offices or 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 2005, 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:

Floyd College Annual Financial Report FY 2005 24

Fiscal Year

Percentage Contributed

Required Contribution

2005 2004 2003

100% 100% 100%

$587,585.40 $577,291.91 $590,820.48

Employees' Retirement System of Georgia

Plan Description Floyd 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. 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

Floyd College Annual Financial Report FY 2005 25

College's payroll for the year ended June 30, 2005, for employees covered by ERS was $46,580.11. The College's total payroll for all employees was $10,671,301.73.
Under the old plan, member contributions consist of 5.66% 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, 2005, the ERS employer contribution rate for the College 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 2005 amounted to $5,142.75, of which $4,495.05 was made by the College and $647.70 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, 2005, 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, 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.
Floyd College and the covered employees made the required contributions of $226,291.79 (10.03%) and $116,816.30 (5%), respectively.
Floyd College Annual Financial Report FY 2005 26

AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $61,181.64, which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 2005 27

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Floyd College Annual Financial Report FY 2005 28

Note 14. 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, 2005, there were 69 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Floyd College recognized as incurred $283,020.12 of expenditures, which was net of $126,508.52 of participant contributions.
Floyd College Annual Financial Report FY 2005 29

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$5,107,697.61 1,043,520.07 1,336,835.93
76,627.00
110,689.52 520,925.59 27,329.21

$0.00

$0.00

$6,604.00 899,760.86 209,112.20
27,597.43
15,555.54 206,205.82 70,872.00

$0.00 909,033.61 236,227.79
19,967.23 24,110.00 18,131.02 192,503.23

$0.00 1,741,302.24
540,900.58 1,404.00 20,148.49 95,770.00 56,249.58
1,124,282.60 14,742.25

Total Expenses

$8,223,624.93

$0.00

$0.00 $1,435,707.85 $1,399,972.88 $3,594,799.74

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 515,693.55 159,494.07 (10,330.36)
591.59
588,727.42 468,706.91 (50,506.04)

$0.00 2,138,655.53

$0.00 190,782.74
41,827.82 10,330.36
1,289.56
5,620.34 1,249,519.25
11,484.38

$0.00 13,291.60
6,345.13
12,219.17 683,874.58

$1,672,377.14 $2,138,655.53

$1,510,854.45 $715,730.48

Total Expenses
$5,114,301.61 5,313,384.67 2,530,743.52 1,404.00 146,221.30 2,258,535.53 794,973.42 3,774,362.57 757,796.38
$20,691,723.00

Floyd College Annual Financial Report FY 2005 30

Note 16. Component Units 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 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 Cartersville/Bartow Foundation, Inc. combined with the Floyd College Foundation, Inc., in May 2005. In future statements, this combined entity will be known as Georgia Highlands Foundation.
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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30. (If Foundation has other fiscal year, please correct note).
During the year ended June 30, 2005, the Foundation distributed $141,958.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3175 Cedartown Highway, Rome, GA 30161.
Investments for Component Units: Floyd College Foundation holds endowment investments in the amount of $580,875. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.
Floyd College Annual Financial Report FY 2005 31

Investments are comprised of the following amounts at June 30, 2005:

Cost

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR T otal Return Fund
T otal Investments

$0.00 547,718.00
33,157.00
$580,875.00

Fair Value $0.00
547,718.00 33,157.00
$580,875.00

Floyd College Annual Financial Report FY 2005 32

FORT VALLEY STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Fort Valley State University Fort Valley, Georgia

Dr. William H. Harris
Interim President

Freddie Johnson
Interim V.P. for Business & Finance

FORT VALLEY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28

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, state-of-the-art technology and technology-related programs. The University offers associate, baccalaureate and master 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. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

126

2,345

118

2,289

148

2,004

Overview of the Financial Statements and Financial Analysis

Fort Valley State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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.

Fort Valley State Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilities
Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Net Asse ts

June 30, 2005
$3,857,074.53 42,824,113.53
3,714,357.40 50,395,545.46
4,607,469.00 2,188,058.14
6,795,527.14
42,824,113.53 1,533,175.25 2,111,086.96
(2,868,357.42) $43,600,018.32

June 30, 2004
$2,815,871.30 23,185,493.20
2,786,148.24 28,787,512.74
3,164,280.64 2,799,995.80
5,964,276.44
23,185,493.20 1,524,716.72 2,024,294.91
(3,911,268.53) $22,823,236.30

The total assets of the institution increased by $21,608,032.72. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $19,638,620.33 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 $831,250.70.
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
Fort Valley State Annual Financial Report FY 2005 2

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, 2005

June 30, 2004

Operating Revenues

$28,139,200.43

$21,874,603.50

Operating Expenses Operating Loss

47,442,730.34 (19,303,529.91)

49,948,664.84 (28,074,061.34)

Nonoperating Revenues and Expenses

19,631,621.52

27,298,980.39

Income (Loss) Before other revenues, expenses, gains or losses

328,091.61

(775,080.95)

Other revenues, expenses, gains or losses

20,448,690.41

Increase in Net Assets

20,776,782.02

(775,080.95)

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

22,823,236.30 22,823,236.30

26,124,711.11 (2,526,393.86) 23,598,317.25

Net Assets at End of Year

$43,600,018.32

$22,823,236.30

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:

Fort Valley State Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$4,304,428.00
18,445,643.52 159,548.46
5,159,333.62 70,246.83
28,139,200.43
18,960,152.00
810,542.82 36,701.29 (83,856.19)
19,723,539.92
20,448,690.41
20,448,690.4 $68,311,430.76

June 30, 2004
$4,144,708.44 3,642,854.70 8,393,312.90 110,673.45 4,898,429.64 684,624.37
21,874,603.50
18,960,053.00 8,301,460.76 276,499.22 14,421.99 (159,381.75)
27,393,053.22
0.00 $49,267,656.72

Fort Valley State Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

June 30, 2005

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

$12,145,238.71 4,303,363.26 2,382,294.39 6,487,645.29 3,872,867.04 5,884,369.09 4,982,450.99 2,059,062.74 5,325,438.83
47,442,730.34

Nonoperating Expenses Interest Expense (Capital Assets)

91,918.40

T otal Expenses

$47,534,648.74

June 30, 2004
$14,952,963.67 5,758,931.70 2,720,012.40 6,221,422.57 4,084,444.80 5,807,402.57 4,162,759.05 2,166,591.02 4,074,137.06
49,948,664.84
94,072.83
$50,042,737.67

The combined grants and contracts (shown under both operating and nonoperating revenues) decreased by ($1,473,471.45) during the year. This decrease reflects the reclassification of certain types of financial aide to the Statement of Net Assets, where they are being reported as designated scholarships.
The compensation and employee benefits category decreased by approximately ($1,387,051.74). The decreased cost reflects the retirement of a significant number of employees who were replaced with employees that were hired at a lower salary base.
Utilities increased by approximately $19,204.97 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2005 and the addition of the Health and Physical Education Building.
Under non-operating revenues (expenses) state appropriations decreased by approximately $99.00. 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.
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
Fort Valley State Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($17,304,251.66) 20,253,427.42 (1,154,366.63) (773,742.73) 1,021,066.40 (788,248.40)
$232,818.00

June 30, 2004
($27,100,912.08) 27,663,929.27 (1,472,285.95) 716,257.00 (193,011.76) (595,236.64)
($788,248.40)

Capital Assets
The University had two significant capital asset additions for facilities in fiscal year 2005. Construction of the new Health and Physical Education Building was completed and the new gymnasium was opened for the 2004-2005 basketball season. Construction of the Veterinary Technology Building was completed and placed into service early in fiscal year 2005.
The more than $20M for these projects was funded by the Georgia State Finance and Investment Commission (GSFIC). Other renovations funded by the GSFIC included $900K for building repairs and equipment.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long-Term Liabilities (Debt)
Fort Valley State University had total Long-Term Liabilities (Debt) of $3,418,374.89 of which $1,230,316.75 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Liabilities (Debt), see Notes 1 and 8 in the Notes to the Financial Statements.

Fort Valley State Annual Financial Report FY 2005 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. 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. William H. Harris, Interim President Fort Valley State University
Fort Valley State Annual Financial Report FY 2005 7

Statement of Net Assets
FO RT VALLEY S TATE UNIVERS ITY S TATEMENT O F NET AS S ETS June 30, 2005
AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Inventories (note 4) P repaid Items Ot her Asset s T ot al Current Asset s
Noncurre nt Asse ts Noncurrent Cash Invest ment s Not es Receivable, net Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS
LIAB ILITIES C u rre n t Liabil itie s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt U.S. Depart ment of Educat ion Set t lement (current port ion) Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabi li ti e s (n ote 8) Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) and Ot her Noncurrent Liabilit ies U. S. Depart ment of Educat ion Set t lement (noncurrent port ion) Compensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n ex p en dable E x p en dable Capit al P roject s Unrest rict ed
TO TAL NET AS S ETS

June 30, 2005
$232,818.00 68,357.32
2,610,835.82 728,990.41 216,072.98
3,857,074.53
1,557,179.92 2,157,177.48 42,824,113.53 46,538,470.93 50,395,545.46
1,665,402.84
1,232,710.64 131,160.79 347,877.98 426,167.36 804,149.39
4,607,469.00
1,244,050.96 944,007.18
2,188,058.14 6,795,527.14
42,824,113.53 1,533,175.25 2,111,086.96 (2,868,357.42)
$43,600,018.32

Fort Valley State Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

FO RT VALLEY STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

REVENUES

June 30, 2005

Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st ore Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n
T otal Operating Expenses Operating Income (loss)

$7,087,823.57 2,783,395.57
17,587,005.01 334,255.02 524,383.49 159,548.46
1,969,292.22 50,099.00
1,802,649.87
334,294.63 932,297.57
70,700.33 70,246.83 28,139,200.43
7,301,406.65 16,666,429.16
7,041,442.01 90.00
450,084.49 3,449,155.65 2,401,417.63 8,168,268.04 1,964,436.71 47,442,730.34 (19,303,529.91)

Fort Valley State Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
FO RT VALLEY S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , an d C H ANG ES i n NET AS S ETS
for th e Ye ar En de d Ju n e 30, 2005
June 30, 2005

NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Ot h er Gift s Invest m ent Incom e (endowm ent s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s Federal St at e Ot h er T ot al Ot her Revenues Increase in Net Asset s
NET AS S ETS Net Asset s-beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s-beginning of year, rest at ed
Net Asset s-End of Year

18,960,152.00
810,542.82 36,701.29 (91,918.40) (83,856.19)
19,631,621.52 328,091.61
20,448,690.41 20,448,690.41 20,776,782.02 22,823,236.30 22,823,236.30 $43,600,018.32

Fort Valley State Annual Financial Report FY 2005 10

Statement of Cash Flows

FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005

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 Scholars hips and Fellows hips Loans Is sued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterprise Charges: Res idence Halls Books tore Food Services Parkin g / Tran s p o rt at io n 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 A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purposes Principal paid on Installment Debt Interes t paid on Installment Debt 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 As sets Purchases of Capital As sets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interes t on Investments Purchase of Inves tments Net Cas h Provided (used) by Inves ting Activities Net Increase/Decrease in Cash Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$4,376,534.65
18,706,875.46 159,548.46
(17,497,329.63) (24,402,059.11)
(3,449,155.65) (421,862.13) 304,096.99
1,969,292.22 50,099.00
1,802,649.87
334,294.63 932,297.57 70,700.33 (240,234.32) (17,304,251.66)
18,960,152.00 966,588.74 726,686.63 (308,081.55) (91,918.40)
20,253,427.42
(1,154,366.63)
(1,154,366.63)
36,701.29 (810,444.02) (773,742.73) 1,021,066.40 (788,248.40) $232,818.00

Fort Valley State Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Not es Receivable, net Account s P ayable Salaries P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($19,303,529.91)
1,964,436.71 (413,192.52)
67,707.67 (117,765.14) 571,237.57 (203,173.39) 436,049.96
(74,972.70) (231,049.91) ($17,304,251.66)
($20,448,690.41)

Fort Valley State Annual Financial Report FY 2005 12

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in 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 FY2005, 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35
Fort Valley State Annual Financial Report FY 2005 13

as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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
Fort Valley State Annual Financial Report FY 2005 14

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. Fort Valley State University does not have any Resale Inventories, at this time.
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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $20,448,690.41 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
Fort Valley State Annual Financial Report FY 2005 15

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. Fort Valley State University had accrued liability for compensated absences in the amount of $1,979,206.48 as of 7-1-2004. For FY2005, $1,175,967.59 was earned in compensated absences and employees were paid $1,407,017.50, for a net decrease of ($231,049.91). The ending balance as of 6-30-2005 in accrued liability for compensated absences was $1,748,156.57.
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 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 previously in Note 1 Capital Assets section.
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 Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $103,078.56 2,008,008.40
$2,111,086.96

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 Reserv e Reserv e fo r E n cum bran ces Reserv e fo r Inv en t o ry Ot h er Un rest rict ed T o t al Unrest rict ed Net Asset s

June 30, 2005
$ 6 6 6 ,7 2 3 .0 5 8 5 1 ,9 8 2 .6 7
(4 ,3 8 7 ,0 6 3 .1 4 ) ($ 2 ,8 6 8 ,3 5 7 .4 2 )

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: 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

Fort Valley State Annual Financial Report FY 2005 17

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Fort Valley State Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $ 860,218.40 of the University's deposits were uninsured. Of these uninsured deposits, $860,218.40 were uncollateralized.
Fort Valley State Annual Financial Report FY 2005 19

B. Investments

Fort Valley State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.

The University's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$9,783.53
9,783.53
1,547,396.39
$1,557,179.92

Investment Maturity

Less Than

1-5

1 Year

Years

$9,783.53

9,783.53

0.00

6 - 10 Years
0.00

More than 10 Years
0.00

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.

Fort Valley State Annual Financial Report FY 2005 20

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.
June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$394,408.48
2,610,835.82
507,333.24 3,512,577.54
172,751.31
$3,339,826.23

Note 4. Inventories
Fort Valley had no inventories at June 30, 2005
Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $1,075,852.36.

Fort Valley State Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$1,262,548.17
1,262,548.17

Additions $0.00 0.00

Reductions $0.00 0.00

Capital Assets, Being Depreciated:

Infrastructure

Building and Building Improvements

37,759,208.06

20,448,690.41

Facilities and Other Improvements

1,506,124.00

Equipment

8,308,502.65

973,238.52

Capital Leases

Library Collections

5,959,840.96

181,128.11

Capitalized Collections

Total Assets Being Depreciated

53,533,675.67

21,603,057.04

0.00

Less: Accumulated Depreciation

Infrastructure

Buildings

20,072,946.53

915,901.52

Facilities and Other improvements

1,279,953.83

62,317.05

Equipment

5,256,086.28

806,061.14

Capital Leases

Library Collections

5,001,744.00

180,157.00

Capitalized Collections

Total Accumulated Depreciation

31,610,730.64

1,964,436.71

0.00

Total Capital Assets, Being Depreciated, Net

21,922,945.03

19,638,620.33

0.00

Capital Assets, net

$23,185,493.20

$19,638,620.33

$0.00

Ending Balance 6/30/2005
$1,262,548.17 0.00
1,262,548.17
0.00 58,207,898.47 1,506,124.00 9,281,741.17
0.00 6,140,969.07
0.00 75,136,732.71
0.00 20,988,848.05 1,342,270.88 6,062,147.42
0.00 5,181,901.00
0.00 33,575,167.35
41,561,565.36
$42,824,113.53

Fort Valley State Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $0.00
1,232,710.64 $1,232,710.64

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) U. S. Dept. of Education Settlement Compensated Absences Total

1,978,299.87 1,979,206.48 3,957,506.35

1,175,967.59 1,175,967.59

308,081.55 1,407,017.50 1,715,099.05

1,670,218.32 1,748,156.57 3,418,374.89

Total Long Term Obligations

$3,957,506.35 $1,175,967.59

$1,715,099.05 $3,418,374.89

Current Portion
$0.00
426,167.36 804,149.39 1,230,316.75 $1,230,316.75

Note 9. Significant Commitments
The University has not executed any significant unearned, outstanding, construction or renovation contracts as of June 30, 2005 that were not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Fort Valley State University is obligated under various operating leases for the use of equipment.
OPERATING LEASES
Fort Valley State University's operating leases have a fixed pricing plan (negotiated by the State Purchasing Division of the Georgia Department of Administrative Services) with annual renewal options for a 3-5 year period.
Fort Valley State Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$ 1,622,022.30 $ 1,719,570.46 $ 1,728,015.65

Employees' Retirement System of Georgia

Fort Valley State University did not contribute to the Employees' Retirement System of Georgia in FY2005.

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable

Fort Valley State Annual Financial Report FY 2005 24

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 2005, the employer contribution was 9.65% 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 $ 423,638.86 (9.65%) and $ 219,502.80 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
Fort Valley State Annual Financial Report FY 2005 25

Total contributions made by employees during fiscal year 2005 amounted to $43,008.15 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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. 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.
Fort Valley State Annual Financial Report FY 2005 26

Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 254 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Fort Valley State University recognized as incurred $667,563.14 of expenditures, which was net of $205,245.16 of participant contributions.
Fort Valley State Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$7,301,406.65 1,397,175.82 2,192,749.85

$0.00 2,536,189.89
628,547.34

86,951.41 135,530.59 98,318.29
788,174.45 144,931.65

155,280.13 196,440.85 30,868.18
558,236.77 197,800.10

$0.00 1,399,104.89
439,665.36
73,368.20
31,483.40 421,988.81 16,683.73

$0.00 3,673,480.61
994,524.13
37,685.27 9,243.68 131,980.99 1,099,700.75 541,029.86

$0.00 2,094,285.05
546,113.16
50,175.26 195,467.02 38,096.85 936,380.61 12,349.09

$0.00 3,300,744.14 1,529,156.42
90.00 36,541.91 405,342.86 72,553.27
508,483.90 31,456.59

Total Expenses

$12,145,238.71 $4,303,363.26 $2,382,294.39 $6,487,645.29 $3,872,867.04 $5,884,369.09

Natural Classification
Facult y St aff Benefit s Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Others Services Depreciat ion
T otal Expenses

Plant Operat ions & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Ent erprises

Unallocat ed Expenses

$0.00 1,228,430.37
492,562.29 (413,038.27)
1,848,122.46 912,866.58 913,507.56

$0.00 2,059,062.74

$0.00 1,037,018.39
218,123.46 413,038.27
10,082.31 448,067.91 149,994.19
2,942,436.17 106,678.13

$0.00

$4,982,450.99 $2,059,062.74 $5,325,438.83

$0.00

T otal Expenses
$7,301,406.65 16,666,429.16
7,041,442.01 90.00
450,084.49 3,449,155.65 2,401,417.63 8,168,268.04 1,964,436.71
$47,442,730.34

Fort Valley State Annual Financial Report FY 2005 28

GEORGIA COLLEGE & STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Georgia College & State University Milledgeville, Georgia

Dr. Dorothy Leland
President

Harry E. Keim
Vice President for Business & Finance

GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses, and Changes in Net Assets......................................... 10 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ..................................................... 14 Note 2 Deposits and Investments..................................................................................... 20 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 Significant Commitments.................................................................26 Note 10 Lease Obligations................................................................................................ 26 Note 11 Retirement Plans ................................................................................................. 28 Note 12 Risk Management................................................................................................ 29 Note 13 Contingencies...................................................................................................... 30 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 15 Natural Classifications With Functional Classifications..................................... 32 Note 16 Component Units ........................................................................33

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, Georgia College & State University is committed to combining the educational experiences typical of esteemed private liberal arts colleges with the affordability of public higher education. Georgia College & State University 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. Georgia College & State University seeks to endow its graduates with a passion for achievement, a lifelong curiosity, and exuberance for living.

Georgia College & State University 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

FY2005 FY2004 FY2003

292

6,706

292

7,096

296

6,696

Overview of the Financial Statements and Financial Analysis

Georgia College & State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

Georgia College & State University Annual Financial Report FY 2005 1

purpose of the Statement of Net Assets is to present to the readers of the financial statements a 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$9,959,897.23 52,988,393.65 8,243,904.01 71,192,194.89

June 30, 2004
$10,676,720.45 35,385,878.78 8,191,169.69 54,253,768.92

Liabilities : Current Liabilities Noncurrent Liabilities

5,250,711.78 873,443.55

4,884,785.72 798,922.45

Total Liabilities

6,124,155.33

5,683,708.17

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

52,938,952.08 2,871,965.91 5,668,134.09
3,588,987.48 $65,068,039.56

35,379,629.82 2,743,388.41 6,191,362.74 54,920.13 4,200,759.65
$48,570,060.75

The total assets of the institution increased by $16,938,425.97. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $17,602,514.87 of investment in plant, net of accumulated depreciation. The consumption of assets follows the
Georgia College & State University Annual Financial Report FY 2005 2

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 $440,447.16. The primary cause for the increase was for deposits, primarily $403,953.53 for an admission confirmation deposit that was implemented in Fiscal Year 2005. These deposits are credited to student accounts for tuition and fees at registration. The combination of the increase in total assets of $16,938,425.97 and the increase in total liabilities of $440,447.16 yields an increase in total net assets of $16,497,978.81 The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $17,559,322.26. 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 & State University Annual Financial Report FY 2005 3

Statement of Revenues, Expenses and Changes in Net Assets, Condensed
June 30, 2005

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

$30,723,841.25 69,619,601.44 (38,895,760.19) 35,579,066.63
(3,316,693.56) 19,814,672.37 16,497,978.81 48,570,060.75 48,570,060.75 $65,068,039.56

June 30, 2004
$32,351,367.32 64,606,066.18 (32,254,698.86) 31,586,059.03
(668,639.83) 80,000.00
(588,639.83) 52,498,344.50 (3,339,643.92) 49,158,700.58 $48,570,060.75

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:

Georgia College & State University Annual Financial Report FY 2005 4

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$16,410,042.64
95,395.06 1,047,149.53 12,409,905.15
761,348.87
30,723,841.25
27,901,393.50 5,408,696.81 1,121,289.63
410,769.35 738,616.16 35,580,765.45
19,814,672.37
19,814,672.37
$86,119,279.07

June 30, 2004
$15,358,722.01 3,448,220.43 1,109,326.05 12,091,271.22 343,827.61 32,351,367.32
26,316,747.76 3,347,792.55 1,343,273.25 427,194.34 152,722.14
31,587,730.04
80,000.00 80,000.00 $64,019,097.36

Georgia College & State University Annual Financial Report FY 2005 5

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$27,558,469.71 308,416.98 89,646.22
5,526,043.48 4,269,281.49 7,959,383.76 6,508,570.99 1,134,333.74 13,812,055.40 2,453,399.67
69,619,601.44
1,698.82
$69,621,300.26

June 30, 2004
$26,569,168.80 187,545.36 127,434.26
3,502,428.37 3,380,762.24 6,877,556.00 9,948,558.94 1,157,644.61 10,336,290.27 2,518,677.33
64,606,066.18
1,671.01
$64,607,737.19

The compensation and employee benefits category increased by approximately $1,553,792.55 The increase reflects increased salaries and related FICA, FICA-Medicare and Retirement, as well as, the cost of health insurance for the employees of the institution.

Utilities increased by approximately $248,484.76 during the past year. The increase was primarily associated with the increased electricity and natural gas costs that were experienced and the addition of square footage and rate increases.

Under non-operating revenues (expenses) state appropriations increased by $1,584,645.74. The increase of state appropriations was due to an increase in formula funding and strategic allocations from the USG Board of Regents.

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 the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Georgia College & State University Annual Financial Report FY 2005 6

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year
Capital Assets

June 30, 2005
($35,821,325.62) 34,230,664.28 (1,284,817.90) 382,834.08 (2,492,645.16) 7,674,037.46
$5,181,392.30

June 30, 2004
($29,290,244.81) 31,153,431.87 (905,929.54) 1,741,557.33 2,698,814.85 4,975,222.61
$7,674,037.46

The University had two significant capital asset additions for facilities in fiscal year 2005. The Russell Library addition and renovations were completed in 2004 - 2005. Construction of the Chiller Plant was completed and also placed into service in fiscal year 2005.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt

Georgia College & State University had a Long-Term Debt of $1,988,912.11 of which $1,115,468.56 was reflected as current liability at June 30, 2005.

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 College & State University has included the financial statements and notes for all required component units for FY2005. The Georgia College & State University Foundation had endowment investments of $8.7 M as of June 30, 2005. The Georgia College & State Real Estate Foundation had long-term debt of $98.3 M in the form of two bond issues. The Georgia College & State University Alumni Association had endowed investments of $5.1 M. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Georgia College & State University Annual Financial Report FY 2005 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. Dr. Dorothy Leland, President Georgia College & State University
Georgia College & State University Annual Financial Report FY 2005 8

Statement of Net Assets

G EORG IA COLLEG E AND STATE UNIVERSITY

STATEMENT OF NET ASSETS

June 30, 2005

Compone nt Units

Georgia College

Georgia College and

Georgia College and

and S tate

S tate Univers ity

S tate Univers ity

Univers ity

Foundation

Alumni As s ociation

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Due from Component Units Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other A s s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Due to Primary Government Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$5,071,147.18 130,000.00 120,093.91
1,484,043.63 1,411,181.00
1,326,381.59 417,049.92
9,959,897.23
110,245.12 5,032,637.55 3,101,021.34
52,988,393.65 61,232,297.66 71,192,194.89
383,000.70 186,603.34
403,953.53 2,343,981.17
508,812.23 308,892.25
8,476.96 1,106,991.60 5,250,711.78
40,964.61 832,478.94
873,443.55 6,124,155.33
52,938,952.08 2,871,965.91 5,668,134.09 3,588,987.48
$65,068,039.56

$684,216.00 8,745,856.00
48,582.00 218,685.00 2,805,698.00 12,503,037.00
12,498,274.00 10,979,497.00
6,500.00 77,469,008.00 100,953,279.00 113,456,316.00
4,924,890.00
68,100.00 1,411,181.00
265,000.00 6,669,171.00
96,038,076.00 96,038,076.00 102,707,247.00
1,043,420.00 8,237,420.00
959,173.00 509,056.00 $10,749,069.00

$205,763.00
2,500.00 8,111.00 1,748.00 16,687.00 234,809.00
5,055,352.00
98,867.00 5,154,219.00 5,389,028.00
0.00
0.00 0.00 98,867.00 5,040,045.00 120,781.00 129,335.00 $5,389,028.00

Georgia College & State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets
GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

Georgia College and State University

Compone nt Units

Georgia College and

Georgia College and

State University

State University Alumni

Foundation

As s ociation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks t o re Food Services Parkin g /Tran s p o rtatio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep re ciat io n Payments to or on behalf of Georgia College & State Univ.
Total Operating Expenses Operating Income (loss)

$19,043,901.41 2,633,858.77
94,645.06 750.00 0.00
1,047,149.53 35,240.78
4,118,726.21 2,645,408.87 2,775,489.88
487,333.81 621,514.23 1,645,233.36 116,198.79 726,108.09 30,723,841.25
17,524,516.20 16,176,854.10 8,636,214.37
466,697.89 1,894,005.88 2,928,651.95 18,847,243.32 3,145,417.73
69,619,601.44 (38,895,760.19)

$0.00 3,019,216.00
246,027.00
7,641,794.00 10,907,037.00
55,764.00
4,364.00 5,685,174.00 1,565,091.00
278,714.00 7,589,107.00 3,317,930.00

$0.00 170,257.00 202,419.00
131,812.00 504,488.00
64.00
9,458.00 110,595.00
5,162.00 186,108.00 311,387.00 193,101.00

Georgia College & State University Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

NONOPERATING REVENUES (EXPENS ES) 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 Loss on Bond Retirement Additions to permanent endowments 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 College and State University

Compone nt Units

Georgia College and

Georgia College and

State University

State University Alumni

Foundation

As s ociation

27,901,393.50
3,618,427.80 66,294.75
1,723,974.26 1,121,289.63
410,769.35 (1,698.82)
738,616.16 35,579,066.63 (3,316,693.56)
19,814,672.37
19,814,672.37 16,497,978.81
48,570,060.75
48,570,060.75 $65,068,039.56

293,959.00 (3,254,321.00)
(2,960,362.00) 357,568.00
(1,066,839.00) 223,110.00 (843,729.00) (486,161.00)
11,235,230.00
11,235,230.00 $10,749,069.00

164,833.00
164,833.00 357,934.00
168,633.00 168,633.00 526,567.00 4,862,461.00 4,862,461.00 $5,389,028.00

Georgia College & State University Annual Financial Report FY 2005 11

Statement of Cash Flows
G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$18,822,070.42
295,055.36 911,981.94 (30,045,612.92) (33,615,252.26) (4,527,864.65) (706,998.00) 751,293.29
2,988,842.14 2,420,036.11 2,947,460.76
491,786.64 603,666.17 1,663,483.60 142,212.13 1,036,513.65 (35,821,325.62)
27,901,393.50 59,961.44
6,269,309.34 34,230,664.28
(1,277,191.95) (5,927.13) (1,698.82)
(1,284,817.90)
1,192,434.28 292,501.12
(1,102,101.32) 382,834.08
(2,492,645.16) 7,674,037.46 $5,181,392.30

Georgia College & State University Annual Financial Report FY 2005 12

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($38,895,760.19)
3,145,417.73 (86,566.81) (52,181.35) (205,865.26) (191,225.02) 452.71 382,585.13 81,817.44
($35,821,325.62)
$49,119.74 ($118,268.23) ($19,814,672.37)

Georgia College & State University Annual Financial Report FY 2005 13

GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations 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 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Georgia College & State University is reporting the activity for the Georgia College & State University Foundation and the Georgia College & State University Alumni Association.
See Note 16. 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 & State University Annual Financial Report FY 2005 14

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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.
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 Statement 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 & State University Annual Financial Report FY 2005 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $19,814,672.37 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 & State University Annual Financial Report FY 2005 16

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 $1,857,653.10 as of 7-1-2004. For FY2005, $3,544,507.08 was earned in compensated absences and employees were paid $ 3,462,689.64, for a net increase of $81,817.44. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 1,939,470.54.
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 previously in Note 1 Capital Assets section.
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 & State University Annual Financial Report FY 2005 17

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005
$1,363,461.02 3,504,017.63 800,655.44 0.00 0.00
$5,668,134.09

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 Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005
$1,817,993.64 3,162,566.94 0.00 (1,391,573.10)
$3,588,987.48

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 & State University Annual Financial Report FY 2005 18

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Georgia College & State University Annual Financial Report FY 2005 19

NOTE 2: DEPOSITS AND INVESTMENTS
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $5,491,996.45 of the university's deposits were uninsured. Of these uninsured deposits, $3,050,998.55 were collateralized with securities held by the financial institution's trust department or agent in the university's name, $ -0- were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name and $2,440,997.90 were uncollateralized.
Georgia College & State University Annual Financial Report FY 2005 20

NOTE 2: DEPOSITS AND INVESTMENTS
B. Investments
Georgia College & State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The university's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$493,392.10
649,045.91

Less Than 1 Year
$100,406.00
24,789.00

Investment Maturity

1-5

6 - 10

Years

Years

$250,498.35

$46,427.75

453,737.31

170,519.60

More than 10 Years
$96,060.00
0.00

1,142,438.01 261,688.45

125,195.00

704,235.66

216,947.35

96,060.00

1,748,944.05 $3,153,070.51

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html

Georgia College & State University Annual Financial Report FY 2005 21

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The university's policy for managing interest rate risk is:
1. The excess cash balances available should be invested for maximum earned income consistent with acceptable risk levels.
2. The amount of cash available and the length of time it may be held in investment are the principal factors in determining such investment.
3. Fixed income investments shall be limited to government agency, and corporate instruments having minimum investment grade credit ratings of Baa by Moody's and/or Standard & Poors.
4. The minimum fixed income target shall be defined and communicated to the investment manager in the form of an Asset Allocation Guideline. The fixed income target may be altered by providing a newly executed Asset Allocation guideline to the investment manager.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the university will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The university's policy for managing custodial credit risk for investments is:
1. The investment manager's performance shall be compared regularly with the performance of the appropriate equity or fixed income market indices.
2. The investment manager shall be responsible for custody of all securities. If the investment manager does not generally offer custodial services, the Vice President for Business and Finance and the Assistant Vice President for Financial Services/Comptroller shall have joint custodial responsibility.
3. All transactions shall be entered into on the basis of best execution, which means best realized net price.
4. The investment manager shall be available for frequent and open communication with the Vice President for Business & Finance and Assistant Vice President for Financial Services/Comptroller of the institution concerning all significant matters pertaining to the portfolio.
5. In the management of the portfolio, should a loss of $5,000 or more on any security transaction be contemplated, the investment manager shall contact the Vice President for Business & Finance and Assistant Vice President for Financial Services/Comptroller for approval to execute a response regarding request for approval within three (3) working days.
6. The investment manager will provide reports on the investment portfolio to the institution at least quarterly.
Georgia College & State University Annual Financial Report FY 2005 22

At June 30, 2005, $480,679.35 of the university's applicable investments were uninsured and held by the investment's counterparty in the university's name and $923,417.12 were uninsured and held by the investment's counterparty's trust department or agent, but not in the university' name.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The university's formal policy for managing credit quality risk is:
1. Equity management will be expected to achieve at least average total rates of return, net of fees, over rolling five (5) year periods that equal or exceed the rates of return of the applicable indices.
2. Fixed income management will be expected to achieve at least average total rates of return, net of fees, over rolling five (5) year periods that equal or exceed the Shearson Lehman Government Corporate Bond Index.

Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value $493,392.10
649,045.91

AAA $493,392.10 267,089.25

Quality Ratings

AA

A

$0.00

$0.00

75,340.05

138,250.04

A1 $0.00

Unrated $0.00
168,366.57

$1,142,438.01

$760,481.35

$75,340.05

$138,250.04 $0.00

$168,366.57

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The university's investments are not exposed to concentration of credit risk; therefore the university does not have a formal policy for managing concentration of credit risk.
The university does not have holdings of investments (other than obligations of U.S. government agencies explicitly guaranteed by the U. S. government) in any one issuer in concentrations of greater than 5% of total investments held.
Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The university's investments are not exposed to foreign currency risk; therefore, the university does not have a formal policy for managing exposure to foreign currency risk.

Georgia College & State University Annual Financial Report FY 2005 23

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal, State and Private Funds State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

June 30, 2005
$17,890.13 1,841,230.34
120,093.91 0.00
1,112,609.74 3,091,824.12
76,505.58
$3,015,318.54

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $1,314,309.94
12,071.65 $1,326,381.59

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the Loans Receivable at June 30, 2005. 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 & State University Annual Financial Report FY 2005 24

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$634,079.21
634,079.21

Additions $0.00 0.00

Reductions $0.00 0.00

Capital Assets, Being Depreciated: In fras tru ctu re Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Ass ets Being Depreciated

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

19,428,837.55
1,381,204.19 49,119.74 206,182.32 6,000.00
21,071,343.80

1,338,840.90
187,433.02 17,093.62 29,936.00
1,573,303.54

Les s: Accumulated Depreciation In fras tru ctu re Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

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

2,164,215.59 39,015.85 633,912.64 14,039.65 289,364.00 4,870.00
3,145,417.73

1,018,076.93
186,596.18 15,283.23 29,936.00
1,249,892.34

Total Capital Assets, Being Depreciated, Net Capital Assets, net

34,751,799.57 $35,385,878.78

17,925,926.07 $17,925,926.07

323,411.20 $323,411.20

Ending Balance 6/30/2005
$634,079.21 0.00
634,079.21
0.00 70,010,891.86
867,019.00 8,480,661.24
111,884.22 6,423,395.52
180,800.00 86,074,651.84
0.00 22,338,239.57
599,514.43 5,572,896.24
62,723.61 5,105,924.80
41,038.75 33,720,337.40
52,354,314.44
$52,988,393.65

Georgia College & State University Annual Financial Report FY 2005 25

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $2,176,278.51
167,702.66 $2,343,981.17

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$6,248.96

Additions $49,119.74

Reductions

Ending Balance June 30, 2005

$5,927.13

$49,441.57

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

1,857,653.10 1,857,653.10
$1,863,902.06

3,544,507.08 3,544,507.08
$3,593,626.82

3,462,689.64 3,462,689.64
$3,468,616.77

0.00 1,939,470.54 1,939,470.54
$1,988,912.11

Current Portion
$8,476.96
1,106,991.60 1,106,991.60 $1,115,468.56

Note 9. Significant Commitments
The University had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2005. Therefore, no amount is reflected in the accompanying basic financial statements.
Note 10. 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. 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 2005 were $7,625.95 of which $1,698.82 represented interest. Total principal paid on capital leases was
Georgia College & State University Annual Financial Report FY 2005 26

$5,927.13 for the fiscal year ended June 30, 2005. 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, 2005:

Equipment

$49,441.57

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.

OPERATING LEASES

Georgia College & State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2011. 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 cancellable 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 in 2005 were $447,898.95 for real estate.

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 through 2011 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$10,376.88 10,376.88 9,192.88 24,300.44

$733,384.00 26,446.00 27,238.00 28,054.00 28,894.00 29,758.00

54,247.08 4,805.51 0.00
$49,441.57

$873,774.00

Georgia College & State University Annual Financial Report FY 2005 27

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$ 1,752,523.07 $ 1,682,743.30 $ 1,768,795.95

Employees' Retirement System of Georgia

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable

Georgia College & State University Annual Financial Report FY 2005 28

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 2005, the employer contribution was 9.65% 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 $1,096,596.49 (9.65%) and $ 567,428.17 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $50,279.35 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Georgia College & State University Annual Financial Report FY 2005 29

Note 12. 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 & State University Annual Financial Report FY 2005 30

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, 2005. Note 14. 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, 2005, there were 234 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Georgia College & State University recognized as incurred $776,158.48 of expenditures, which was net of $297,038.43 of participant contributions.
Georgia College & State University Annual Financial Report FY 2005 31

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$16,660,758.20 3,168,365.74 4,641,218.26
242,806.99
164,555.65 2,576,034.49
104,730.38

$23,440.57 137,909.55 27,721.53
19,573.60 6,710.00
817.83 90,191.24 2,052.66

$0.00 55,973.29 16,781.31
2,708.38 12,240.90 1,942.34

$763,641.49 1,587,261.76 603,304.34
46,970.18
37,176.63 2,178,189.33 309,499.75

$0.00 2,281,110.60 534,912.30
54,064.78
57,306.91 1,339,358.44
2,528.46

$0.00 4,177,793.80 1,426,100.64
59,174.21 228,310.28 68,265.95 1,917,193.56 82,545.32

Total Expenses

$27,558,469.71

$308,416.98

$89,646.22

$5,526,043.48

$4,269,281.49

$7,959,383.76

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Op e ra t io n s & Maintenance

Functional Classification FY2005

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

$0.00 3,154,985.81 1,002,308.59 (1,496,593.59)
13,268.16
2,063,092.17 1,710,901.08
60,608.77

$0.00 1,134,333.74

$76,675.94 1,613,453.55 383,867.40 1,496,593.59
30,839.97 524,651.86 534,728.43 9,023,134.28 128,110.38

$0.00 2,453,399.67

$6,508,570.99

$1,134,333.74

$13,812,055.40

$2,453,399.67

Total Expens es
$17,524,516.20 16,176,854.10 8,636,214.37 0.00 466,697.89 1,894,005.88 2,928,651.95 18,847,243.32 3,145,417.73
$69,619,601.44

Georgia College & State University Annual Financial Report FY 2005 32

Note 16. Component Units
Georgia College & State University Foundation (foundation) and the 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 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 (LLCs) 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. On September 1, 2004, the bonds originally financed by the LLC I were redeemed through the issuance of bonds by Property III, LLC.
The foundation and association 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. The FASB reports will be reclassified to the GASB presentation for external financial reporting purposes. The foundation's and association's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the foundation distribution $278,714 and the association distributed $186,108 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 096, Milledgeville, GA 31061.
Investments for Component Units:
The Georgia College & State University Foundation holds endowment investments of $8,745,856 and the Alumni Association holds endowment investments of $5,055,352. 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, have 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.
Georgia College & State University Annual Financial Report FY 2005 33

The Georgia College & State University Foundation also holds investments in real property and equipment, net of accumulated depreciation valued at $77,469,008.

Investments: Georgia College & State University Foundation

Investments are comprised of the following amounts at June 30, 2005:

Cos t

Fair Value

Cash held by inves tment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Es tate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00 633,696.00
2,795,396.00 4,199,085.00

$0.00 633,696.00
2,787,990.00 5,324,170.00

Total Investments

$7,628,177.00

$8,745,856.00

Georgia College & State University Alumni Association

Investments are comprised of the following amounts at June 30, 2005:

Co s t

Fair Value

Cash held by inves tment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Es tate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00 147,182.00
2,547,903.00 1,666,494.00

$0.00 147,182.00
3,245,917.00 1,662,253.00

Total Investments

$4,361,579.00

$5,055,352.00

Georgia College & State University Annual Financial Report FY 2005 34

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 Georgia College & State University 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 of Georgia.
Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

B e ginning B alance July 1, 2004

Additions

Re ductions

Ending B alance June 30, 2005

Amounts due within One Ye ar

Student Housing Revenue Bonds Lease Revenue Bonds Total Long Term Debt Issuance Premium - Net Bond Dis count - Net

$55,875,000.00 7,840,000.00 63,715,000.00 1,624,383.00
$65,339,383.00

$89,000,000.00
89,000,000.00
(568,217.00) $88,431,783.00

$55,875,000.00
55,875,000.00 1,612,628.00
19,538.00 $57,507,166.00

$89,000,000.00 7,840,000.00 96,840,000.00 11,755.00 (548,679.00)
$96,303,076.00

$0.00 265,000.00 $265,000.00

Annual debt service requirements to maturity for Housing Revenue Bonds:

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035
Bond Dis count - Net

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Bonds Payable

Principal

Interest

$0.00 0.00
640,000.00 835,000.00 1,045,000.00 8,955,000.00 13,315,000.00 17,415,000.00 23,010,000.00 23,785,000.00
89,000,000.00 (548,679.00)
$88,451,321.00

$4,969,600.00 4,969,600.00 4,953,600.00 4,916,725.00 4,869,725.00
23,120,088.00 20,111,688.00 16,005,139.00 10,415,156.00
2,950,069.00
97,281,390.00
$97,281,390.00

Total
$4,969,600.00 4,969,600.00 5,593,600.00 5,751,725.00 5,914,725.00
32,075,088.00 33,426,688.00 33,420,139.00 33,425,156.00 26,735,069.00
186,281,390.00 (548,679.00)
$185,732,711.00

Georgia College & State University Annual Financial Report FY 2005 35

Annual debt service requirements to maturity for Student Center and Parking Lot Bonds:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035
Issuance Premium - Net

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Bonds Payable

Prin c ip a l

Interes t

$265,000.00 275,000.00 275,000.00 280,000.00 290,000.00
1,610,000.00 1,935,000.00 2,375,000.00
535,000.00 0.00
7,840,000.00 11,755.00
$7,851,755.00

$300,421.25 294,456.25 287,581.25 280,706.25 272,306.25
1,191,443.75 870,306.25 443,243.75 24,075.00 0.00
3,964,540.00
$3,964,540.00

Total
$565,421.25 569,456.25 562,581.25 560,706.25 562,306.25
2,801,443.75 2,805,306.25 2,818,243.75
559,075.00 0.00
11,804,540.00 11,755.00
$11,816,295.00

Georgia College & State University Annual Financial Report FY 2005 36

GAINESVILLE COLLEGE
Financial Report
For the Year Ended June 30, 2005

Dr. Martha T. Nesbitt President

Gainesville College Gainesville, Georgia
Debbra Pilgrim Interim VP for Fiscal Affairs

GAINESVILLE COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments..................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 19 Note 4 Inventories............................................................................................................ 20 Note 5 Notes/Loans Receivable....................................................................................... 20 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 23 Note 12 Risk Management................................................................................................ 25 Note 13 Contingencies...................................................................................................... 26 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 15 Natural Classifications With Functional Classifications..................................... 27 Note 16 Component Units........................................................................ 28

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 almost 6,000 students each year. The institution continues to grow as shown by the comparative data that follows.

Faculty

Students

FY2005 FY2004 FY2003

759

13,844

700

12,691

392

9,010

Overview of the Financial Statements and Financial Analysis

Gainesville College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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.

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.

Gainesville College Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

June 30, 2005
$6,478,658.86 19,539,053.81
10,722.50 26,028,435.17
2,014,243.67 331,976.43
2,346,220.10
19,539,053.81 10,722.50
463,505.97
3,668,932.79 $23,682,215.07

June 30, 2004
$4,861,379.75 19,339,338.57
10,722.50 24,211,440.82
1,996,343.79 160,899.50
2,157,243.29
19,339,338.57 10,722.50 8,804.97
2,695,331.49 $22,054,197.53

The total assets of the institution increased by $1,816,994.35. A review of the Statement of Net Assets will reveal that the increase was due primarily to an increase of $1,409,019.71 in cash and cash equivalents and a re-categorization of short term investments in the amount of $403,962.20, coupled with an increase of $199,715.24 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 and public service missions of the institution.

The total liabilities for the year increased by $188,976.81. The primary cause for the increase was in non-current liabilities, compensated absences. The combination of the increase in total assets of $1,816,994.35 and the increase in total liabilities of $188,976.81 yields an increase in total net assets of $1,628,017.54. The increase in total net assets is in the categories of cash and cash equivalents in the amount of $1,812,981.91 and invested in capital assets, net of debt in the amount of $199,715.24.

Gainesville College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues

$13,988,690.68

$12,320,649.52

Operating Expenses Operating Loss

26,947,084.16 (12,958,393.48)

24,815,776.73 (12,495,127.21)

Nonoperating Revenues and Expenses

13,810,181.02

12,635,127.87

Income (Loss) Before other revenues, expenses, gains or losses

851,787.54

140,000.66

Other revenues, expenses, gains or losses

776,230.00

1,467,532.84

Increase in Net Assets

1,628,017.54

1,607,533.50

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

22,054,197.53 22,054,197.53

20,446,664.03 20,446,664.03

Net Assets at End of Year

$23,682,215.07

$22,054,197.53

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:

Gainesville College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$7,917,022.63
2,820,038.14 504,137.78
2,695,787.81 51,704.32
13,988,690.68
12,657,872.78 555,556.98 582,776.00 24,729.60 (10,754.34)
13,810,181.02
776,230.00
776,230.00
$28,575,101.70

June 30, 2004
$6,989,618.35 2,555,730.06 295,994.07 2,405,824.94 73,482.10
12,320,649.52
11,911,211.74 739,206.26
1,531,586.07 26,056.73 (41,346.86)
14,166,713.94
1,467,532.84
1,467,532.84 $27,954,896.30

Gainesville College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses Inst ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$12,184,881.80
93,921.73 3,491,541.96 2,352,755.56 3,085,468.13
822,654.09 1,525,550.19 2,428,172.71
962,137.99
26,947,084.16

June 30, 2004
$10,195,838.08
93,256.02 3,646,075.89 2,017,629.16 2,651,992.69 1,814,023.67 1,483,017.37 1,930,334.10
983,609.75
24,815,776.73

Nonoperating Expenses Interest and Other Nonoperating Expense
T otal Expenses

$26,947,084.16

1,531,586.07 $26,347,362.80

The compensation and employee benefits category increased by approximately $708,054.34. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $100,059.91 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2005.

Under non-operating revenues (expenses) state appropriations increased by $746,661.04. The increase of state appropriations is due to Gainesville College receiving full formula funding for Fiscal Year 2005 for past year's increased enrollment.

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 used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Gainesville College Annual Financial Report FY 2005 5

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Act ivit ies Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($13,617,141.53) 15,396,015.04 (394,583.40) 439,414.30 1,823,704.41 2,867,848.01
$4,691,552.42

June 30, 2004
($11,784,770.06) 12,851,329.10 (389,413.01) (397,347.81) 279,798.22 2,588,049.79
$2,867,848.01

Capital Assets

The College had two significant capital asset additions for facilities in fiscal year 2005. The resurfacing of two of the four tennis courts on the Oakwood campus was completed in May 2005. A Plant Operations/Warehouse building was completed also in May 2005. The Plant Operations/Warehouse is part of the second phase of a $4.2 M project which was approved in 2002. Phase one of the project was completed in 2003. The project includes upgrades to existing electrical, HVAC and life safety systems on campus. The $4.2 M for 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.

Long Term Liabilities (Debt)

Gainesville College had total Long Term Liabilities (Debt) of $740,211.70 of which $408,235.27 was reflected as current liability at June 30, 2005.

Component Units

In compliance with GASB Statement No. 39, Gainesville College has included the financial statements and notes for all required component units for FY2005. The Gainesville College Foundation had endowment investments of $8.8 M as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Gainesville College Annual Financial Report FY 2005 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 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. Dr. Martha T. Nesbitt, President Gainesville College
Gainesville College Annual Financial Report FY 2005 7

Statement of Net Assets

GAINESVILLE COLLEGE STATEMENT OF NET ASSETS
June 30, 2005
Gai n e svi l l e C ol l e ge

AS S ETS C u rre n t Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Leases Receivable P ledges Receivable Invent ories P repaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s
Noncu rre n t Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s TO TAL AS S ETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Noncu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS SETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al Project s Unrest rict ed TO TAL NET AS S ETS

$4,680,829.92
40,711.34 817,317.26
316,623.71 623,176.63
6,478,658.86
10,722.50
19,539,053.81 19,549,776.31 26,028,435.17
133,335.59
1,206,612.60 266,060.21 408,235.27
2,014,243.67
331,976.43
331,976.43 2,346,220.10 19,539,053.81
10,722.50 463,505.97 3,668,932.79 $23,682,215.07

Gai ne svi l l e C ol l e ge
Fou n dati on ($388,652.00)
352,727.00 491,873.00 455,948.00 8,402,110.00
8,400.00 8,410,510.00 8,866,458.00
0.00
0.00 0.00
2,533,260.00 5,572,074.00
761,124.00 $8,866,458.00

Gainesville College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
GAINESVILLE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Boo k st ore Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Gainesville College
T otal Operating Expenses Operating Income (loss)

Gaine sville College

Gaine sville College
Fo u n da ti o n

$9,024,420.99 1,107,398.36
2,574,047.95 14,327.89
231,662.30 504,137.78

$0.00
601,234.00 250,624.00

2,659,443.90 7,561.19 7,615.04
21,167.68 51,704.32 13,988,690.68

201,735.00 1,053,593.00

6,978,391.77 6,750,732.65 3,222,412.54
168,263.90 1,525,550.19
859,064.67 6,476,985.62
965,682.82
26,947,084.16 (12,958,393.48)

39,481.75 13,545.02
76,797.23 494,132.00 623,956.00 429,637.00

Gainesville College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GAINESVILLE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

Gaine sville College

Gaine sville College
Fo u n da ti o n

12,657,872.78
280,310.71 179,902.67
95,343.60 582,776.00
24,729.60
(10,754.34) 13,810,181.02
851,787.54

192,452.00
192,452.00 622,089.00

776,230.00
776,230.00 1,628,017.54 22,054,197.53 22,054,197.53 $23,682,215.07

17,570.00 17,570.00 639,659.00
8,226,799.00
8,226,799.00 $8,866,458.00

Gainesville College Annual Financial Report FY 2005 10

Statement of Cash Flows
GAINES VILLE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$9,077,807.11
2,458,378.05 513,725.18
(12,324,099.09) (13,549,006.66)
(2,632,948.55)
2,759,834.22 7,561.19 7,615.04
21,167.68 42,824.30 (13,617,141.53)
12,657,872.78 79,393.48
2,658,748.78 15,396,015.04
(394,583.40)
(394,583.40)
24,729.60 414,684.70 439,414.30 1,823,704.41 2,867,848.01 $4,691,552.42

Gainesville College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of invest m ent s recognized as a com ponent of int erest incom e Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($12,958,393.48)
965,682.82 (279,408.54)
(18,606.64) (1,576,834.85)
91,882.03 (23,739.50)
4,429.21 177,847.42 ($13,617,141.53)
$0.00 ($776,230.00)

Gainesville College Annual Financial Report FY 2005 12

GAINESVILLE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Gainesville College is reporting the activity of the Gainesville College Foundation.
See Note 16. 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
Gainesville College Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 Statement 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.
Gainesville College Annual Financial Report FY 2005 14

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.
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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $776,230.00 to Gainesville 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.
Gainesville College Annual Financial Report FY 2005 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. Gainesville College had accrued liability for compensated absences in the amount of $560,364.28 as of 7-1-2004. For FY2005, $1,272,153.91 was earned in compensated absences and employees were paid $1,092,306.49, for a net increase of $177,847.42. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 740,211.70.
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 previously in Note 1 Capital Assets section.
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.
Gainesville College Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $463,505.97
$463,505.97

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 Reserv e fo r En cum bran ces Reserv e fo r Inv en t ory Ot h er Unrest rict ed T o t al Unrest rict ed Net Asset s

June 30, 2005
$ 8 ,2 2 8 .4 0 2 ,0 8 8 ,2 4 1 .3 1
1 ,5 7 2 ,4 6 3 .0 8 $ 3 ,6 6 8 ,9 3 2 .7 9

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:

Gainesville College Annual Financial Report FY 2005 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.
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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 non-operating 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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.
Gainesville College Annual Financial Report FY 2005 18

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 and 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.
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.
At June 30, 2005, $5,194,211.02 of the college's deposits were uninsured. Of these uninsured deposits $5,194,211.02 were collateralized with securities held by the financial institution, by its trust department or agency in the college's name.

B. Investments

Gainesville College had no investments as of June 30, 2005.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$223,487.13 450.17
40,711.34
593,379.96 858,028.60
$858,028.60

Gainesville College Annual Financial Report FY 2005 19

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005 $316,623.71
$316,623.71

Note 5. Notes/Loans Receivable Gainesville College has no loans receivable at this time.

Gainesville College Annual Financial Report FY 2005 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$105,849.29
105,849.29

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

371,830.00 26,722,552.58 1,069,478.00 2,036,411.16
1,876,529.18
32,076,800.92

767,000.00 119,220.00 246,355.40
38,238.00
1,170,813.40

171,928.24 13,098.00 185,026.24

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

320,536.32 8,362,154.49
946,189.74 1,533,032.09
1,681,399.00
12,843,311.64

88,548.70 407,507.55 71,674.56 319,828.01
78,124.00
965,682.82

163,967.90 15,643.00 179,610.90

Total Capital Assets, Being Depreciated, Net

19,233,489.28

205,130.58

5,415.34

Capital Assets, net

$19,339,338.57

$205,130.58

$5,415.34

Ending Balance 6/30/2005
$105,849.29 0.00
105,849.29
371,830.00 27,489,552.58 1,188,698.00 2,110,838.32
0.00 1,901,669.18
0.00 33,062,588.08
409,085.02 8,769,662.04 1,017,864.30 1,688,892.20
0.00 1,743,880.00
0.00 13,629,383.56
19,433,204.52
$19,539,053.81

Gainesville College Annual Financial Report FY 2005 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $1,048,615.17
157,997.43 $1,206,612.60

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

560,364.28 560,364.28

1,272,153.91 1,272,153.91

1,092,306.49 1,092,306.49

740,211.70 740,211.70

Total Long Term Obligations

$560,364.28 $1,272,153.91

$1,092,306.49

$740,211.70

Current Portion
$0.00
408,235.27 408,235.27 $408,235.27

Note 9. Significant Commitments Gainesville College has no outstanding contracts not represented in the financial statements. Note 10. Lease Obligations Gainesville College had no outstanding lease obligations at June 30, 2005.

Gainesville College Annual Financial Report FY 2005 22

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$786,858.51 $759,949.74 $740,823.51

Employees' Retirement System of Georgia

Plan Description Gainesville College has no participants in the Employees' Retirement System of Georgia (ERS).

Gainesville College Annual Financial Report FY 2005 23

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 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 2005, the employer contribution was 9.65% 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 $254,907.53 (9.65%) and $132,087.93 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
Gainesville College Annual Financial Report FY 2005 24

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 2005 amounted to $86,216.38 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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.
Gainesville College Annual Financial Report FY 2005 25

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 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, 2005.
Note 14. 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, 2005, there were 101 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Gainesville College recognized as incurred $362,469.94 of expenditures, which was net of $108,740.98 of participant contributions.
Gainesville College Annual Financial Report FY 2005 26

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$6,967,859.77 1,147,351.06 1,656,582.88
77,676.97
70,490.22 2,264,920.90

$0.00

$0.00 75,130.51 16,638.19
946.45
1,206.58

$2,950.00 1,591,298.75
344,884.63
22,016.90
52,850.12 1,477,541.56

$0.00 1,517,336.47
344,019.91
44,508.30
27,013.94 419,876.94

$7,582.00 1,535,011.01
638,542.68
22,292.08
6,878.18 875,162.18

Total Expenses

$12,184,881.80

$0.00 $93,921.73 $3,491,541.96 $2,352,755.56 $3,085,468.13

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 776,016.32 190,125.21 (34,226.27)
747.60
699,274.00 (809,282.77)

$0.00 1,525,550.19

$0.00 108,588.53
31,619.04 34,226.27
75.60
2,558.21 2,247,560.23
3,544.83

$0.00 962,137.99

$822,654.09 $1,525,550.19

$2,428,172.71

$962,137.99

T ot al Expenses
$6,978,391.77 6,750,732.65 3,222,412.54 0.00 168,263.90 1,525,550.19 859,064.67 6,476,985.62 965,682.82
$26,947,084.16

Gainesville College Annual Financial Report FY 2005 27

Note 16. Component Units

Gainesville College Foundation is a legally separate, tax-exempt component unit of Gainesville 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 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. 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 June 30, 2005, the Foundation distributed $494,132.00 to the college for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at P.O. Box 1358, Gainesville, GA 30503.

Investments for Component Units:

Gainesville College Foundation holds endowment investments in the amount of $8.4 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. 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.

Gainesville College Foundation also holds investments in real property valued at $8,400.00.

FASB Note for Investments

Investments are comprised of the following amounts at December 31, 2004:

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds

Cos t

Fair Value

$ 1,356,709 $ 1,356,709

1,412,957

1,438,903

455,967

466,794

3,091,046

3,425,781

1,473,962

1,713,924

Total Investments

$ 7,790,641

$8,402,111

Gainesville College Annual Financial Report FY 2005 28

GEORGIA PERIMETER COLLEGE
Financial Report
For the Year Ended June 30, 2005
Georgia Perimeter College Decatur, Georgia

Robert E. Watts
Interim President

Ronald L. Carruth
Executive Vice President for Financial and Administrative Affairs

GEORGIA PERIMETER COLLEGE ANNUAL FINANCIAL REPORT FY 2005
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses, and Changes in Net Assets......................................... 10 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 Deposits and Investments..................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 20 Note 5 Notes/Loans Receivable....................................................................................... 20 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 26 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28

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 County 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 of Georgia. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

373

20,316

347

18,986

330

17,573

Overview of the Financial Statements and Financial Analysis

Georgia Perimeter College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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. 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 Perimeter College Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts

June 30, 2005
$17,428,226.61 112,671,450.84
1,052,358.50 131,152,035.95

June 30, 2004
$15,026,720.41 111,789,328.30
1,043,986.52 127,860,035.23

Liabilitie s: Current Liabilities Noncurrent Liabilities

9,705,528.34 16,563,496.64

8,331,051.57 16,743,302.08

Total Liabilitie s

26,269,024.98

25,074,353.65

Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

96,752,986.30 31,338.39
177,753.72 1,000,215.54 6,920,717.02 $104,883,010.97

95,495,037.98 31,338.39
156,531.54 1,000,215.54 6,102,558.13 $102,785,681.58

The total assets of the institution increased by $3,292,000.72. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of cash at fiscal year end as well as an increase of over one million dollars added to investment in plant, net of accumulated depreciation. The consumption of assets follows 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 $1,194,671.33. The primary causes for the increase includes an increase in non current liabilities of $268,376 for compensated absences; along with an increase of $833,073 in accounts payables for Gwinnett University Center. The Gwinnett University Center is a part of the Georgia Perimeter College financial records. There was also an increase in utilities payables for fiscal year 05. These represent items not paid before the close of 05 books due to a more aggressive time schedule for reporting.

Georgia Perimeter College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operat ing Revenues

$53,003,086.44

$53,051,184.18

Operat ing Expenses Operat ing Loss
Nonoperat ing Revenues and Expenses
Incom e (Loss) Before ot her revenues, expenses, gains or losses

112,224,040.64 (59,220,954.20) 58,172,848.30
(1,048,105.90)

102,284,264.38 (49,233,080.20) 49,423,197.02
190,116.82

Ot her revenues, expenses, gains or losses

3,145,435.29

2,449,755.70

Increase in Net Asset s

2,097,329.39

2,639,872.52

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
Net Asset s at End of Year

102,785,681.58 102,785,681.58 $104,883,010.97

100,145,809.06 100,145,809.06 $102,785,681.58

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. Tuition and fees remained level, while the State Appropriation increased by $8,083,467. 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 FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
Revenue by Source For t he Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

June 30, 2004

Operat ing Revenue T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s Sales and Services A ux ilia r y Other
T ot al Operat ing Revenue
Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other
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

$31,384,983.89
17,037,331.52 1,835,848.17 2,367,963.00 376,959.86
53,003,086.44
57,796,322.18
981,034.76 280,552.90 (55,973.32) 59,001,936.52
3,145,435.29
3,145,435.29 $115,150,458.25

$31,566,621.00
16,809,967.70 1,624,138.03 2,450,618.93 599,838.52
53,051,184.18
49,712,835.37
835,902.04 68,917.09 73,357.15
50,691,011.65
2,457,157.53 (7,401.83)
2,449,755.70
$106,191,951.53

Georgia Perimeter College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004
Expenses (by Funct ional Classificat ion) For t he Years Ended June 30, 2005 and June 30, 2004

Operat ing Expenses Inst ruct ion Research P ublic Service Academic 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 at ient Care (MCG only)
T ot al Operat ing Expenses

June 30, 2005
$40,530,748.22
814.71 9,692,714.11 10,384,398.59 20,100,201.54 11,489,473.58 15,037,945.33 2,389,337.93 2,598,406.63
112,224,040.64

June 30, 2004
$38,300,343.18
848.02 7,901,129.05 9,917,272.53 14,906,279.33 10,004,732.54 14,699,622.78 1,802,345.60 4,751,691.35
102,284,264.38

Nonoperat ing Expenses Int erest Expense and Ot her
T ot al Expenses

829,088.22 $113,053,128.86

1,267,814.63 $103,552,079.01

Federal grants and contracts continued to grow, even with the completion of the previous year one time transportation enhancement grant of $2,000,000. The increase of over $5,000,000 in institutional support is mainly due to the installation of a new telephone system, voice over IP. The new digital telephone system is much more efficient and has enhanced capability to control cost. The investment should result in cost savings on telecommunications expenses in the future. The institution expects to recoup the cost of the telephone system over the next several years by using this more efficient and cost effective system. The increase in instruction and academic support is due to an increase in staffing and purchase of supplies and materials.

Utilities increase by approximately $784,559 during the past year. The increase was primarily created because of an increase in building space occupied during fiscal year 2005. The increased costs are associated with electric, natural gas, water and telecommunications.

Under non-operating revenues state appropriations increased by $8,083,487. The increase of state appropriations is due to workload funding for increasing enrollments, merit salary funds and fringe benefits.

Georgia Perimeter College Annual Financial Report FY 2005 5

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 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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($52,852,515.51) 59,167,558.46 (3,978,863.24) 280,552.90 2,616,732.61 12,410,546.03
$15,027,278.64

June 30, 2004
($44,687,023.01) 49,743,145.32 (3,117,227.41) 68,318.34 2,007,213.24 10,403,332.79
$12,410,546.03

Capital Assets

The College had one significant capital asset addition for facilities in fiscal year 2005. The classroom renovation on the Clarkston campus was completed, along with several labs on all campuses.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long-Term Liabilities (Debt)

Georgia Perimeter College had Long-Term Liabilities (Debt) of $18,647,198.08 of which $2,083,701.44 is reflected as a current liability at June 30, 2005.

For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.

Georgia Perimeter College Annual Financial Report FY 2005 6

Component Units
In compliance with GASB Statement No. 39, Georgia Perimeter College is not including financial statements and notes for any component units for FY2005. The Georgia Perimeter College Foundation does not meet the threshold to consider it significant for component unit reporting at this time.
Economic Outlook
Georgia Perimeter College currently operates a center in Rockdale County which serves approximately 1,700 students. The center occupies leased space and enrollment has outgrown the facilities available. In order for the college to grow and serve the community with higher education opportunities, the administration explored options to develop a permanent campus in the area.
Financial commitments from Newton County and the community led to the development of plans for a GPC campus in Newton County. In January 2005, Georgia Perimeter College presented to the Board of Regents, a request to establish a new campus in Newton County, Georgia. The Board of Regents authorized the development and the construction of an initial academic facility.
The Newton campus will consist of approximately 100 acres and a 95,000 square foot academic facility, parking, and other related infrastructure. The expected opening date is spring 2007. Enrollment is projected at 3,000 students in the fall of 2007. The Rockdale Center will be closed when the new facility opens.
Georgia Perimeter College Lawrenceville Campus is located at the Gwinnett University Center and provides lower division programs to approximately 7,000 students. The University of Georgia provides upper division and graduate programs for approximately 1,000 students. Based on the Gwinnett County growth in population, the Center expects 1,000 new students per year. Strong community support for a four year college in Gwinnett County led the Board of Regents to approve a new state college in June 2005.
The new state college will be responsible for all undergraduate academic offerings and the University of Georgia will continue to offer graduate degree programs. The University System of Georgia is planning a multi-year transition to transform the Center into the state college. The state college will begin admitting upper level students in the fall of 2007. GPC will be completely fazed out of the Center by fiscal year 2009. The University System administration is working closely with Georgia Perimeter College on the transition of students, administrative operations and financial resources.
Georgia Perimeter College Annual Financial Report FY 2005 7

Georgia Perimeter College (GPC) has served as the administrative service agent for the Gwinnett University Center. GPC provides support for human resources, payroll, budgets, accounting, purchasing, inventory, auxiliary enterprises, plant operations and protective services. For fiscal year 2006, GPC will continue to provide the same services. Transition plans will be developed during fiscal year 2006 to define administrative operations of the new college and the level of support provided by Georgia Perimeter College. Robert E. Watts, Interim President Georgia Perimeter College
Georgia Perimeter College Annual Financial Report FY 2005 8

Statement of Net Assets
G EO RG IA PERIMETER C O LLEG E S TATEMENT O F NET AS S ETS June 30, 2005
AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest m ent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot m ent Receivables - Ot her Inventories (note 4) P repaid Items Ot her Asset s T ot al Current Asset s
Noncurre nt Assets Noncurrent Cash Invest m ent s Not es Receivable, net Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS
LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s (n ote 8) Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) and Ot her Noncurrent Liabilit ies Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p en dable E x p e n da ble Capit al P rojects Unrest rict ed TO TAL NET AS S ETS

June 30, 2005
$13,984,314.12 16,341.21
347,198.84
2,901,935.53 167,339.38 11,097.53
17,428,226.61
1,042,964.52
9,393.98 112,671,450.84 113,723,809.34 131,152,035.95
2,268,471.30 316,389.18
52,390.00
3,846,682.54 342,397.56 795,496.32 448,181.97
1,635,519.47 9,705,528.34
15,417,892.57
1,145,604.07 16,563,496.64 26,269,024.98
96,752,986.30
31,338.39 177,753.72 1,000,215.54 6,920,717.02 $104,883,010.97

Georgia Perimeter College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets

GEO RGIA PERIMETER C O LLEGE S TATEMENT of REVENUES , EXPENS ES , an d C HANGES i n NET AS S ETS
for th e Ye ar En de d Ju n e 30, 2005

REVENUES

June 30, 2005

Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Federal Appropriat ions Grant s and Cont ract s Federal St at e Other Sales and Services Rents and Royalties Auxiliary Ent erprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Operat ing Revenues T ot al Operat ing Revenues
EXPENS ES Operat ing Expenses
Salaries: Facult y St aff
Ben efit s Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Depreciat ion
T ot al Operat ing Expenses Operat ing Income (loss)

$36,792,827.81 5,407,843.92
16,405,043.97 222,210.78 410,076.77
1,835,848.17 62,402.83
878,607.00 17,787.24
1,252,920.55 218,648.21 314,557.03
53,003,086.44
26,631,798.97 32,352,851.77 12,290,231.04
675,990.88 10,606,252.00
3,739,707.30 21,036,179.44
4,891,029.24 112,224,040.64 (59,220,954.20)

Georgia Perimeter College Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued

GEO RGIA PERIMETER CO LLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Ot h er Gift s Invest m ent Incom e (endowm ent s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s Federal St at e Ot h er T ot al Ot her Revenues Increase in Net Asset s
NET AS S ETS Net Asset s-beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s-beginning of year, rest at ed
Net Asset s-End of Year

57,796,322.18
981,034.76 280,552.90 (829,088.22) (55,973.32) 58,172,848.30 (1,048,105.90)
3,145,435.29 3,145,435.29 2,097,329.39 102,785,681.58 102,785,681.58 $104,883,010.97

Georgia Perimeter College Annual Financial Report FY 2005 11

Statement of Cash Flows

GEO RGIA PERIMETER C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005

C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$30,854,519.86
17,475,568.15 1,870,870.72
(36,747,395.30) (58,496,532.21) (10,606,252.00)
(57,301.33) 60,224.75
733,773.46 12,799.44
1,275,602.83 371,256.68 400,349.44
(52,852,515.51)
57,796,322.18 352,332.09
1,018,904.19 59,167,558.46
(2,721,559.24) (428,215.78) (829,088.22)
(3,978,863.24)
280,552.90
280,552.90 2,616,732.61 12,410,546.03 $15,027,278.64

Georgia Perimeter College Annual Financial Report FY 2005 12

Statement of Cash Flows, Continued
REC O NCILIATIO N O F O PERATING LO SS TO NET CASH PRO VIDED (USED) BY O PERATING ACTIVITIES:
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities
Dep reciat io n Change in Assets and Liabilities:
Receivables, net In v en t o ries Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (used) by Operating Activities
** NON-CASH INVEST ING, NON-CAPIT AL FINANCING, AND CAPIT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capital assets reducing proceeds of capital grants and gifts

($59,220,954.20)
4,891,029.24 (190,843.99)
6,727.70 43,302.81 1,022,880.89 47,703.53 26,020.78 521,617.73 ($52,852,515.51)
($5,343,788.33)

Georgia Perimeter College Annual Financial Report FY 2005 13

GEORGIA PERIMETER COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Perimeter College serves the state and national communities by providing 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in 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 FY2005, 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB
Georgia Perimeter College Annual Financial Report FY 2005 14

and are presented as required by these standards to provide 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. 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 Statement 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.
Georgia Perimeter College Annual Financial Report FY 2005 15

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $2,868,816 to Georgia Perimeter 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 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 $2,259,505.81 as of 7-1-2004. For FY2005, $2,096,179.06 was earned in compensated absences and employees were paid $1,574,561.33, for a net increase of $521,617.73. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $2,781,123.54.
Georgia Perimeter College Annual Financial Report FY 2005 16

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 previously in Note 1 Capital Assets section.

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:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005
$25,270.30 17,542.67
123,530.16
11,410.59 $177,753.72

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
Georgia Perimeter College Annual Financial Report FY 2005 17

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 Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s

June 30, 2005
$35,328.79 5,949,507.90
203,000.00 732,880.33 $6,920,717.02

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 restricted resources, and then towards unrestricted 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.

Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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

Georgia Perimeter College Annual Financial Report FY 2005 18

that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances.
Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $14,541,754.90 of the college's deposits were uninsured. Of these uninsured deposits, $14,541,754.90 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the college's name.
Georgia Perimeter College Annual Financial Report FY 2005 19

B. Investments

At June 30, 2005, the carrying value of the college's investment was $2,699,604.85, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

$2,699,604.85 2,699,604.85

$2,699,604.85

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$981,735.42 585,158.12 347,198.84
1,335,011.99 3,249,104.37
(30.00)
$3,249,134.37

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005 $0.00
167,339.38
$167,339.38

Note 5. Notes/Loans Receivable Georgia Perimeter College had no loans/notes receivable as of June 30, 2005.

Georgia Perimeter College Annual Financial Report FY 2005 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$4,220,775.73 2,198,353.04 6,419,128.77

Additions
$200,000.00 1,507,635.43 1,707,635.43

Reductions
$0.00 2,198,353.04 2,198,353.04

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

108,046,393.64 4,776,345.03 10,233,785.71 17,279,804.07 12,023,244.34
152,359,572.79

4,076,274.31 1,636,116.09
645,321.74 6,357,712.14

74,954.97 441,624.51 243,303.00 759,882.48

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

27,494,128.26 2,280,112.02 6,704,060.56
702,844.42 9,808,228.00
46,989,373.26

2,854,637.12 83,183.67
1,144,710.08 289,813.37 518,685.00
4,891,029.24

422,736.73 243,303.00 666,039.73

Total Capital Assets, Being Depreciated, Net

105,370,199.53

1,466,682.90

93,842.75

Capital Assets, net

$111,789,328.30

$3,174,318.33

$2,292,195.79

Ending Balance 6/30/2005
$4,420,775.73 1,507,635.43 5,928,411.16
0.00 112,047,712.98
4,776,345.03 11,428,277.29 17,279,804.07 12,425,263.08
0.00 157,957,402.45
0.00 30,348,765.38 2,363,295.69 7,426,033.91
992,657.79 10,083,610.00
0.00 51,214,362.77
106,743,039.68
$112,671,450.84

Georgia Perimeter College Annual Financial Report FY 2005 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $3,467,445.96
379,236.58 $3,846,682.54

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$16,294,290.32

Additions $0.00

Reductions

Ending Balance June 30, 2005

$428,215.78 $15,866,074.54

2,259,505.81 2,259,505.81

2,096,179.06 2,096,179.06

1,574,561.33 1,574,561.33

2,781,123.54 2,781,123.54

Total Long Term Obligations

$18,553,796.13 $2,096,179.06

$2,002,777.11 $18,647,198.08

Current Portion $448,181.97
1,635,519.47 1,635,519.47 $2,083,701.44

Note 9. Significant Commitments
Georgia Perimeter College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $8,205,000 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Georgia Perimeter College is obligated under a capital lease for the acquisition of real property.

Georgia Perimeter College Annual Financial Report FY 2005 22

CAPITAL LEASES
Georgia Perimeter College has one capital lease payable in monthly installments with the term expiring in 2023. Expenditures for fiscal year 2005 were $1,257,304, of which $829,088 represented interest expense. Principal paid on the capital lease was $428,216. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Buildings Total Assets Held Under Capital Lease

$15,866,074.54 $15,866,074.54

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.

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 t hrough 2015 2016 t hrough 2020 2021 t hrough 2025 2026 t hrough 2030 2031 t hrough 2035 2036 t hrough 2040 2041 t hrough 2045 T ot al m inim um lease paym ent s
Less: Int erest Less: Execut ory cost s (if paid) P rincipal Out st anding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Real P roperty Capit al Leases
$1,254,804.00 1,354,804.00 1,374,804.00 1,374,804.00 1,374,804.00 7,000,680.00 6,934,000.00 3,569,109.06

Operat ing Leases

24,237,809.06 8,371,734.52
$15,866,074.54

Georgia Perimeter College Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$2,875,100.63 $2,714,400.40 $2,601,856.37

Employees' Retirement System of Georgia

Georgia Perimeter College made no contributions to the Employees' Retirement System of Georgia (ERS) for FY2005.

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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.

Georgia Perimeter College Annual Financial Report FY 2005 24

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 2005, the employer contribution was 9.65% 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 $2,903,467 (9.65%) and $1,504,413 (5%), respectively.
AIG-VALIC, American Century, Fidelity, Valic, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $711,368 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Georgia Perimeter College Annual Financial Report FY 2005 25

Note 12. 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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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
Georgia Perimeter College Annual Financial Report FY 2005 26

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, 2005. Note 14. 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, 2005, there were 242 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Georgia Perimeter College recognized as incurred $999,032 of expenditures, which was net of $321,793 of participant contributions.
Georgia Perimeter College Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2005 are shown below:

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Instruction
$26,596,796.53 5,603,074.60 5,697,388.65
270,053.80 (5,402,504.62)
416,459.96 6,281,479.60 1,067,999.70
$40,530,748.22

Research $0.00
$0.00

Functional Classification FY2005

Public Service

Academic Support

Student Services

$0.00

$10,800.00 6,399,836.51 1,166,067.81

$23,999.94 6,481,830.56 1,326,022.38

814.71

110,658.79 4,000.00
208,943.43 1,187,058.08
605,349.49

107,390.18 166,339.36 126,138.98 2,144,389.64
8,287.55

$814.71 $9,692,714.11 $10,384,398.59

Institutional Support
$0.00 9,218,410.77 2,910,490.10
0.00 119,325.50 431,421.94 698,622.61 6,444,857.95 277,072.67
$20,100,201.54

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance
$0.00 4,107,111.55 1,083,141.41
(89,517.64) 16,317.00
2,262,582.29 3,793,985.68
315,853.29
$11,489,473.58

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 15,037,945.33

$202.50 542,587.78 107,120.69 89,517.64 52,245.61 369,049.99 26,145.32 1,184,408.49
18,059.91

$0.00 2,598,406.63

$15,037,945.33 $2,389,337.93 $2,598,406.63

Total Expenses
$26,631,798.97 32,352,851.77 12,290,231.04 0.00 675,990.88 10,606,252.00 3,739,707.30 21,036,179.44 4,891,029.24
$112,224,040.64

Georgia Perimeter College Annual Financial Report FY 2005 28

GEORGIA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Carl V. Patton President

Georgia State University Atlanta, Georgia
Jerry J. Rackliffe Vice President for Finance &
Administration

GEORGIA STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments................................................................19 Note 3 Accounts Receivable............................................................................................ 21 Note 4 Inventories..................................................................................21 Note 5 Notes/Loans Receivable....................................................................................... 22 Note 6 Capital Assets....................................................................................................... 22 Note 7 Deferred Revenue................................................................................................. 24 Note 8 Long-Term Liabilities .......................................................................................... 24 Note 9 Significant Commitments.................................................................24 Note 10 Lease Obligations................................................................................................ 25 Note 11 Retirement Plans ................................................................................................. 27 Note 12 Risk Management................................................................................................ 30 Note 13 Contingencies...................................................................................................... 31 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 15 Natural Classifications With Functional Classifications..................................... 32 Note 16 Component Units ........................................................................ 33

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 27,000 students each year. The comparison numbers follow:

Faculty

Students

FY2005 FY2004 FY2003

1778 1741 1740

27,267 28,079 27,502

Overview of the Financial Statements and Financial Analysis

Georgia State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$123,004,353.59 297,155,174.70 5,943,290.46 426,102,818.75

June 30, 2004
$107,227,572.75 292,512,321.83 6,141,412.60 405,881,307.18

Liabilities : Current Liabilities Noncurrent Liabilities

40,004,563.38 45,102,404.48

39,730,520.97 46,193,717.35

Total Liabilities

85,106,967.86

85,924,238.32

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

253,527,266.27 45,699.00
17,101,683.96 598,193.07
69,723,008.59 $340,995,850.89

247,330,516.12 46,275.93
15,110,744.89 64,850.00
57,404,681.92 $319,957,068.86

The total assets of the institution increased by $20,221,511.57. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,642,852.87 of investment in plant, net of accumulated depreciation and an increase of $15,776,780.84 in current assets.
The total liabilities for the year decreased by ($817,270.46).
The unrestricted net asset balance of $69,723,008.59 is allocated to Reserve for Encumbrances in the amount of $16,221,795.67 and Reserve for Renewals and Replacements in the amount of $13,303,973.26. The remaining balance is primarily allocated to Auxiliary Enterprises and Student Activities.

Georgia State University Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net As s ets
Net A ssets at beginning of year, as originally reported Prior Year Adjus tments Net A ssets at beginning of year, restated
Net A s s ets at End of Year

$220,779,102.22 399,811,909.56 (179,032,807.34) 188,392,223.07
9,359,415.73 11,679,366.30 21,038,782.03 319,957,068.86 319,957,068.86 $340,995,850.89

$215,478,211.41 397,987,827.35 (182,509,615.94) 177,562,791.39
(4,946,824.55) 9,596,058.43 4,649,233.88 315,307,834.98 315,307,834.98 $319,957,068.86

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A u xiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$107,212,722.25
76,685,828.66 5,036,222.26
26,597,282.42 5,247,046.63
220,779,102.22
180,328,825.04 5,728,239.55 1,987,508.87 2,416,353.58 729,982.07
191,190,909.11
11,289,849.29 389,517.01
11,679,366.30
$423,649,377.63

June 30, 2004
$106,986,758.24
75,494,951.48 1,964,245.64 24,687,102.21 6,345,153.84
215,478,211.41
170,612,715.71 5,663,320.37 4,213,150.01 968,127.28 (1,143,615.08)
180,313,698.29
9,494,311.39 101,747.04
9,596,058.43
$405,387,968.13

Georgia State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res e arch Public Service Academic Support Student Services Ins titutional Support Plant Operations and Maintenance Scholars hips and Fellows hips Auxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital As s ets )
Total Expens es

June 30, 2005
$137,354,944.08 64,352,631.75 16,689,085.17 42,631,813.54 22,320,007.81 37,023,311.94 32,255,840.03 26,464,225.23 20,720,050.01
399,811,909.56
2,798,686.04
$402,610,595.60

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 25,007,753.37 20,233,160.00
397,987,827.35
2,750,906.90
$400,738,734.25

Revenues associated with student tuition and fees, net of sponsored and unsponsored scholarships, increased $225,964.01 during the year. This reflects an increase in both tuition and fees for the University. Grants and Contracts increased in the amount of $1,190,877.18 with a decrease in federal grants of ($1,091,668.63), an increase in state grants of $1,571,531.46 and an increase in local and private grants of $711,014.35.
The compensation and employee benefits category increased by approximately $360,762.21.
Utilities increased by approximately $117,909.74 during the past year.
Under non-operating revenues (expenses) state appropriations increased by approximately $9,716,109.33.
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 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
Georgia State University Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Activities Inves ting Activities
Net Change in Cash Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($152,256,872.25) 189,339,739.74 (15,625,710.11) 2,417,109.25 23,874,266.63 82,657,494.78
$106,531,761.41

June 30, 2004
($160,796,664.28) 180,140,326.34 (16,198,886.38) 965,492.64 4,110,268.32 78,547,226.46
$82,657,494.78

Capital Assets
In Fiscal Year 2005, Georgia State University obtained the Atlanta Jail Property valued at $7,450,000. In terms 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. Additionally, the Board of Regents, in Spring 2005, added our proposal for a 330,000 square foot Humanities Building to its Major Capital Funding List. Of the total $77.71 million estimated cost to construct the building, the University has requested $57.51 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 Long-Term Debt of $54,082,899.52 of which $8,980,495.04 was reflected as a current liability at June 30, 2005.
For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.

Georgia State University Annual Financial Report FY 2005 6

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 FY2005. The Georgia State University Foundation had endowment investments of $75.2 million as of June 30, 2005 and long-term debt of $48.1 million in the form two capital leases, one bond and one promissory note. The Georgia State University Research Foundation had endowment investments of $2 million and no longterm debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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 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 2005 7

Statement of Net Assets

GEORGIA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2005

COMPONENT UNITS

ASS ETS
Current As s ets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Due from Component Units Due from Primary Government Pledges Receivable Inventories Prepaid Items Other Assets Total Current Assets

GEORGIA STATE UNIVERSITY
$106,531,761.41
3,426,922.95 9,787,400.91
635,544.00
85,685.43 2,537,038.89 123,004,353.59

Noncurrent As s ets Noncurrent Cash Due from Component Units Investments Investments in Real Estate Notes Receivable, net Pledges Receivable Other Assets Capital Assets, net Total Noncurrent Assets TOTAL ASSETS

47,444.80 5,895,845.66
297,155,174.70 303,098,465.16 426,102,818.75

LIABILITIES Curre nt Liabilitie s Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue Notes Payable to Primary Government Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to Primary Government Current Portion of Long-term Debt Compensated Absences (current portion) Total Current Liabilities Noncurre nt Liabilitie s Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Notes Payable to Primary Government Other Noncurrent Liabilities Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES

3,794,676.00 714,753.45
407,598.60 491,616.47 22,880,479.76
221,571.31 2,443,869.75
69,503.00
1,907,598.16 7,072,896.88 40,004,563.38
41,720,310.27
3,382,094.21 45,102,404.48
85,106,967.86

NET AS SETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted
TOTAL NET ASSETS

253,527,266.27
45,699.00 17,101,683.96
598,193.07 69,723,008.59 $340,995,850.89

Ge orgia State Unive rs ity Re s e arch
Foundation, Inc.
$5,875,296.00 1,624,787.00 4,909,291.00 69,503.00 4,648,137.00
17,127,014.00
5,305,184.00
3,731,752.00 9,036,936.00 26,163,950.00
6,510.00
4,648,137.00 161,897.00
6,001,560.00 10,818,104.00
0.00 10,818,104.00 3,731,752.00 2,000,000.00 361,547.00 9,252,547.00 $15,345,846.00

Ge orgia State Unive rs ity
Foundation, Inc.
$18,472,377.00
1,178,958.00
2,561,476.00 111,389.00
22,324,200.00
86,166,685.00
7,235,119.00 5,085,454.00 62,380,196.00 160,867,454.00 183,191,654.00
1,766,747.00
10,383,469.00
629,034.00 651,277.00 13,430,527.00 10,408,676.00
33,439,966.00 43,848,642.00
57,279,169.00 18,282,993.00 59,821,377.00 41,422,769.00
6,385,346.00 $125,912,485.00

Georgia State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses, and Changes in Net Assets

GEORGIA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005
COMPONENT UNITS

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties 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 Payments to or on behalf of Georgia State University
Total Operating Expenses Operating Income (loss)

GEORGIA STATE
UNIVERSITY

Georgia State University Research
Foundation, Inc.

Georgia State Univ e rs ity
Foundation, Inc.

$131,204,015.26 23,991,293.01
56,762,968.35 8,067,262.57 11,855,597.74 5,036,222.26
26,000.00
12,000,271.98 714,625.93 221,344.49
5,206,309.14
4,928,905.60 3,525,825.28 5,221,046.63 220,779,102.22

$0.00
37,074,566.00 4,547,596.00 8,508,265.00

$0.00 849,532.00 4,307,441.00
10,247,054.00

50,130,427.00

15,404,027.00

79,849,454.12 129,319,570.55 41,868,038.07
3,593,568.02 27,385,293.31 9,277,199.73 88,891,502.82 19,627,282.94
399,811,909.56 (179,032,807.34)

602,104.00 144,239.00 49,057,069.00 49,803,412.00 327,015.00

641,470.00 162,752.00
192,179.00
4,667,838.00 2,224,553.00 6,686,723.00 14,575,515.00
828,512.00

Georgia State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

GEORGIA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005
COMPONENT UNITS

GEORGIA STATE
UNIVERSITY

Ge orgia State University Re se arch
Foundation, Inc.

Ge orgia State Unive rsity
Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Additions to Permanent Endowment Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Additions to Permanent Endowment 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

180,328,825.04
87,612.42 5,640,627.13 1,987,508.87 2,416,353.58 (2,798,686.04)
729,982.07 188,392,223.07
9,359,415.73
11,289,849.29
389,517.01 11,679,366.30 21,038,782.03
319,957,068.86
319,957,068.86 $340,995,850.89

269,984.00
425,334.00 695,318.00 1,022,333.00

11,808,314.00 5,504,206.00 (2,505,962.00)
14,806,558.00 15,635,070.00

0.00 1,022,333.00
14,323,513.00
14,323,513.00 $15,345,846.00

1,012,459.00 1,012,459.00 16,647,529.00
109,264,956.00
109,264,956.00 $125,912,485.00

Georgia State University Annual Financial Report FY 2005 10

Statement of Cash Flows
GEORGIA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
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 Scholars hips and Fellowships Loans Iss ued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate Athletics Other Organizations Other Receipts (payments ) Net Cas h 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 Purpos es Net Cas h 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 Ass ets Purchas es of Capital As sets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash us ed by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchas e of Investments Net Cash Provided (us ed) by Investing Activities Net Increase/Decreas e in Cash Cas h and Cash Equivalents - Beginning of year Cas h and Cash Equivalents - End of Year

June 30, 2005
$106,400,897.87
77,026,810.43 5,372,140.61 (143,680,397.95) (208,421,961.23) (23,266,202.30) (1,056,769.03) 1,254,135.50
12,968,632.21 663,609.46 205,276.02
6,157,536.23
5,838,534.08 2,352,433.82 5,928,452.03 (152,256,872.25)
180,328,825.04 1,295,166.28 7,715,748.42
189,339,739.74
180,062.05 45,936.92 (11,225,639.14) (1,827,383.90) (2,798,686.04) (15,625,710.11)
2,417,109.25
2,417,109.25 23,874,266.63 82,657,494.78 $106,531,761.41

Georgia State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Notes Receivable, Net Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($179,032,807.34)
19,627,282.94 6,923,056.00
19,500.02 197,366.47 581,943.29 (120,547.46) (946,738.50) 494,072.33 ($152,256,872.25)
575,873.73 $755.67
($11,679,366.30)

Georgia State University Annual Financial Report FY 2005 12

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Georgia State University is reporting the activity of the Georgia State University Foundation and the Georgia State University Research Foundation.
See Note 16. Component Units, for foundation notes.
Georgia State University Annual Financial Report FY 2005 13

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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 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 not to apply FASB pronouncements.
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
Georgia State University Annual Financial Report FY 2005 14

reported as a component of investment income in the Statement 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 grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies and 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 $100,000.00 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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 State University when complete. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $4,037,334.07 to Georgia State University
Georgia State University Annual Financial Report FY 2005 15

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. Georgia State University had accrued liability for compensated absences in the amount of $9,960,918.76 as of 7-1-2004. For FY2005, $7,478,295.46 was earned in compensated absences and employees were paid $6,984,223.13, for a net increase of $494,072.33. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $10,454,991.09.
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 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 previously in Note 1 Capital Assets section.
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 the Official Code of Georgia Annotated.
Georgia State University Annual Financial Report FY 2005 16

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:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $10,772,032.20
6,216,104.67 113,547.09
$17,101,683.96

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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2005
$13,303,973.26 16,221,795.67 79,137.31 40,118,102.35
$69,723,008.59

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.

Georgia State University Annual Financial Report FY 2005 17

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. 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Georgia State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $26,332,336.47 of the University's deposits were uninsured. Of these uninsured deposits, $26,332,336.47 was uncollateralized.
Georgia State University Annual Financial Report FY 2005 19

Investments At June 30, 2005, the carrying value of the University's investments was $81,054,130.20, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and/or Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund
Office of Treasury and Fiscal Services Georgia Fund 1

$0.00 47,444.80 47,444.80 81,006,685.40

$81,054,130.20

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financials Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their website at http://www.audits.state.ga.us/internet/ead/colltech.html.
The Weighted Average Maturity of the Total Return Fund is 4.4 years. Of the University's total investment of $47,444.80 in the Total Return Fund, $13,213.17 is invested in debt securities.
The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 24 days.
The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price.
The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest

Georgia State University Annual Financial Report FY 2005 20

income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).
Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk.
The Board of Regents Investment Pool was not rated by a national rating organization. The Georgia Fund 1 and Georgia Extended Asset Pool were both rated AAA by Standard and Poor's.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Georgia State Financing and Inves tment Commis s ion Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$7,268,079.04 867,137.60
3,426,922.95
8,769,447.24
20,331,586.83 6,481,718.97
$13,849,867.86

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005
$0.00
73,965.43 11,720.00 $85,685.43

Georgia State University Annual Financial Report FY 2005 21

Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005, the allowance for uncollectible loans was $949.21.
Georgia State University Annual Financial Report FY 2005 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$21,361,853.59 9,267,474.77 30,629,328.36

Additions
$7,450,000.00 5,925,951.24 13,375,951.24

Reductions
$0.00 3,113,187.22 3,113,187.22

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

2,515,865.03 322,088,809.01
1,472,472.12 57,172,799.72 1,013,015.27 82,642,528.83
54,968.60 466,960,458.58

925,935.93 1,482,919.12
6,336,100.61 575,901.80
5,607,762.03 6,180.00
14,934,799.49

16,934.00 4,240,730.97
274,226.28 157,090.86
4,688,982.11

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

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

115,002.54 8,905,795.86
78,937.83 5,741,079.27
195,296.86 4,591,170.58
19,627,282.94

16,745.84 3,394,526.92
192,332.49 157,090.86
858.30 3,761,554.41

Total Capital Assets, Being Depreciated, Net

261,882,993.47

(4,692,483.45)

927,427.70

Capital Assets, net

$292,512,321.83

$8,683,467.79

$4,040,614.92

Ending Balance 6/30/2005
$28,811,853.59 12,080,238.79 40,892,092.38
3,441,800.96 323,571,728.13
1,455,538.12 59,268,169.36 1,314,690.79 88,093,200.00
61,148.60 477,206,275.96
805,775.36 117,259,307.70
760,592.94 38,583,962.07
336,978.44 63,196,577.13
0.00 220,943,193.64
256,263,082.32
$297,155,174.70

Georgia State University Annual Financial Report FY 2005 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005
$17,954,007.42 2,968,964.44 1,957,507.90
$22,880,479.76

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$44,879,413.60

Additions $575,878.73

Reductions

Ending Balance June 30, 2005

$1,827,383.90

$43,627,908.43

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

0.00 9,960,918.76 9,960,918.76
$54,840,332.36

7,478,295.46 7,478,295.46
$8,054,174.19

6,984,223.13 6,984,223.13
$8,811,607.03

0.00 10,454,991.09 10,454,991.09
$54,082,899.52

Current Portion $1,907,598.16
7,072,896.88 7,072,896.88 $8,980,495.04

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $8,995,979.36 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.

Georgia State University Annual Financial Report FY 2005 24

Note 10. Lease Obligations
Georgia State University is obligated under various operating 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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$4,673,927.34 4,632,558.13 4,614,881.68 4,601,218.25 5,247,950.53
27,856,756.24 30,050,119.59
5,705,610.14

$5,159,458.99 5,081,460.32 4,493,286.65 3,424,641.75 3,086,170.80 8,820,843.27

87,383,021.90 43,755,113.47
0.00 $43,627,908.43

$30,065,861.78

Capital Leases Capital leases are generally payable in monthly installments and have terms expiring in various years between 2006 and 2022. Expenditures for fiscal year 2005 were $4,626,069.94 of which $2,798,686.04 represented interest. Total principal paid on capital leases was $1,827,383.90 for the fiscal year ended June 30, 2005. Interest rates range from 3.30 percent to 7.66 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Land Buildings Equipment Total Assets Held Under Capital Lease

$0.00 46,523,545.14
977,712.35 $47,501,257.49

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
Georgia State University Annual Financial Report FY 2005 25

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, 2005 on these capital leases is $30,972,130.00 and $11,951,903.15 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI. Georgia State University had no new capital building leases with related entities in the current fiscal year. Georgia State University also has various capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $703,875.00. . Operating Leases Georgia State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2012. 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 Fiscal Year 2005, Georgia State University entered into operating leases for storage or office space at the Brookhaven Center, Grady Hospital, and 56 Marietta Street in Atlanta. Noncancellable operating lease expenditures for equipment in 2005 were $236,699.17 and for buildings were $6,477,223.00.
Georgia State University Annual Financial Report FY 2005 26

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$9,403,541.59 $9,706,222.04 $9,755,816.34

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 2005 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 University's payroll for the year ended June 30, 2005, for employees covered by ERS was $654,044.41. The University's total payroll for all employees was $209,169,024.67.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the University amounted 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 2005 amounted to $78,271.33, of which $68,474.80 was made by the University and $9,796.53 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, 2005, financial report, which may be obtained through ERS.
Georgia State University Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 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 2005, the employer contribution was 9.65% 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 $7,033,603.14 (9.65%) and $3,656,346.65 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
Georgia State University Annual Financial Report FY 2005 29

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 2005 amounted to $519,939.55 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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 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.
Georgia State University Annual Financial Report FY 2005 30

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 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, 2005.
Note 14. 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 $25,000.00 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, 2005, there were 696 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Georgia State University incurred $3,540,011.46 of expenditures, which was net of $1,460,724.06 in participant contributions.
Georgia State University Annual Financial Report FY 2005 31

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$62,088,734.11 31,342,619.39 22,663,366.21
1,549,379.68 438,902.04 954,367.31
12,458,963.57 5,858,611.77

$16,329,004.50 23,394,633.30 4,839,034.62
942,160.18 206,278.56 185,028.22 16,118,585.57 2,337,906.80

$473,587.26 6,314,688.61 1,609,035.56
249,488.52 275,887.48 114,563.03 7,134,439.12 517,395.59

$567,513.94 23,179,212.70 5,936,031.71
436,815.94
198,992.89 10,632,734.44
1,680,511.92

$25,598.75 12,183,403.18 2,940,500.50
207,863.96
367,748.83 4,780,943.71 1,813,948.88

$365,015.56 19,887,191.70 3,155,958.29
153,173.55
324,223.84 11,448,990.91 1,688,758.09

Total Expenses

$137,354,944.08

$64,352,631.75

$16,689,085.17

$42,631,813.54 $22,320,007.81

$37,023,311.94

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp e n s es

$0.00 9,912,282.09
170,245.01

$0.00

$0.00 3,105,539.58
553,866.17

$0.00

33,270.45
5,111,629.15 13,476,553.24
3,551,860.09

26,464,225.23

21,415.74
2,020,646.46 12,840,292.26
2,178,289.80

$32,255,840.03

$26,464,225.23

$20,720,050.01

$0.00

Total Exp en s es
$79,849,454.12 129,319,570.55 41,868,038.07
0.00 3,593,568.02 27,385,293.31 9,277,199.73 88,891,502.82 19,627,282.94
$399,811,909.56

Georgia State University Annual Financial Report FY 2005 32

Note 16. Component Units
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 37-member board of the Foundation, of which 6 members are ex-officio, 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. During the 2005 fiscal year, the Foundation adopted GASB Statement No. 35, Basic Financial Statement and Management's Discussion and Analysis for Public Colleges and University, and has applied those statements having been defined a component unit of the University under the provisions of GASB Statement No. 39 Determining Whether Certain Organizations Are Component Units. The objective of the GASB in developing the new reporting standards is to enhance the understandability and usefulness of the external financial reports of state and local governments to the citizenry, legislative and oversight bodies and investors and creditors. The Foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $6,686,723 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Ellen Burgin, Assistant Vice President Finance and Operations, Georgia State University Foundation, P. O. Box 3963, Atlanta, GA 30302-3963 or in person at 1 Park Place South, Atlanta, GA.
Georgia State University Research Foundation (the Research Foundation) is a legally separate, tax-exempt component unit of Georgia State University (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.
During the 2005 fiscal year, the Research Foundation adopted GASB Statement No. 35, Basic Financial Statement and Management's Discussion and Analysis for Public Colleges and
Georgia State University Annual Financial Report FY 2005 33

University, and has applied those statements having been defined a component unit of the University under the provisions of GASB Statement No. 30 Determining Whether Certain Organizations Are Component Units. The objective of the GASB in developing the new reporting standards is to enhance the understandability and usefulness of the external financial reports of state and local governments to the citizenry, legislative and oversight bodies and investors and creditors. The Research Foundation's fiscal year is July 1 through June 30.

At the end of Fiscal Year 2005, the Research Foundation had a Due to Primary Government of $6,001,560 which is not reflected in the University's financial statements as a Due from Component Units. This amount includes $1,600,092 of Accounts Receivable Federal Financial Assistance and $4,401,468 of Accounts Receivable Other exclusive of Federal Pass-Thru. Additionally, the University shows $6,510 in Due from Component Units that is reflected on the Research Foundation's financial statements as Accounts Payable.

During the year ended June 30, 2005, the Research Foundation paid to the University $48,248,002 in grant revenue and $809,067 for support of research activities. Complete financial statements for the Research Foundation can be obtained from the office of the Georgia State University Research Foundation, Inc., Alumni Hall, 30 Courtland Street, Suite 219, Atlanta, GA 30303.

Investments for Component Units:

Georgia State University Foundation holds endowment investments in the amount of $75.2 million. The Foundation determines the spendable amounts for endowment funds using a total return formula and makes no spending allocations to restricted funds from the operating portfolio. Income from the operating portfolio is used to fund the Foundation's administrative activities pursuant to an unrestricted 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.

Georgia State University Foundation also holds investments in real property (land, buildings, net of depreciation) valued at $62,380,196.04 (net of depreciation of $16,844,619.27).

Investments:
U.S. Equity Funds International Equity Funds Venture Capital Funds Futures and Hedge Funds Bond Funds REIT's
Total Investments

$32,887,322.53 10,046,059.85 7,559,578.75 9,462,320.82 19,883,393.26 6,328,009.79
$86,166,685.00

Georgia State University Annual Financial Report FY 2005 34

At June 30, 2005, the carrying value and fair value of Georgia State University Research Foundations investments was $5,305,184. Investments are comprised of common stock and mutual funds. The common stock investment in the amount of $322,335 is held by the Research Foundation. Other investments are held in Georgia State University Foundation's investment pool in the Research Foundation's name.

Common Stock Corporate Bonds Investments in Real Estate Total Investments

$5,305,184.00 $5,305,184.00

Long Term Liabilities for Component Units:
Changes in long-term liabilities for the fiscal year ended June 30, 2005 for the Foundation are as follows:

Rialto Center - Capital Lease Alpharetta Campus Facilities - Capital Lease Student Recreation Center - Bonds Piedmont Ellis - Promissory Note

Beginning Balance July 1, 2004
$4,003,881.60 7,602,675.00 29,445,000.00 9,000,000.00
$50,051,556.60

Additions $0.00
$0.00

Reductions
$170,853.33 375,750.00 1,430,000.00 166,668.00
$2,143,271.33

Ending Balance June 30, 2005
$3,833,028.27 7,226,925.00 28,015,000.00 8,833,332.00
$47,908,285.27

Amounts Due Within One Year
$263,001.74 388,275.00 1,490,000.00 8,833,332.00
$10,974,608.74

Rialto Center Facilities 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 (the "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 will in turn lease the facilities to the University through a series of one year 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

Georgia State University Annual Financial Report FY 2005 35

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, 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 year ended June 30, 2005 amounted to $344,030.
Annual debt service requirements to maturity for the Rialto Center Capital Lease are as follows:
Rialto Capital Lease

Year Ending June 30: Year

2006

1

2007

2

2008

3

2009

4

2010

5

2011 through 2015

6-10

2016

11

Principal
$263,001.74 281,245.56 300,754.89 321,617.54 343,927.38 2,112,367.21 210,113.95
$3,833,028.27

Interest
$249,782.26 231,538.44 212,029.11 191,166.46 168,856.62 451,552.79
3,546.05
$1,508,471.73

Total
$512,784.00 512,784.00 512,784.00 512,784.00 512,784.00 2,563,920.00 213,660.00
$5,341,500.00

Alpharetta Campus Facilities Capital Lease
On September 23, 1998, $10,600,000 of revenue bonds were issued by the Development Authority of Alpharetta, Georgia (the "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 Authority. The Foundation will in turn sublease 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 Authority amounted to $332,019 for the year ended June 30, 2005.

Georgia State University Annual Financial Report FY 2005 36

Annual debt service requirements to maturity for the Alpharetta Campus Facilities Capital Lease are as follows:
Alpharetta Capital Lease

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2019

Year
1 2 3 4 5 6-10 11-14

Principal
$388,275.00 404,975.00 421,675.00 438,375.00 455,075.00 2,584,325.00 2,534,225.00
$7,226,925.00

Interest
$314,614.41 298,973.68 282,469.35 264,956.94 246,318.72 904,295.82 240,340.65
$2,551,969.57

Total
$702,889.41 703,948.68 704,144.35 703,331.94 701,393.72 3,488,620.82 2,774,565.65
$9,778,894.57

Student Recreation Center Bond

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 AMBAC Assurance Corporation. 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%. During 2005, interest expense, in the amount of $1,274,165 has been charged to operations.

Annual debt service requirements to maturity for the Student Recreation Center Bonds are as follows:
Student Recreation Center Bonds

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2019

Year
1 2 3 4 5 6-10 11-14

Principal
$1,490,000.00 1,550,000.00 1,615,000.00 1,680,000.00 1,755,000.00
10,035,000.00 9,890,000.00
$28,015,000.00

Interest
$1,216,338.36 1,155,386.68 1,090,576.64 1,021,464.96 948,220.00 3,470,489.18 889,041.68
$9,791,517.50

Total
$2,706,338.36 2,705,386.68 2,705,576.64 2,701,464.96 2,703,220.00
13,505,489.18 10,779,041.68
$37,806,517.50

Georgia State University Annual Financial Report FY 2005 37

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: Year

2006

1

Principal

Interest (Estimated)

$8,833,332.00

$160,000.00

Total $8,993,332.00

Working Capital Note

In 1998, the Foundation entered into an arrangement with a bank for a discretionary line of credit that was unsecured. Loan proceeds were used to finance the purchase of land for the Helen Aderhold Learning Center and repayments were scheduled to occur when pledge payments for the facility are received. After five (5) years and when the balance was reduced below $400,000, the loan was converted to a one-year renewable promissory note at Prime for the remainder of the repayments. The Foundation continues to repay the balance when pledge payments are received. The interest rate as of June 30, 2005 was 5.04%. The outstanding balance as of June 30, 2005 was $60,137.

Georgia State University Annual Financial Report FY 2005 38

GORDON COLLEGE
Financial Report
For the Year Ended June 30, 2005

Gordon College Barnesville, Georgia

Dr. Lawrence V. Weill
President

George J. Turner
Senior Vice President for Fiscal Affairs

GORDON COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments..................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 23 Note 12 Risk Management................................................................................................ 27 Note 13 Contingencies...................................................................................................... 28 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units ........................................................................ 30

GORDON COLLEGE
Management's Discussion and Analysis

Introduction

Gordon College is one of the thirty-four 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

FY2005 FY2004 FY2003

89

3,480

89

3,470

87

3,416

Overview of the Financial Statements and Financial Analysis

Gordon College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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.

Gordon College Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts

June 30, 2005
$6,528,631.21 28,160,049.66
10,632.54 34,699,313.41

June 30, 2004
$6,348,247.27 27,080,721.92
10,632.54 33,439,601.73

Liabilitie s: Current Liabilities Noncurrent Liabilities

2,657,941.39 45,126.67

2,627,873.53 40,318.90

Total Liabilitie s

2,703,068.06

2,668,192.43

Ne t Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Un rest rict ed Total Ne t Asse ts

28,160,049.66
13,052.91
3,823,142.78 $31,996,245.35

27,080,721.92
13,052.91
3,677,634.47 $30,771,409.30

The total assets of the institution increased by $1,259,711.68. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,079,327.74 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 $34,875.63. The primary cause for the increase was in current liabilities, primarily $59,215.56 in deposits held for other organizations. The combination of the increase in total assets of $1,259,711.68 and the increase in total liabilities of $34,875.63 yields an increase in total net assets of $1,224,836.05. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $1,079,327.74.

Gordon College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues

$10,805,304.59

$9,950,625.87

Operating Expenses Operating Loss

21,944,348.25 (11,139,043.66)

20,736,181.13 (10,785,555.26)

Nonoperating Revenues and Expenses

10,200,046.83

10,335,668.48

Income (Loss) Before other revenues, expenses, gains or losses

(938,996.83)

(449,886.78)

Other revenues, expenses, gains or losses

2,163,832.88

Increase in Net Assets

1,224,836.05

(449,886.78)

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

30,771,409.30 30,771,409.30

31,221,296.08 31,221,296.08

Net Assets at End of Year

$31,996,245.35

$30,771,409.30

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:

Gordon College Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot her
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot her
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$3,582,437.37 3,393,219.75 80,180.23 3,662,460.33 87,006.91
10,805,304.59
10,091,319.48
144,633.93 (35,906.58) 10,200,046.83
2,163,832.88 2,163,832.88 $23,169,184.30

June 30, 2004
$2,892,478.75 3,243,010.59 3,474,095.93 341,040.60 9,950,625.87
10,367,465.85
50,970.38 (82,767.75) 10,335,668.48
0.00 $20,286,294.35

Gordon College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses Inst ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

38,533.00
$7,477,085.66
203.21 1,381,905.93 1,458,321.35 3,158,016.91 2,586,666.30 1,947,329.49 2,979,386.76
955,432.64
21,944,348.25
$21,944,348.25

38,168.00
$7,084,310.70 4,391.56
1,657,087.29 1,399,305.45 2,154,805.99 3,756,898.34 1,522,086.88 3,157,294.92
20,736,181.13
$20,736,181.13

The compensation and employee benefits category increased by approximately $445,422.51. The increase reflects an increased cost for full time faculty, part time faculty and staff salaries. There was an increase cost for health insurance for the employees of the institution. Utilities increased by approximately $166,469.20 during the past year. The increase was primarily associated with the increased rates for natural gas, electricity, and phone system.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($276,146.37). 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 Gordon College. We are hopeful that the economy is now on an upward trend.
Statement of Cash Flows
The final statement presented by the 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 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

Gordon College Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Act ivit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($9,790,998.78) 9,929,525.22 (196,166.59) 144,633.93 86,993.78 5,690,998.56
$5,777,992.34

June 30, 2004
($9,135,110.86) 11,586,143.16
(539,209.85) 50,970.38
1,962,792.83 3,728,205.73
$5,690,998.56

Capital Assets
Gordon College completed major renovations to the Instructional Complex, Russell Hall, Student Center, Lambdin Building Phase III and Spencer Parking Lot. The $2,163,832.88 for these projects 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.
Long Term Liabilities (Debt)
Gordon College had Long-Term Liabilities (Debt) of $289,114.34 of which $234,987.67 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 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 FY2005. The Gordon College Foundation had endowment investments of $3.5 M as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Gordon College Annual Financial Report FY 2005 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. Dr. Lawrence V. Weill, President Gordon College
Gordon College Annual Financial Report FY 2005 7

Statement of Net Assets

GO RDO N C O LLEGE STATEMENT O F NET ASSETS
June 30, 2005

Gordon C ol l e ge

AS S ETS C urre n t Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Leases Receivable Pledges Receivable Invent ories Prepaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s

$5,777,992.34
27,725.53 421,057.00
295,501.74 6,354.60
6,528,631.21

Noncurre n t Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable Pledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s
TO TAL ASSETS
LIABILITIES C urre n t Li abi l i ti e s Account s Payable Salaries Payable Benefit s Payable Cont ract s Payable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current Port ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Noncurre n t Li abi l i ti e s Lease Purchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al Project s Unrest rict ed TO TAL NET ASSETS

10,632.54
28,160,049.66 28,170,682.20 34,699,313.41
585,684.87 55,456.72
668,543.99 123,880.59 980,387.55 243,987.67 2,657,941.39
45,126.67
45,126.67 2,703,068.06
28,160,049.66
13,052.91 3,823,142.78 $31,996,245.35

Gordon C ol l e ge Foundati on $180,865.00 1,617,197.00
12,787,815.00 14,585,877.00
3,597,579.00
3,604,500.00 7,202,079.00 21,787,956.00
274,725.00 10,486.00
285,211.00
16,195,754.00 16,195,754.00 16,480,965.00
34,623.00 86,843.00 5,185,525.00 $5,306,991.00

Gordon College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
GO RDO N C O LLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Gordon College
T otal Operating Expenses Operating Income (loss)

Gordon College

Gordon College Fo u n da ti o n

$5,031,414.05 1,448,976.68
3,393,219.75
80,180.23 14,311.05
858,139.54 1,542,120.23
913,252.35 76,931.50
252,525.27 19,491.44 72,695.86
10,805,304.59

$0.00 103,702.00
5,558.00
151.00 109,411.00

5,241,095.37 3,874,752.33 2,245,578.48
2,632.00 112,035.28 2,032,951.89 1,217,524.44 5,953,051.93 1,264,726.53
21,944,348.25 (11,139,043.66)

29,137.00
109,173.00 138,310.00 (28,899.00)

Gordon College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GO RDO N C O LLEGE STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal 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

Gordon College
10,091,319.48

Gordon College Fo u n da ti o n

144,633.93
(35,906.58) 10,200,046.83
(938,996.83)

490,568.00
490,568.00 461,669.00

2,163,832.88

2,163,832.88 1,224,836.05
30,771,409.30
30,771,409.30 $31,996,245.35

0.00 461,669.00
4,845,322.00
4,845,322.00 $5,306,991.00

Gordon College Annual Financial Report FY 2005 10

Statement of Cash Flows

G O RDO N C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005

C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart ment s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$3,603,925.80
3,389,910.20 80,592.66
(9,275,900.83) (8,434,386.89) (2,032,951.89)
858,318.44 567,627.98 917,153.61
76,931.50
248,751.70 19,491.44
189,537.50 (9,790,998.78)
10,091,319.48 (161,794.26)
9,929,525.22
(196,166.59)
(196,166.59)
144,633.93
144,633.93 86,993.78
5,690,998.56 $5,777,992.34

Gordon College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
D ep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($11,139,043.66)
1,264,726.53 (85,887.78) (7,502.38) 88,577.94 (27,193.14) 69,473.21 45,850.50
($9,790,998.78)
($2,163,832.88)

Gordon College Annual Financial Report FY 2005 12

GORDON COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Gordon College is reporting the activity for the Gordon College Foundation, the Gordon College Properties Foundation, LLC.
See Note 16. 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 implemented GASB
Gordon College Annual Financial Report FY 2005 13

Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 Statement 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 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $2,163,832.88 to Gordon College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Gordon College Annual Financial Report FY 2005 15

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. Gordon College had accrued liability for compensated absences in the amount of $243,263.84 as of 7-1-2004. For FY2005, $284,170.91 was earned in compensated absences and employees were paid $238,320.41, for a net increase of $45,850.50. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $289,114.34.
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 previously in Note 1 Capital Assets section.
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.
Gordon College Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $0.00
13,052.91
$13,052.91

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 Reserv e Reserv e fo r E n cum bran ces Reserve fo r Inv ent ory Ot her Un rest rict ed T o t al Un rest rict ed N et Asset s

June 30, 2005
$ 2 ,6 3 3 ,2 8 6 .6 5 1 ,5 3 6 ,4 6 2 .7 0 3 7 ,6 1 1 .0 6 (3 8 4 ,2 1 7 .6 3 )
$ 3 ,8 2 3 ,1 4 2 .7 8

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 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:

Gordon College Annual Financial Report FY 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Gordon College Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $1,436,926.71 of the college's deposits were uninsured. Of these uninsured deposits, $1,436,926.71 were collateralized with securities held by the financial institution's trust department or agent in the college's name.
Gordon College Annual Financial Report FY 2005 19

B. Investments

At June 30, 2005, the carrying value of the college's investment was $4,679,286.66, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents Short Term Investment Fund as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$0.00 4,679,286.66
$4,679,286.66

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Other
Less Allowance for Doubt ful Account s
Net Account s Receivable

$36,648.34 51,369.78 27,725.53
340,555.88 456,299.53
7,517.00
$448,782.53

Gordon College Annual Financial Report FY 2005 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Other
T otal

June 30, 2005 $260,284.00
35,217.74 $295,501.74

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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.

Gordon College Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
T otal Capital Assets Not Being Depreciated

Beginning B al an ce s 7/1/2004
$348,207.04 4,912.50
353,119.54

Addi ti o n s
$0.00 14,246.25 14,246.25

Re du cti on s $0.00 0.00

Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated

2,699,055.85 31,106,237.36 1,125,187.35 3,607,504.88
2,402,875.49
40,940,860.93

1,921,291.88 242,541.00 98,982.76
96,100.50 1,083.33 2,359,999.47

34,104.62 5,561.00
39,665.62

Less: Accumulated Depreciation

In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections
T otal Accumulated Depreciation

1,280,772.95 8,209,764.95
814,157.91 1,918,459.48
1,990,103.26
14,213,258.55

97,439.86 701,120.00 44,435.29 335,918.18
85,813.20
1,264,726.53

3,552.55 5,504.95
416.67
9,474.17

T otal Capital Assets, Being Depreciated, Net

26,727,602.38

1,095,272.94

30,191.45

Capital Assets, net

$27,080,721.92

$1,109,519.19

$30,191.45

En di n g Balance 6/30/2005
$348,207.04 19,158.75 367,365.79
2,699,055.85 32,993,424.62 1,362,167.35 3,706,487.64
0.00 2,498,975.99
1,083.33 43,261,194.78
1,378,212.81 8,907,332.40
853,088.25 2,253,960.99
0.00 2,075,916.46
0.00 15,468,510.91
27,792,683.87
$28,160,049.66

Gordon College Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit io n and Fees Research Ot her Deferred Reven ue
T otals

June 30, 2005 $668,543.99
$668,543.99

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance $38,169.00
$0.00

Additions $0.00

Reductions $0.00

Ending Balance $38,533.00
$0.00

243,263.84 243,263.84

284,170.91 284,170.91

238,320.41 238,320.41

289,114.34 289,114.34

Total Long Term Obligations

$243,263.84

$284,170.91

$238,320.41

$289,114.34

Current Portion
$0.00
243,987.67 243,987.67 $243,987.67

Note 9. Significant Commitments
Gordon College has no significant unearned, outstanding, construction or renovation contracts that are not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Gordon College has no lease obligations as June 30, 2005
Note 11. 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

Gordon College Annual Financial Report FY 2005 23

financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of 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 2005, 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

2005 2004 2003

100% 100% 100%

$472,048.55 $466,188.64 $456,222.56

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. 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.

Gordon College Annual Financial Report FY 2005 24

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, 2005, for employees covered by ERS was $57,908.45. The College's total payroll for all employees was $9,198,467.61.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the College 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 2005 amounted to $6,957.97, of which $6,089.34 was made by the College and $868.63 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2005, financial report, which may be obtained through ERS.
Gordon College Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $305,175.30 (9.65%) and $158,135.21 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
Gordon College Annual Financial Report FY 2005 26

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 2005 amounted to $23,781.47 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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.
Gordon College Annual Financial Report FY 2005 27

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 24 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Gordon College recognized as incurred $115,556.65 of expenditures, which was net of $31,671.86 of participant contributions.
Gordon College Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$5,238,595.37 275,536.32
1,346,881.61
28,802.21
42,556.65 435,010.55 109,702.95

$0.00

$0.00 203.21

$0.00 642,140.61 168,843.36
8,695.29
32,034.15 423,745.96 106,446.56

$500.00 789,671.05 214,359.08
36,051.51 2,000.00 29,833.81 385,475.33
430.57

$0.00 1,114,231.73
212,567.92 1,290.00 28,763.72
96,361.96 1,770,285.85
(65,484.27)

Total Expenses

$7,477,085.66

$0.00

$203.21 $1,381,905.93 $1,458,321.35 $3,158,016.91

Natural Classification
Faculty Staff Benefit s Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 778,136.75 266,301.66
3,832.07
960,218.41 525,290.49
52,886.92

$0.00 1,947,329.49

$2,000.00 275,035.87
36,624.85 1,342.00 5,890.48
83,622.40 56,316.25 2,413,243.75 105,311.16

$0.00 955,432.64

$2,586,666.30 $1,947,329.49 $2,979,386.76

$955,432.64

T ot al Expenses
$5,241,095.37 3,874,752.33 2,245,578.48 2,632.00 112,035.28 2,032,951.89 1,217,524.44 5,953,051.93 1,264,726.53
$21,944,348.25

Gordon College Annual Financial Report FY 2005 29

Note 16. Component Units Gordon College Foundation (Foundation) is a legally separate, tax-exempt component unit of Gordon 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 forty 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 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. 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, 2004, the Foundation distributed $109,173 in scholarships to qualifying students of the College. Complete financial statements for the Foundation can be obtained from the Administrative Office at 419 College Drive, Barnesville, GA 30204.
Investments for Component Units: The Gordon College Foundation adopted SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. Under SFAS No. 124, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the statement of activities.
Gordon College Annual Financial Report FY 2005 30

Gordon College Foundation Investments are comprised of the following amounts at December 31, 2004

Cos t

Fair Value

The Common Fund Charles Schwab State Farm Mutual Fund Upson Bankshares Gordon College Properties Foundation, LLC

$609,588.00 2,188,790.00
1,690.00 6,000.00
130.00

$1,220,637.00 2,159,431.00
5,747.00 6,000.00
130.00

Total Investments

$2,806,198.00

$3,391,945.00

Gordon College Annual Financial Report FY 2005 31

GEORGIA SOUTHERN UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

President Dr. Bruce Grube

Georgia Southern University Statesboro, Georgia
Vice President for Business and Finance Mr. Joe Franklin

GEORGIA SOUTHERN UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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. 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. Significant Commitments............................................................................................ 28 Note 10. Lease Obligations...................................................................................................... 28 Note 11. Retirement Plans ....................................................................................................... 31 Note 12. Risk Management...................................................................................................... 34 Note 13. Contingencies............................................................................................................ 35 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................ 35 Note 15. Natural Classifications with Functional Classifications ........................................... 36 Note 16. 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. The University is a residential campus of more than 16,000

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, Jack N.

Averitt College of Graduate Studies, Allen E. Paulson College of Science and Technology, and

the College of Information Technology. The University has earned national accreditation in 79

program areas. Founded in 1906, the University is located in Statesboro, Georgia. The

University's enrollment continues to increase to record levels even as admission standards are

raised.

Faculty

Students

FY2005 FY2004 FY2003

641

16,100

642

15,704

596

15,075

Overview of the Financial Statements and Financial Analysis

Georgia Southern University is proud to present its financial statements for fiscal year 2005. 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 fiscal year 2004 and fiscal year 2005.

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-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 Notes to the financial statements.

Georgia Southern University Annual Financial Report FY2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$40,914,597.42 249,191,321.85
5,306,418.02 $295,412,337.29

June 30, 2004
$30,357,114.62 250,178,929.61
5,313,456.85 $285,849,501.08

Liabilities : Current Liabilities Noncurrent Liabilities Total Liabilities

$16,580,352.73 44,331,389.94 $60,911,742.67

$15,186,905.96 45,146,536.31 $60,333,442.27

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

$205,289,375.71 2,321,820.06 3,302,099.97
23,587,298.88 $234,500,594.62

$205,302,221.15 2,347,834.09 3,259,429.73
14,606,573.84 $225,516,058.81

The total assets of the institution increased by $9,562,836.21. Current Assets increased by $10,557,482.80. This increase is primarily due to increases in summer enrollment and grant activity at the end of the year as compared to the previous summer's activity. A review of the Statement of Net Assets will reveal a decrease of ($987,607.76) in 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.

Georgia Southern University Annual Financial Report FY2005 2

The total liabilities for the year increased $578,300.40. The increase was primarily caused by an increase in deferred revenue from the increase in summer enrollment in Summer-term 2005. The combination of the increase in total assets of $9,562,836.21 and the increase in total liabilities of $578,300.40 yields an increase in total net assets of $8,984,535.81. The increase in total net assets is primarily in the category of unrestricted net assets. Net Assets invested in capital assets, net of debt decreased in the amount of ($12,845.44), primarily due to reduction of building assets through demolition in preparation of construction of new facilities.

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, 2005

Operating Revenues

$98,884,782.64

Operating Expens es Operating Los s

164,957,600.85 ($66,072,818.21)

Nonoperating Revenues and Expens es

71,792,575.49

Income (Los s ) Before other revenues , expens es , gains or los s es

$5,719,757.28

Other revenues , expens es , gains or los s es

3,264,778.53

Increas e in Net A s s ets

$8,984,535.81

Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated

$225,516,058.81 225,516,058.81

Net A s s ets at End of Year

$234,500,594.62

June 30, 2004 $89,302,289.77 157,794,033.67 ($68,491,743.90) 70,062,057.45
$1,570,313.55 40,134,047.19 $41,704,360.74 $183,811,698.07 183,811,698.07 $225,516,058.81

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 Annual Financial Report FY2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2005
$37,702,266.40 18,988,237.84 2,310,031.10 38,595,556.02 1,288,691.28 $98,884,782.64
$74,164,106.18 881,052.97 669,126.73
$75,714,285.88
$3,264,778.53 $3,264,778.53 $177,863,847.05

June 30, 2004
$32,963,876.84 17,422,949.88
1,909,939.61 35,970,521.23
1,035,002.21 $89,302,289.77
$72,384,581.00 52,151.33
545,058.80 $72,981,791.13
$40,106,569.40 27,477.79
$40,134,047.19 $202,418,128.09

Georgia Southern University Annual Financial Report FY2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004:

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets ) Other Non Operating Expens es
Total Expens es

June 30, 2005
$60,763,414.61 2,943,938.16 2,380,657.15 13,023,923.69 12,637,541.96 16,488,438.92 19,999,490.04 5,032,949.29 31,687,247.03
$164,957,600.85
$2,185,368.32 1,736,342.07
$168,879,311.24

June 30, 2004
$59,154,026.66 2,481,003.34 2,507,176.62
11,769,015.57 12,336,254.46 16,722,165.36 15,927,946.70
4,699,295.71 32,197,149.25
$157,794,033.67
$1,693,405.61 1,226,328.07
$160,713,767.35

Georgia Southern University enrollment continues to grow in-light of continuing increases in admission standards. Increases in tuition rates and steady increases in enrollment result in increases in tuition revenue and non-operating revenue state appropriations through the state funding formula. Auxiliary and other departmental sales produce greater revenues as enrollment increases. Efficient use of resources helps maintain operating costs. Additionally, delayed effective dates of salary merit raises lowers salary and benefit costs in the initial year of the increase.
Sponsored program revenues also increase as enrollment increases due to the rise in amounts of Federal financial aid assistance provided to a larger student population. Focused initiatives by the academic community have increased the number and amount of research dollars awarded to the University.
Georgia Southern University did not have any major capital GSFIC projects gifted to the institution during fiscal year 2005 which resulted in a decrease in capital state gift revenues.
Operating expenses for supplies and other services increased by $2,948,090.37 due to an increase in available tuition and state appropriation funds available in 2005 following several previous years of no increases in operating funds due to budget reductions of state funds. The compensation and employee benefits category increased by $835,143.09. The increase reflects a mid year increase in salaries for merit raises. Under non-operating revenues state appropriations increased by $1,779,525.18. This increase is the result of additional state appropriated funds through application of the funding formula for prior year increases in enrollment. Because the institution did not incur budget reductions during 2005 increases in state appropriated funds were not off set by budget reductions resulted in a greater increase in state appropriated funds.
Georgia Southern University Annual Financial Report FY2005 5

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 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($56,601,104.20) 74,107,602.41 (9,323,680.91) 632,159.05 8,814,976.35 20,240,995.43
$29,055,971.78

June 30, 2004
($60,204,520.17) 72,785,790.13 (12,468,931.20) 2,018,226.69 2,130,565.45 18,110,429.98
$20,240,995.43

Capital Assets
The University had no significant capital asset additions for facilities in fiscal year 2005. One building was demolished and removed from Capital Assets in preparation for construction of an on-going GSFIC managed library capital addition. Two other University buildings were demolished and removed from Capital Assets in preparation of construction of a residence hall complex owned by the Georgia Southern University Housing Foundation. The facility will be operated by the University when complete.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the notes to the financial statements.
Long-Term Debt
Georgia Southern University had a Long-Term Debt of $47,891,348.73 of which $3,559,958.79 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.

Georgia Southern University Annual Financial Report FY2005 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. 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 FY2005 7

Statement of Net Assets:

G EORG IA SOUTHERN UNIVERSTIY STATEMENT OF NET ASSETS June 30, 2005
PRIMARY GOVERNMENT UNIT
Georgia S outhern Univers ity

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other (Including Interes t) Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other As s ets Total Current A s s ets

$29,055,971.78 1,854,583.49 2,068,437.64 3,073,138.04
2,191,987.86 2,670,478.61
40,914,597.42

Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Receivables -Other (Including Interes t) Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS

145,416.51 2,238,212.15 2,922,789.36
249,191,321.85 254,497,739.87 295,412,337.29

LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Notes & Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Notes & Loans Payable (non-current) Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

1,993,755.91 485,157.48
573,121.61 1,293,070.00 7,735,859.99
939,428.95 1,056,960.29 2,430,743.00
72,255.50 16,580,352.73
40,407,810.61
1,558,659.59
2,364,919.74
44,331,389.94 60,911,742.67
205,289,375.71
2,321,820.06 3,302,099.97
23,587,298.88 $234,500,594.62

Component Unit Georgia S outhern Univers ity Foundation,
Inc.
$52,758.00 33,938,153.00
34,366.00 1,138,228.00
21,250.00 35,184,755.00
1,106,376.00
1,764,898.00 423,082.00
3,294,356.00 38,479,111.00
15,829.00
173,992.00 3,741,522.00
3,931,343.00
0.00 3,931,343.00
423,082.00 23,659,597.00
8,792,660.00 1,672,429.00 $34,547,768.00

Georgia Southern University Annual Financial Report FY2005 8

Statement of Net Assets, continued

G EORG IA SOUTHERN UNIVERSTIY STATEMENT OF NET ASSETS June 30, 2005
Georgia S outhern Univers ity Hous ing
Foundation, Inc.

Component Units S outhern Boos ters ,
Inc.

Georgia S outhern Univers ity Res earch and S ervice Foundation, Inc.

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other (Including Interes t) Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other A ss ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Receivables -Other (Including Interes t) Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Notes & Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Notes & Loans Payable (non-current) Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$49,029,129.00
2,402,425.00 849,919.00
1,511,400.00 53,792,873.00
31,943,963.00 38,767,867.00 36,780,363.00 107,492,193.00 161,285,066.00
1,372,802.00
2,224,077.00 2,047,916.00
985,000.00 6,629,795.00 38,767,867.00
114,393,489.00 153,161,356.00 159,791,151.00
942,009.00 551,906.00 $1,493,915.00

$501,791.00
2,337.00 388,585.00
892,713.00 553,828.00
6,155.00 579,000.00 548,843.00 417,620.00 2,105,446.00 2,998,159.00
77,313.00
54,588.00 19,947.00 151,848.00
230,606.00 230,606.00 382,454.00 417,620.00 1,194,789.00 643,305.00 359,991.00 $2,615,705.00

$698,405.00 1,588,551.00
235,103.00 2,522,059.00
0.00 2,522,059.00
20,000.00 400,870.00 1,823,841.00 2,244,711.00
0.00 2,244,711.00
277,348.00 $277,348.00

Georgia Southern University Annual Financial Report FY2005 9

Statement of Revenues, Expenses and Changes in Net Assets:
GEORGIA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

PRIMARY GOVERNMENT UNIT Georgia Southern Univers ity

Component Unit Georgia Southern Univers ity
Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip Allowances Gifts and Contributions Endowment Income (per s pending plan) Federal Appropriations Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties Auxiliary Enterpris es Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENSES
Operating Expens es Salaries : Fa c u lt y Staff Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Georgia Southern Univers ity Total Operating Expens es Operating Income (los s )

$45,605,481.04 7,903,214.64
17,123,971.53 658,988.90
1,205,277.41 2,310,031.10
27,666.24
10,934,041.00 9,849,467.85 7,002,488.09 1,354,548.43 2,480,000.58 6,291,593.39
683,416.68 1,261,025.04 98,884,782.64
37,722,843.48 47,076,979.11 21,705,262.12
354.00 1,504,434.45 7,707,778.14 6,423,073.20 33,499,848.65 9,317,027.70
164,957,600.85 (66,072,818.21)

$0.00 2,135,387.00 1,087,339.00
292,055.00 3,514,781.00
92,732.00 895,674.00
1,667.00 1,551,855.00 2,541,928.00
972,853.00

Georgia Southern University Annual Financial Report FY2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued
G EORG IA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

PRIMARY GOVERNMENT UNIT Georgia Southern Univers ity

Component Unit Georgia Southern Univers ity
Foundation, Inc.

NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Income from or on behalf of Georgia Southern Univers ity Interes t Expens e (capital as s ets ) Other Nonoperating Revenues (Expens e) Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Other A dditions to permanent endowments Total Other Revenues Increas e in Net A s s ets
NET AS S ETS
Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated Net A s s ets -End of Year

74,164,106.18
881,052.97 669,126.73 (2,185,368.32) (1,736,342.07) 71,792,575.49 5,719,757.28
3,264,778.53
3,264,778.53 8,984,535.81 225,516,058.81 225,516,058.81 $234,500,594.62

190,696.00
190,696.00 1,163,549.00
2,214,665.00 2,214,665.00 3,378,214.00 31,169,554.00 31,169,554.00 $34,547,768.00

Georgia Southern University Annual Financial Report FY2005 11

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA SOUTHERN UNIVERSITY STATEMENTof REVENUES, EXPENSES, and CHANGES in NETASSETS
for the Year Ended June 30, 2005

Georgia Southern University Housing
Foundation, Inc.

Component Units Southern Boosters, Inc

Georgia Southern University Research and Service Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties 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 Payments to or on behalf of Georgia Southern University Total Operating Expenses Operating Income (loss)

$0.00

$0.00

1,180,980.00

142,090.00

$0.00
3,005,441.00 505,576.00 328,627.00

61,588.00 61,588.00

85,840.00 1,408,910.00

26,108.00 3,865,752.00

109,332.00
109,332.00 (47,744.00)

28,372.00
382,055.00 18,488.00 728,029.00 1,156,944.00 251,966.00

39,195.00
3,709,976.00 3,749,171.00
116,581.00

Georgia Southern University Annual Financial Report FY2005 12

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

Georgia Southern University Housing
Foundation, Inc.

Component Units Southern Boosters, Inc

Georgia Southern University Research and Service Foundation, Inc.

NONOPERATINGREVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income fromor on behalf of Georgia Southern University Interest Expense (capital assets) Other Nonoperating Revenues(Expense) Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Additions to permanent endowments 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

873,651.00 2,028,478.00 (2,298,381.00)
603,748.00 556,004.00

16,564.00
(15,069.00)
1,495.00 253,461.00

15,202.00
15,202.00 131,783.00

0.00 556,004.00
937,911.00
937,911.00 $1,493,915.00

0.00 253,461.00
2,362,244.00
2,362,244.00 $2,615,705.00

0.00 131,783.00
145,565.00
145,565.00 $277,348.00

Georgia Southern University Annual Financial Report FY2005 13

Statement of Cash Flows
G EORG IA SOUTHERN UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$38,217,529.63
18,672,180.01 2,152,215.04 (64,565,893.36) (84,692,900.18) (7,707,778.14) (492,210.44)
510,202.92
12,039,751.08 9,679,908.35 6,957,415.95 1,354,548.43 2,485,601.26 6,321,965.14 683,416.68 1,782,943.43
(56,601,104.20)
74,164,106.18 (972,008.50) 915,504.73
74,107,602.41
1,595,867.56
(7,694,522.79) (1,039,657.36) (2,185,368.32) (9,323,680.91)
(10,709.75) 643,112.70
(243.90) 632,159.05 8,814,976.35 20,240,995.43 $29,055,971.78

Georgia Southern University Annual Financial Report FY2005 14

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOSS TO NET CASHPROVIDED (USED) BYOPERATINGACTIVITIES:
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
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCINGTRANSACTIONS
Fixed assets acquired by incurring capital lease obligations Change in fair value of investments recognized as a component of interest income Gift of capital assets reducing proceeds of capital grants and gifts

($66,072,818.21)
9,317,027.70
(144,403.27) (332,620.87) (25,983.56) (252,013.34) 672,862.15
78,489.26 158,355.94
($56,601,104.20)

($68,491,743.90)
6,690,144.55
361,502.34 (174,117.49) (126,015.92) 588,365.47 950,032.29
0.00 (2,687.51)
($60,204,520.17)

$139,155.57 $26,014.03 ($1,668,910.97)

$43,381,785.03 $126,615.54
($2,463,810.67)

Georgia Southern University Annual Financial Report FY2005 15

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units an amendment of Statement No. 14 in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University' report. For FY2005, Georgia Southern University is reporting the activity for the Georgia Southern Foundation, Inc., the Georgia Southern University Housing Foundation, Inc., Southern Boosters, Inc., and Georgia Southern University Research and Service Foundation, Inc.
See Note 16. 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 Southern University Annual Financial Report FY2005 16

by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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 Southern University Annual Financial Report FY2005 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 lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories for Food services are valued at cost using the average-cost basis. Resale Inventories for Bookstore and other services 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 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $1,668,910.97 to Georgia Southern University.
Georgia Southern University Annual Financial Report FY2005 18

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. Georgia Southern University had accrued liability for compensated absences in the amount of $3,831,046.65 as of 7-1-2004. For FY2005, $2,947,502.89 was earned in compensated absences and employees were paid $2,789,146.95, for a net increase of $158,355.94. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 3,989,402.59.
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 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 previously in Note 1 Capital Assets section.
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.
Georgia Southern University Annual Financial Report FY2005 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:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $169,368.35 3,078,955.36 53,776.26
$3,302,099.97

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) of $99,136.31. 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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2005
$1,165,465.88 12,588,254.84
105,000.00 9,728,578.16 $23,587,298.88

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 115(1) of the Internal Revenue Code, as Georgia Southern University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section amended.

Georgia Southern University Annual Financial Report FY2005 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 scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 non-operating 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 scholarship allowances.
Georgia Southern University Annual Financial Report FY2005 21

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college/university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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 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.
At June 30, 2005, $34,583,614.00 of the University's deposits were uninsured. Of these uninsured deposits, $1,800,000.00 were collateralized with securities help by the financial institution's trust department or agent in the University's name, $32,783,614.00 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name.
Georgia Southern University Annual Financial Report FY2005 22

B. Investments Georgia Southern University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.

The University's investments as of June 30, 2005 are presented below. These investments are

comprised entirely of funds invested in the GSU Foundation investment pool with Sun Trust

Bank and a life insurance policy. All investments are presented by investment type and debt

securities are presented by maturity. Investments presented below are private endowment fund

and investment in a life insurance policy.

Investment Maturity

Fair

Less Than

1-5

6 - 10

More than

Investment Type

Value

1 Year

Years

Years

10 Years

Debt Securities

U. S. Treasuries

$0.00

$0.00

$0.00

$0.00

$0.00

U. S. Agencies

Corporate Debt

Money Market Mutual Fund Commercial Paper

546,746.24

546,746.24

Repurchase Agreements

Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Life Insurance Policy (Surrender Value)

546,746.24
655,445.74 1,027,930.08
8,090.09

$0.00

$546,746.24

$0.00

$0.00

Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

Total Investments

$2,238,212.15

The GSU Foundation Inc. Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. The funds invested in the investment pool are comprised of GSU Foundation, Inc. funds and University endowment funds invested by the Foundation on our behalf. The University is allocated a pro rata share of each investment at fair value in addition to a pro rata share of interest income, realized and unrealized gains and/or losses and administrative costs. GSU Foundation Inc. investment pool is not rated.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a policy for managing interest rate risk as debt securities are managed within the investment pool managed by Sun Trust Bank.

Georgia Southern University Annual Financial Report FY2005 23

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the college/university will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a policy for managing custodial credit risk as debt securities are managed within the investment pool managed by Sun Trust Bank.

At June 30, 2005, $2,230,122 were uninsured and held by the investment's counterparty's trust department or agent, but not in the University's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The university does not have a formal policy for managing credit quality risk as all debt securities are held in the investment pool managed by Sun Trust Bank.

Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value
$0.00
546,746.24

AAA $0.00

AA $0.00

Quality Ratings

A

A1

$0.00

$0.00

Unrated $0.00
546,746.24

$546,746.24

$0.00

$0.00

$0.00

$0.00

$546,746.24

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University's investment is diversified in an investment pool therefore minimizing concentration of credit risk with a single issuer.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$339,125.90 861,016.75 2,068,437.64
2,090,238.81 5,358,819.10
217,243.42
$5,141,575.68

Georgia Southern University Annual Financial Report FY2005 24

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005
$1,769,350.57 145,041.39 143,078.30 134,517.60
$2,191,987.86

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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 Southern University Annual Financial Report FY2005 25

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 July 1, 2004
$4,232,094.89 41,952,039.61 46,184,134.50
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
10,336,178.59 61,492,592.12
1,231.88 13,371,450.64
43,774.81 25,658,946.81
224,822.78 111,128,997.63
203,994,795.11
$250,178,929.61

Additions
$7,850.00 5,809,249.65 5,817,099.65

Reductions
$0.00 44,633,372.13 44,633,372.13

44,668,652.91 1,706,111.55 1,026,461.05
139,155.57 1,233,280.63
48,773,661.71
248,305.42 5,663,021.62
1,116.57 1,467,347.38
166,327.71 1,770,909.00
9,317,027.70
39,456,634.01
$45,273,733.66

2,111,000.00
826,510.95 23,976.00 27,387.00 4,500.00 2,993,373.95
602,475.06
704,186.21 31,356.39 27,387.00
1,365,404.66
1,627,969.29
$46,261,341.42

Ending Balance June 30, 2005
$4,239,944.89 3,127,917.13 7,367,862.02
13,311,925.00 251,443,290.62
1,726,693.00 17,962,813.69 43,500,978.79 32,723,544.01
234,835.39 360,904,080.50
10,584,484.01 66,553,138.68
2,348.45 14,134,611.81
178,746.13 27,402,468.81
224,822.78 119,080,620.67
241,823,459.83
$249,191,321.85

Georgia Southern University Annual Financial Report FY2005 26

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $6,599,591.53
1,136,268.46 $7,735,859.99

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$42,371,093.66

Additions $133,334.60

Reductions

Ending Balance June 30, 2005

$1,039,657.36

$41,464,770.90

Other Liabilities Deferred Revenue (noncurrent) Compensated Absences Notes and Loan Payable Total

3,831,046.65 2,505,614.80 6,336,661.45

2,947,502.89 2,947,502.89

2,789,146.95 68,439.56
2,857,586.51

0.00 3,989,402.59 2,437,175.24 6,426,577.83

Total Long TermObligations

$48,707,755.11

$3,080,837.49

$3,897,243.87

$47,891,348.73

Current Portion $1,056,960.29
2,430,743.00 72,255.50
2,502,998.50 $3,559,958.79

Notes and Loans Payable
Included in the total long-term liabilities is a $3,000,000.00 note payable with the Georgia Education Authority issued in November 1991 for the purpose of financing construction of a student residence hall through the U.S. Department of Education Academic Housing Facility Loan Program. Payments are rendered to GSFIC (Georgia State Finance and Investment Commission) acting as paying agent for the Authority. The note carries an interest rate of 5.50% and is due semi-annually through the year 2025. The outstanding balance at June 30, 2005 is $2,437,175.24.

Georgia Southern University Annual Financial Report FY2005 27

Annual maturities are as follows:

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025

Note Payable - Georgia Education Authority

P r inc ipal

Interest

To t al

$72,255.50 76,284.20 80,537.51 85,027.98 89,768.82
529,741.77 694,836.35 808,723.11 $2,437,175.24

$133,064.60 129,035.90 124,782.59 120,292.12 115,551.28 496,858.73 331,764.15 115,217.34
$1,566,566.71

$205,320.10 205,320.10 205,320.10 205,320.10 205,320.10
1,026,600.50 1,026,600.50
923,940.45 $4,003,741.95

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,713,946 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. 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.
CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2006 and 2031. Expenses for fiscal year 2005 were $3,225,025.68 of which $2,185,368.32 represented interest. Total principal paid on capital leases was $1,039,657.36 for the fiscal year ended June 30, 2005. 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, 2005:

Buildings Equipment Total Assets Held Under Capital Lease

$42,668,051.53 832,927.46
$43,500,978.99

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 FY2005 28

Georgia Southern University had one capital lease with related entities in the current fiscal year. In September 2003, Georgia Southern 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. an affiliated organization, 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, 2005 on this capital leases is $41,040,443.18.
Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $424,327.72.
OPERATING LEASES
Georgia Southern University's has certain operating leases which provide for renewable 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. The property under operating lease is for office space.
In 2004, 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 contains a renewal option on a year-to-year basis. Under this agreement, the University paid $84,000.00 in the current year.
In 2004, 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 contains a renewal option on a year-to-year basis. Under this agreement, the University paid $9,200.00 in the current year.
In 2004, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $2,500.00. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $30,000.00 in the current year.
Non cancelable operating lease expenditures in 2005 were $123,200.00 for real property.
Georgia Southern University Annual Financial Report FY2005 29

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$3,061,886.61 2,950,279.64 2,904,573.00 2,890,713.23 2,840,932.95 14,189,580.00
14,189,580.00 14,189,580.00 14,189,580.00
472,996.00

$123,200.00

71,879,701.43 30,414,930.53
0.00 $41,464,770.90

$123,200.00

Georgia Southern University Annual Financial Report FY2005 30

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$ 3,797,349.69 $ 3,907,198.42 $ 3,969,575.81

Employees' Retirement System of Georgia

Plan Description Georgia Southern 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

Georgia Southern University Annual Financial Report FY2005 31

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, 2005, for employees covered by ERS was $136,382.72. The University's total payroll for all employees was $ 84,799,822.59.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, 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 2005 amounted to $16,260.85, of which $14,215.16 was made by the University and $2,045.69 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, 2005, financial report, which may be obtained through ERS.
Georgia Southern University Annual Financial Report FY2005 32

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 accordance with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $3,172,347.86 (9.65%) and $1,643,701.65 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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
Georgia Southern University Annual Financial Report FY2005 33

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 2005 amounted to $220,324.24 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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 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.
Georgia Southern University Annual Financial Report FY2005 34

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 548 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Georgia Southern University recognized as incurred $2,257,149.57 of expenditures, which was net of $881,711.11 of participant contributions.
Georgia Southern University Annual Financial Report FY2005 35

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$36,279,554.87 7,416,151.96
10,681,840.59
546,290.01 100,775.53 596,851.45 4,292,537.69 849,412.51

$1,008,100.40 894,821.21 237,074.02
169,709.08 27,134.99 16,005.10 562,172.20 28,921.16

$162,538.26 745,406.01 173,832.64
58,109.97 176,803.73 22,505.15 1,032,332.63
9,128.76

$253,797.93 6,953,984.96 1,663,485.08
173.76 185,952.73 143,311.10 123,173.76 1,809,808.92 1,890,235.45

$18,852.02 7,687,005.64
1,915,121.12 188.24
127,925.22 3,500.00
140,374.28 2,666,243.79
78,331.65

$0.00 9,040,004.63 3,341,766.27
914.80 131,055.60 450,265.73 166,972.54 3,177,401.07 180,058.28

Total Expenses

$60,763,414.61

$2,943,938.16

$2,380,657.15

$13,023,923.69

$12,637,541.96

$16,488,438.92

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

$0.00 6,141,728.79 2,046,526.35 (525,970.55)
26,211.72
3,508,022.97 3,594,971.91 5,207,998.85

$0.00
5,026,129.18 6,820.11

$0.00 8,197,875.91 1,645,616.05 525,047.75
259,180.12 1,779,857.88 1,849,167.95 16,357,560.33 1,072,941.04

$0.00

$19,999,490.04

$5,032,949.29

$31,687,247.03

$0.00

Total Exp en s es
$37,722,843.48 47,076,979.11 21,705,262.12 354.00 1,504,434.45 7,707,778.14 6,423,073.20 33,499,848.65 9,317,027.70
$164,957,600.85

Georgia Southern University Annual Financial Report FY2005 36

Note 16. Component Units

Georgia Southern University Foundation

Georgia Southern University Foundation (Foundation) is a legally separate, tax-exempt component unit of Georgia Southern 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 forty-six 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $1,551,855 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Georgia Southern Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Investments for Component Units

Georgia Southern University Foundation holds endowment investments in the amount of $150 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 Foundation, in conjunction with the donors, has an established a spending plan.

Georgia Southern University Foundation also holds investments valued at $35,044,529.00 as shown below:

Investments at Fair Market Value:
Money Market Funds Corporate Stocks Mutual Funds Cash Value of Life Insurance Investments in Real Estate Total Investments

$ 4 9 1 ,8 1 2 .0 0 1 1 ,8 7 3 ,7 8 1 .0 0 2 1 ,5 7 2 ,5 6 0 .0 0
1 0 2 ,2 2 6 .0 0 1 ,0 0 4 ,1 5 0 .0 0 $ 3 5 ,0 4 4 ,5 2 9 .0 0

Georgia Southern University Annual Financial Report FY2005 37

Georgia Southern University Housing Foundation

Georgia Southern University Housing Foundation (Housing Foundation) is a legally separate, tax-exempt component unit of Georgia Southern University (University). The Housing Foundation constructs research and auxiliary buildings and facilities for use by the University and then leases the completed buildings to the institution. The six-member board of the Housing 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 Housing Foundation, the majority of resources or income thereon that the Housing Foundation holds and invests is restricted to the real estate activities of the University by the donors. Because these restricted resources held by the Housing Foundation can only be used by, or for the benefit of, the University, the Housing Foundation is considered a component unit of the University and is discretely presented in the University's financial statements.

The Housing 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Housing Foundation's fiscal year is July 1 through June 30.

Buildings (Construction in Progress) valued at $37 million and the associated long-term debt of $37 million, plus the net Investment in Direct Financing Lease valued at $32 million and the associated long-term receivables of $32 million along with the associated long-term debt of $77 are included in the financial statements of the Housing Foundation. The corresponding capital leases and associated long-term debt are included in the University's report. Complete financial statements for the Foundation can be obtained from Georgia Southern Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Investments for Component Units

Georgia Southern University Housing Foundation holds net investments in direct financing in the amount of $32,793,882.00.

Total Investments in Real Estate

$ 3 2 ,7 9 3 ,8 8 2 .0 0

Long-Term Liabilities for Component Units

Student Housing Bonds are issued by the Georgia Southern University Housing Foundation to finance student housing and recreation facilities on university property funded by the proceeds of the Bond Issuance. The Foundation has note payables with banks and grants a pledge and assignment of and grants a lien upon and security interest in, the loan agreement, the deed, and the development agreement as security for the bonds. The interest rate on the Bonds varies, based on the Bond and the Year; from 2.75% to 5.25%.

Georgia Southern University Annual Financial Report FY2005 38

Changes in long-term liabilities for the Georgia Southern Housing Foundation for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable GSU Housing Foundation Note Payable-Wachovia Note Payable-BB&T
Total Long Term Debt

Beginning Balance July 1, 2004
$38,737,928.00 35,983,721.00
$74,721,649.00

Additions

Reductions

$0.00 41,051,840.00
$41,051,840.00

$395,000.00 $395,000.00

Ending Balance June 30, 2005

Amounts due within
One Year

$38,342,928.00 77,035,561.00
$115,378,489.00

$885,000.00 100,000.00
$985,000.00

Debt Service Obligations:
Annual de bt s e rvic e re quire m e nts to m aturity fo r Stude nt H o us ing fo r G e o r gia So uthe rn H o us ing Fo undatio n re ve nue bo nds payable (W ac ho via) are as fo llo ws :

Bonds P ayable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031 th ro u g h 2035 2036 th ro u g h 2040 2041 th ro u g h 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipal
$885,000.00 910,000.00 955,000.00 985,000.00
1,000,000.00 5,685,000.00 7,010,000.00 8,940,000.00 11,972,928.00

Inte re st

To tal

$1,693,706.00 1,657,681.00 1,620,606.00 1,590,275.00 1,556,769.00 7,168,059.00 5,782,750.00 3,808,509.00 1,284,396.00

$2,578,706.00 2,567,681.00 2,575,606.00 2,575,275.00 2,556,769.00
12,853,059.00 12,792,750.00 12,748,509.00 13,257,324.00

$38,342,928.00

$26,162,751.00

$64,505,679.00

Georgia Southern University Annual Financial Report FY2005 39

Annual de bt se rvic e re quire m e nts to m aturity fo r Stude nt H o using & Re c re atio n Fac ility fo r G e o rgia So uthe rn Ho using Fo undatio n re ve nue bo nds payable (BB& T) are as fo llo ws:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031 th ro u g h 2035 2036 th ro u g h 2040 2041 th ro u g h 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$100,000.00 875,000.00 755,000.00
1,815,000.00 1,950,000.00 11,145,000.00 13,595,000.00 17,010,000.00 21,700,000.00 8,090,561.00

Int e r e s t

To tal

$2,484,938.00 3,582,529.00 3,558,466.00 3,536,760.00 3,467,329.00
16,006,043.00 12,123,848.00
9,874,363.00 5,104,250.00
471,250.00

$2,584,938.00 4,457,529.00 4,313,466.00 5,351,760.00 5,417,329.00
27,151,043.00 25,718,848.00 26,884,363.00 26,804,250.00
8,561,811.00

$77,035,561.00

$60,209,776.00

$137,245,337.00

Georgia Southern University Research & Service Foundation
Georgia Southern University Research & Service Foundation (the Research Foundation) is a legally separate, tax-exempt component unit of Georgia Southern University (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 seven member board of the Foundation 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During fiscal year 2005, the Research Foundation transferred approximately $3.7 million in sponsored research to the University. Complete financial statements for the Research Foundation can be obtained from Georgia Southern University Provost Office, P.O. Box 8022, Statesboro, GA 30461.
Georgia Southern University Annual Financial Report FY2005 40

Southern Boosters, Inc.

Southern Boosters, Inc. (Boosters Foundation) is a legally separate, tax-exempt component unit of Georgia Southern University (University). The Boosters Foundation acts primarily as a fundraising organization to supplement resources that are available to the University in support of its athletic programs. The fifty-member board of the Boosters 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 Boosters Foundation, the majority of resources or income thereon that the Boosters Foundation holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by the Boosters 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 Boosters Foundation is considered a component unit of the University and is discretely presented in the University's financial statements.

The Boosters 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Boosters Foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Boosters Foundation distributed $728,029 to the University for the scholarships and support of University programs. Complete financial statements for the Boosters Foundation can be obtained from the Southern Boosters Cowart Building, Lanier Road, P.O. Box 8115, Statesboro, GA, 30461.

Investments for Component Units

Southern Boosters Inc. holds investments valued at $6,155.

Common Stock Total Investments

$ 6 ,1 5 5 .0 0 $ 6 ,1 5 5 .0 0

Long-Term Liabilities for Component Units

Southern Boosters, Inc. has a Note Payable to Sea Island Bank, payable in annual installments of $35,220 including interest at a variable rate (6.25% at June 30, 2005) through September 14, 2013, unsecured. The original note amount was $279,000.00.

Georgia Southern University Annual Financial Report FY2005 41

Changes in long-term liabilities for Southern Boosters for the fiscal year ended June 30, 2005 are shown below:

N ote P a ya ble Se a Isla nd B a nk, U nse c ure d

Beginning Balance July 1, 2004
$279,000.00

Additio ns
$0.00

R e duc tio ns

Ending

Amounts due

B alanc e

within

June 30, 2005 One Year

$28,447.00

$250,553.00

$19,947.00

Total Long Term D ebt

$279,000.00

$0.00

$28,447.00

$250,553.00

$19,947.00

Debt Service Obli gati ons

Annual debt service requirements to maturity for the unsecured Sea Island Bank note payable are as follows:

Note Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Ye ar
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$19,947.00 20,807.00 22,107.00 23,489.00 24,957.00
139,246.00

Interest
$15,273.00 14,413.00 13,113.00 11,731.00 10,263.00 36,854.00

To t al
$35,220.00 35,220.00 35,220.00 35,220.00 35,220.00 176,100.00

$250,553.00

$101,647.00

$352,200.00

Georgia Southern University Annual Financial Report FY2005 42

GEORGIA SOUTHWESTERN STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Georgia Southwestern State University Americus, Georgia

Dr. Michael Hanes President

Dr. Charles A. Parks Vice President for Fiscal Affairs

Georgia Southwestern State University ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments..................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 20 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 24 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units ........................................................................ 30

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

FY2005

95

FY2004

104

FY2003

109

2323 2410 2508

Overview of the Financial Statements and Financial Analysis

Georgia Southwestern State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

Georgia Southwestern State University Annual Financial Report FY 2005 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
Assets: Current Assets Capital Assets, net Other Assets Total Assets

June 30, 2005
$5,644,596.89 18,641,681.28 1,186,941.80 25,473,219.97

June 30, 2004
$4,989,293.15 16,117,073.23
1,217,220.79 22,323,587.17

Liabilities: Current Liabilities Noncurrent Liabilities

2,789,220.29 271,092.98

2,655,098.53 322,635.64

Total Liabilities

3,060,313.27

2,977,734.17

Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets

18,641,681.28 387,971.00
1,166,561.17
2,216,693.25 $22,412,906.70

16,117,073.23 382,106.22
1,175,828.81
1,670,844.74 $19,345,853.00

The total assets of the institution increased by $3,149,632.80. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,524,608.05 of investment in plant, net of accumulated depreciation.

The total liabilities for the year increased by $82,579.10. The primary cause for the increase was due to the increase in deferred revenue. The combination of the increase in total assets of $3,149,632.80 and the increase in total liabilities of $82,579.10 yields an increase in total net assets of $3,067,053.70. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $2,524,608.05.

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

Georgia Southwestern State University Annual Financial Report FY 2005 2

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, 2005

June 30, 2004

Operating Revenues

$16,983,750.07

$15,447,820.49

Operating Expenses Operating Loss

30,520,716.92 (13,536,966.85)

29,776,432.77 (14,328,612.28)

Nonoperating Revenues and Expenses

13,313,083.70

13,769,960.37

Income (Loss) Before other revenues, expenses, gains or losses

(223,883.15)

(558,651.91)

Other revenues, expenses, gains or losses

3,290,936.85

12,725.00

Increase in Net Assets

3,067,053.70

(545,926.91)

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

19,345,853.00 19,345,853.00

19,891,779.91 19,891,779.91

Net Assets at End of Year

$22,412,906.70

$19,345,853.00

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$4,445,920.78
6,261,493.72 1,600,749.83 4,454,627.30
220,958.44
16,983,750.07
12,061,462.41
1,190,897.00 120,239.34 (59,515.05)
13,313,083.70
3,290,936.85
3,290,936.85 $33,587,770.62

June 30, 2004
$4,329,109.45
5,152,275.16 1,666,119.46 4,134,951.48
165,364.94
15,447,820.49
12,616,989.28 950,070.37 321,122.71 83,425.28 (201,647.27)
13,769,960.37
12,725.00
12,725.00 $29,230,505.86

Georgia Southwestern State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
Total Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)
Total Expenses

June 30, 2005
$11,036,817.96 219,291.87
1,398,874.10 2,411,558.67 1,888,079.50 3,802,202.01 3,739,638.80 1,755,092.26 4,269,161.75
30,520,716.92

June 30, 2004
$11,813,502.98 310,001.99
1,610,965.91 2,529,301.19 1,922,818.21 2,597,987.90 2,532,714.45 1,640,447.33 4,818,692.81
29,776,432.77

$30,520,716.92

$29,776,432.77

Operating revenue increased by approximately $1,535,929.58. This increase is primarily due to increase in several federal awards to the institution.

The compensation and employee benefits category decreased by approximately ($1,484,680.44). The decrease was due to a reduction in employer paid health care cost and a continued reduction in number of employees.

Utilities increased by approximately $130,781.05 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2005.

Under non-operating revenues (expenses) state appropriations decreased by approximately ($555,526.87). 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

Georgia Southwestern State University Annual Financial Report FY 2005 5

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, 2005 and 2004, 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, 2005
($12,035,821.38) 13,265,354.08 (389,048.83) 120,239.34 960,723.21 3,453,071.97
$4,413,795.18

June 30, 2004
($13,162,923.94) 14,322,076.33 (372,058.02) 196,258.13 983,352.50 2,469,719.47
$3,453,071.97

Capital Assets

The University had two significant capital asset additions for facilities in fiscal year 2005. The Jackson Hall renovation as well as the Wheatley Hall were completed and transferred to the institutions books during 2005. 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.

Long Term Debt Georgia Southwestern State University had a total Long-Term Debt of $672,369.54, of which $401,276.56 was reflected as current liability at June 30, 2005.

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 Southwestern State University has included the financial statements and notes for all required component units for FY2005. The Georgia Southwestern State University Foundation had endowment investments.

Georgia Southwestern State University Annual Financial Report FY 2005 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. Even with a reduction in state appropriations, 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. Michael L. Hanes, Ph. D., President Georgia Southwestern State University
Georgia Southwestern State University Annual Financial Report FY 2005 7

Statement of Net Assets

GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2005
Georgia Southwestern State
University

Georgia Southwestern Foundation

ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Due from Component Unit Leases Receivable Pledges Receivable Inventories Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets, net Total Noncurrent Assets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations Due to Primary Government Current Portion of Long-term Debt Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Deposits Liabilities under Split-Interest Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS

$4,413,795.18
196,828.72 478,496.89 115,056.00
319,596.03 120,824.07
5,644,596.89
552,156.03 634,785.77
18,641,681.28 19,828,623.08 25,473,219.97
15,408.41 59,067.75
9,382.61 50,405.00 2,176,452.08 20,007.74 57,220.14
401,276.56 2,789,220.29
271,092.98
271,092.98 3,060,313.27
18,641,681.28 387,971.00
1,166,561.17 2,216,693.25 $22,412,906.70

$1,545,251.00
94,662.00 386,508.00
17,849.00 96,270.00 2,140,540.00
22,064,943.00
957,038.00 23,021,981.00 25,162,521.00
20,018.00
115,056.00 135,074.00
0.00 135,074.00 957,038.00 6,478,048.00 4,487,863.00
6,745.00 13,097,753.00 $25,027,447.00

Georgia Southwestern Research and Development Corporation
$18,154.00
18,154.00
541,620.00 541,620.00 559,774.00
0.00
0.00 0.00 541,620.00 18,154.00 $559,774.00

Georgia Southwestern State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties 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 Payments to or on behalf of Georgia Southwestern State University
Total Operating Expenses Operating Income (loss)

Georgia Southwestern State University

Georgia Southwestern Foundation

Georgia Southwestern Research and Development Corporation

$6,007,254.36 1,561,333.58
3,908,368.41 265,026.34
2,088,098.97 1,600,749.83
3,585.00
1,387,218.94 999,292.65 894,699.41 79,704.43 307,340.70 761,814.17 24,557.00 217,373.44
16,983,750.07

$0.00 842,725.00 394,863.00
326,798.00 1,564,386.00

$0.00 9,600.00 69,236.00
78,836.00

5,362,848.18 7,613,988.49 2,953,937.12
1,680.00 217,673.20 2,371,295.87 1,292,084.37 9,555,405.15 1,151,804.54
30,520,716.92 (13,536,966.85)

130,163.00 54,074.00

29,017.00 20,527.00

2,279.00 205,889.00
3,189.00 1,649,220.00 2,044,814.00 (480,428.00)

11,138.00 240,720.00
301,402.00 (222,566.00)

Georgia Southwestern State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

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 Additions to permanent endowments 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 Southwestern State University

Georgia Southwestern Foundation

Georgia Southwestern Research and Development Corporation

12,061,462.41

1,190,897.00 120,239.34
(59,515.05) 13,313,083.70
(223,883.15)

(480,428.00)

3,290,936.85
3,290,936.85 3,067,053.70 19,345,853.00 19,345,853.00 $22,412,906.70

131,387.00 131,387.00 (349,041.00)
25,376,487.00 1.00
25,376,488.00 $25,027,447.00

(222,566.00)
0.00 (222,566.00) 782,340.00 782,340.00 $559,774.00

Georgia Southwestern State University Annual Financial Report FY 2005 10

Statement of Cash Flows
GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
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, 2005
$6,105,635.46
6,398,504.43 1,593,800.53 (14,155,182.27) (13,024,808.16) (3,909,587.53) (189,616.00)
180,823.91
1,459,121.15 999,292.65 919,864.91 79,210.43 358,939.88 853,859.39 25,192.00 269,127.84
(12,035,821.38)
12,061,462.41 38,654.51
1,165,237.16 13,265,354.08
(389,048.83)
(389,048.83)
120,239.34
120,239.34 960,723.21 3,453,071.97 $4,413,795.18

Georgia Southwestern State University Annual Financial Report FY 2005 11

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
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS
Gift of capital assets reducing proceeds of capital grants and gifts

($13,536,966.85)
1,151,804.54 309,465.36 153,912.18 (54,708.90) (189,535.27) 172,616.20 (4,995.14) (37,413.50)
($12,035,821.38)
($3,290,936.85)

Georgia Southwestern State University Annual Financial Report FY 2005 12

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, 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 16. 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 Southwestern State University Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $3,290,936.85 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 2005 15

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 $709,783.04 as of 7-1-2004. For FY2005, $457,926.92 was earned in compensated absences and employees were paid $495,340.42, for a net decrease of $37,413.50. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $672,369.54.
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 previously in Note 1 Capital Assets section.
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 2005 16

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments Total Restricted Expendable

June 30, 2005 $126,945.34
766,870.43 272,745.40
$1,166,561.17

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 Assets

June 30, 2005
$1,024,270.35 808,759.24 46,000.00 337,663.66
$2,216,693.25

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 2005 17

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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.
Georgia Southwestern State University Annual Financial Report FY 2005 18

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 and 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.
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. At June 30, 2005, $2,731,566.11 of the university's deposits were uninsured. Of these uninsured deposits, $2,724,026.80 were collateralized with securities held by the financial institution's trust department or agent in the university's name and $7,539.31 were uncollateralized.
Georgia Southwestern State University Annual Financial Report FY 2005 19

B. Investments

Georgia Southwestern University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.

The University's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Bond Mutual Funds Commercial Paper Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Total Investments

Fair Value
$0.00 247,105.87
247,105.87 305,050.16
$552,156.03

Less Than 1 Year $0.00
0.00

Investment Maturity

1-5

6 - 10

Years

Years

$0.00

$0.00

12,105.19

95,135.76

12,105.19

95,135.76

More than 10 Years
$0.00
139,864.92
139,864.92

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

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

$84,553.60 93,892.37
196,828.72
310,856.64 686,131.33
10,805.72
$675,325.61

Georgia Southwestern State University Annual Financial Report FY 2005 20

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookstore Food Services Physical Plant Other
Total

June 30, 2005 $273,234.63
46,361.40 $319,596.03

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the University had no allowance for uncollectible loans.

Georgia Southwestern State University Annual Financial Report FY 2005 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$529,207.00
529,207.00

Additions $0.00

Reductions $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

28,028,039.11 1,267,167.00 2,790,024.08
5,829,522.61
37,914,752.80

3,290,936.85 178,586.41 210,462.42
3,679,985.68

180,514.34 5,867.00
186,381.34

14,245,307.11 1,063,661.51 2,319,721.95
4,698,196.00
22,326,886.57

730,017.83 44,937.63 191,316.08
185,533.00
1,151,804.54

176,941.25 5,867.00
182,808.25

Total Capital Assets, Being Depreciated, Net Capital Assets, net

15,587,866.23 $16,117,073.23

2,528,181.14 $2,528,181.14

3,573.09 $3,573.09

Ending Balance 6/30/2005
$529,207.00 0.00
529,207.00
0.00 31,318,975.96 1,267,167.00 2,788,096.15
0.00 6,034,118.03
0.00 41,408,357.14
0.00 14,975,324.94 1,108,599.14 2,334,096.78
0.00 4,877,862.00
0.00 23,295,882.86
18,112,474.28
$18,641,681.28

Georgia Southwestern State University Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Research Other Deferred Revenue
Totals

June 30, 2005 $942,730.46 1,233,721.62 $2,176,452.08

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions $0.00

Ending Balance June 30, 2005
$0.00

709,783.04 709,783.04

457,926.92 457,926.92

495,340.42 495,340.42

672,369.54 672,369.54

Total Long Term Obligations

$709,783.04

$457,926.92

$495,340.42

$672,369.54

Current Portion
$0.00
401,276.56 401,276.56 $401,276.56

Note 9. Significant Commitments
Other than the new Student Success Center valued at over $20 million dollars, there are no other significant commitments that should be reflected in the accompanying basic financial statements.

Georgia Southwestern State University Annual Financial Report FY 2005 23

Note 10. Lease Obligations
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.

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum lease payments
Less: Interest Less: Executory costs (if paid) Principal Outstanding

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

$9,260.64 3,077.40 1,642.59

0.00 $0.00

$13,980.63

Note 11. 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 TRS offices or 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
Georgia Southwestern State University Annual Financial Report FY 2005 24

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 2005, 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

2005 2004 2003

100% 100% 100%

$686,260.02 $740,629.03 $774,092.97

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 year 2005, the employer contribution was 9.65% 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 $366,077.49 (9.65%) and $188,123.97 (5%), respectively.

AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.

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

Georgia Southwestern State University Annual Financial Report FY 2005 25

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 2005 amounted to $23,252.73 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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
Georgia Southwestern State University Annual Financial Report FY 2005 26

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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
Georgia Southwestern State University Annual Financial Report FY 2005 27

individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2005, there were 142 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Georgia Southwestern State University recognized as incurred $532,867.41 of expenditures, which was net of $217,825.58 of participant contributions.
Georgia Southwestern State University Annual Financial Report FY 2005 28

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$5,255,934.90 988,971.36
1,505,440.92
52,239.71 10,860.00 57,698.96 3,165,672.11

$44,653.35 88,582.39 39,465.19
5,774.72
1,084.49 35,983.33 3,748.40

$16,364.14 479,847.96 101,249.19
30,887.35 110,435.12
8,389.08 649,141.65
2,559.61

$36,095.79 1,372,833.40
356,091.05
30,042.16 790.95
42,821.00 375,675.71 197,208.61

$3,000.00 1,071,313.55
251,212.05
39,333.78 50,881.92 21,401.38 448,879.13 2,057.69

$0.00 2,354,271.45
360,124.75 1,680.00 37,075.21
116,444.63 63,460.68
838,413.37 30,731.92

Total Expenses

$11,036,817.96

$219,291.87 $1,398,874.10

$2,411,558.67 $1,888,079.50 $3,802,202.01

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 703,097.33 190,190.38 (196,523.31)
2,813.48
1,021,998.03 1,211,425.38
806,637.51

$0.00 1,755,092.26

$6,800.00 555,071.05 150,163.59 196,523.31 19,506.79 326,790.99 75,230.75
2,830,214.47 108,860.80

$0.00

$3,739,638.80

$1,755,092.26

$4,269,161.75

$0.00

Total Expenses
$5,362,848.18 7,613,988.49 2,953,937.12
1,680.00 217,673.20 2,371,295.87 1,292,084.37 9,555,405.15 1,151,804.54
$30,520,716.92

Georgia Southwestern State University Annual Financial Report FY 2005 29

Note 16. Component Units Georgia Southwestern Foundation, Inc. (Foundation) Georgia Southwestern Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Southwestern 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 thirty-seven 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2005, the Foundation distributed $1,649,220 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1800 South Lee Street, Americus, Georgia 31709. Investments for Component Units: Georgia Southwestern Foundation, Inc. holds endowment investments in the amount of $22 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation has an established investment policy which is monitored by its Trustees.
Georgia Southwestern State University Annual Financial Report FY 2005 30

Investments are comprised of the following amounts at June 30, 2005:

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Equity Mutual Funds Fixed Income Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund
Total Investments

Cost
$1,800,003.00 358,094.57
7,279,061.95 6,455,387.18 5,207,338.30

Fair Value
$1,800,000.00 358,095.00
7,807,213.00 6,931,691.00 5,167,944.00

$21,099,885.00

$22,064,943.00

Georgia Southwestern Research and Development Corporation, Inc.

Georgia Southwestern Research and Development Corporation, Inc. is a legally separate, taxexempt component unit of Georgia Southwestern State University (University). The Research and Development Corporation 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 and Development Corporation. The twelve-member board of the Corporation consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Corporation itself. Although the University does not control the timing or amount of receipts from the Research and Development Corporation, 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 and Development Corporation 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is August 1 through July 31.

Complete financial statements for the Research and Development Corporation can be obtained from the Administrative Office at 800 Wheatley Street, Americus, Georgia 31709.

Georgia Southwestern State University Annual Financial Report FY 2005 31

KENNESAW STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Betty L. Siegel
President

Kennesaw State University Kennesaw, Georgia
B. Earle Holley
Vice President for Business & Finance

KENNESAW STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 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 Significant Commitments.................................................................24 Note 10 Lease Obligations................................................................................................ 24 Note 11 Retirement Plans ................................................................................................. 27 Note 12 Risk Management................................................................................................ 30 Note 13 Contingencies...................................................................................................... 31 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 15 Natural Classifications With Functional Classifications..................................... 32 Note 16 Component Units ........................................................................ 33

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 disciplines. 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

FY2005 FY2004 FY2003

537

17,961

469

17,485

409

15,654

Overview of the Financial Statements and Financial Analysis

Kennesaw State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s ets : Current A s s ets Capital As s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital As s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$32,730,801.96 145,030,032.68
5,406,995.09 183,167,829.73
21,373,274.68 44,608,473.25
65,981,747.93
101,434,205.74 752,316.84
2,986,862.94
12,012,696.28 $117,186,081.80

June 30, 2004
$32,294,695.58 108,115,524.80
4,311,146.28 144,721,366.66
18,722,827.45 30,580,521.62
49,303,349.07
78,435,511.68 2,809,197.23
411,664.33
13,761,644.35 $95,418,017.59

The total assets of the institution increased by $38,446,463.07. This increase is primarily due to an increase of $36,914,507.88 in capital assets net of accumulated depreciation. The detail of activity in capital assets is discussed in more detail below.
The total liabilities for the year increased by $16,678,398.86. The primary cause for the increase was due to $13,915,813.82 additional capital lease liability, net of payments. The combination of the increase in total assets of $38,446,463.07 and the increase in total liabilities of $16,678,398.86 yields an increase in total net assets of $21,768,064.21. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $22,998,694.06.
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, 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
Kennesaw State University Annual Financial Report FY 2005 2

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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$80,802,354.46 145,123,510.87 (64,321,156.41) 61,857,160.89
(2,463,995.52) 22,611,643.74 20,147,648.22 95,418,017.59
1,620,415.99 97,038,433.58 $117,186,081.80

$72,702,374.26 129,827,911.99 (57,125,537.73) 58,499,528.56
1,373,990.83 2,501,487.86 3,875,478.69 91,542,538.90
0.00 91,542,538.90 $95,418,017.59

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$47,293,191.71
12,229,932.85 4,525,030.91
15,193,666.51 1,560,532.48
80,802,354.46
60,954,156.29 1,401,971.23
693,309.68 1,055,773.88
(35,599.16) 64,069,611.92
22,556,108.74 55,535.00
22,611,643.74
$167,483,610.12

June 30, 2004
$44,279,874.71 7,757,473.84 4,420,862.93
15,234,886.91 1,009,275.87
72,702,374.26
54,560,010.88 4,548,574.14 306,871.13 580,107.86 563.50
59,996,127.51
2,501,487.86 2,501,487.86 $135,199,989.63

Kennesaw State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$60,388,227.11 698,920.81
4,152,959.95 16,559,132.30 8,054,670.99 19,464,993.23 15,474,846.85 4,707,346.40 15,622,413.23
145,123,510.87
2,212,451.03
$147,335,961.90

June 30, 2004
$56,842,337.99 429,409.42
4,668,199.75 14,730,058.45
7,669,493.13 17,446,376.58
8,714,676.81 3,262,726.36 16,064,633.50
129,827,911.99
1,496,598.95
$131,324,510.94

Operating revenue increased $8,099,980.20 primarily due an increase in grant and contract income. A decrease in non-operating grant and contract revenue partially offset the increase primarily due to reclassification of some grants. An increase in tuition and fees due to a continued rise in enrollment and tuition rates further added to the increase in operating revenue. Non-operating revenue increased by $4,073,484.41 primarily due to an increase in state appropriations offset in part by decreases in non-operating grants and contracts revenue as discussed above. The $20,110,155.88 increase in capital gifts and contracts is mainly made up of the transfer of capital costs to the University by GSFIC as discussed further in Note 6 in the notes to the financial statements.
Operating expenses increased by $15,295,598.58. The increase in costs consisted of $7,713,243.11 in increased salaries and benefits, $4,657,598.68 in additional supplies and materials and $1,563,401.01 in additional depreciation. Under non-operating expenses, interest expense increased $715,852.08 due to the addition of two new capital leases.
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. 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
Kennesaw State University Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($54,961,089.17) 63,258,026.97 (7,225,919.19) (1,051,908.17) 19,110.44 24,249,065.00
$24,268,175.44

June 30, 2004
($49,071,777.49) 61,388,949.51 (4,057,525.23) (1,192,883.60) 7,066,763.19 17,182,301.81
$24,249,065.00

Capital Assets
Kennesaw State University had $41,540,925.72 in capital asset additions in fiscal year 2005 of which $22,556,108.74 was funded by the Georgia State Finance and Investment Commission (GSFIC) and transferred to the University. These additions included the completion of the Convocation Center, a multi-use office, classroom and arena complex, and additional classroom space in the College of Humanities and Social Sciences. The University also entered into two additional capital leases with Kennesaw State University Foundation. The leases added $14,984,033.81 to capital assets, primarily for an additional parking deck. The smaller lease was for additional office space.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Liabilities (Debt)
Kennesaw State University had Long-Term Liabilities (Debt) of $47,633,511.57 of which $3,025,038.32 was reflected as a current liability at June 30, 2005.
For additional information concerning Long-Term Liabilities (Debt), see Notes 1 and 8 in the notes to the financial statements.

Kennesaw State University Annual Financial Report FY 2005 6

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 FY2005. The Kennesaw State University Foundation had endowment investments of $15,281,343 as of June 30, 2005. Details are available in Notes 1 and 16 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 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 2005 7

Statement of Net Assets

KENNESAW STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2005

Ke nne s aw State Unive rs ity

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Leas es Receivable Pledges Receivable Due from Component Units Due from Primary Government In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other A s s ets Total Current A s s ets

$24,268,175.44 1,000,000.00 1,176,888.58 4,165,702.04
658,276.61 842,275.78 619,483.51
32,730,801.96

Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital A s s ets , net Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS

5,029,636.78 377,358.31
145,030,032.68 150,437,027.77 183,167,829.73

LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Due to Component Units Due to Primary Government Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

2,819,404.56 328,953.37 331,266.17
11,493,264.60 3,198,073.66 177,274.00 1,074,836.65 1,950,201.67
21,373,274.68 42,520,990.29
2,087,482.96
44,608,473.25 65,981,747.93

NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

101,434,205.74
752,316.84 2,986,862.94
12,012,696.28 $117,186,081.80

Component Unit Ke nne s aw State Unive rs ity Fo undatio n
$3,655,013.00
922,530.00 3,496,981.00 1,899,351.00
177,274.00
212,842.00 450,778.00 17,859,483.00 28,674,252.00
15,295,143.00 757,397.00
73,509,538.00 403,133.00
98,352,514.00 13,178,112.00 201,495,837.00 230,170,089.00
5,554,749.39
3,038,633.00
3,236,631.00 5,194,831.00
658,276.61 2,310,000.00
19,993,121.00
33,415,436.00
20,548.00 210,930.00 164,491,448.00 198,138,362.00 218,131,483.00
(7,623,346.00)
10,113,623.00 5,802,636.00
3,745,693.00 $12,038,606.00

Kennesaw State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

KENNESAW STATE UNIVERSITY STATEM ENT of REVENUES, EXP ENSES, and CH ANG ES i n NET ASSETS
fo r the Year Ended J une 3 0 , 2 0 0 5

R EV EN UES
O p e ra tin g Re v e n u e s Stu d e n t T u itio n a n d Fe e s (n e t o f a llo w a n c e fo r d o u b tfu l a c c o u n ts ) Le s s : Sc h o la rs h ip A llo w a n c e s Gifts a n d Co n trib u tio n s En d o w me n t In c o me (p e r s p e n d in g p la n ) Fe d e ra l A p p ro p riatio n s Gra n ts a n d Co n trac ts Fed eral State Other Sa le s a n d Se rv ic e s Re n ts a n d Ro y a ltie s A u xilia ry En te rp ris e s Re s id e n c e H a lls Bo o ks to re Fo o d Se rv ic e s Pa rkin g /T ra n s p o rtatio n H e a lth Se rv ic e s In te rc o lle g ia te A th le tic s O th e r O rg a n iza tio n s O th e r O p e ra tin g Re v e n u e s T o ta l O p e ra tin g Re v e n u e s
EX P EN S ES O p e ra tin g Exp e n s e s
Sa la rie s : Fac u lty Staff
Be n e fits O th e r Pe rs o n a l Se rv ic es Trav el Sc h o la rs h ip s a n d Fe llo w s h ip s U tilitie s Su p p lie s a n d O th e r Se rv ic e s D e p re c ia tio n Pa y me n ts to o r o n b e h a lf o f Pe a c h tre e Sta te U n iv e rs ity
T o ta l O p e ra tin g Exp e n s e s O p e ra tin g In c o me (lo s s )

Kennes aw S tate Unive r s ity

C ompone nt U nit
Kennes aw S tate Unive r s ity Foundation

$51,136,056.42 3,842,864.71
9,780,483.71 1,415,477.58 1,033,971.56 4,525,030.91
866,986.74
149,303.91 7,200,024.85
328,756.24 2,722,758.64 1,207,139.63 3,448,698.96
136,984.28 693,545.74 80,802,354.46
38,761,337.82 37,427,609.97 16,368,419.24
1,405,048.74 9,381,034.66 2,764,448.38 32,846,668.09 6,168,943.97
145,123,510.87 (64,321,156.41)

$0.00 2,651,919.00
13,995,996.00
175,513.00 16,823,428.00
657,236.00
926,723.00 7,924,149.00 3,528,413.00 1,725,376.00 14,761,897.00 2,061,531.00

Kennesaw State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

KENNESAW STATE UNIVERSITY STATEM ENT of REVENUES, EXP ENSES, and CH ANG ES i n NET ASSETS
fo r the Year Ended J une 3 0 , 2 0 0 5

Kennes aw S tate Unive r s ity

C ompone nt U nit
Kennes aw S tate Unive r s ity Foundation

NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interes t Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expenses, gains, or loss Capital Grants and Gifts Federal State Other A dditions to permanent endowments Total Other Revenues Increas e in Net Ass ets
NET AS SETS Net Ass ets-beginning of year, as originally reported Prior Year Adjustments Net Ass ets-beginning of year, restated
Net Ass ets-End of Year

60,954,156.29
980,788.59 50,479.53 370,703.11 693,309.68 1,055,773.88 (2,212,451.03) (35,599.16) 61,857,160.89 (2,463,995.52)
22,556,108.74 55,535.00
22,611,643.74 20,147,648.22
95,418,017.59 1,620,415.99 97,038,433.58 $117,186,081.80

1,082,235.00 (7,146,039.00)
0.00 (6,063,804.00) (4,002,273.00)
397,191.00 397,191.00 (3,605,082.00)
15,643,688.00
15,643,688.00 $12,038,606.00

Kennesaw State University Annual Financial Report FY 2005 10

Statement of Cash Flows
KENNESAW STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$46,878,278.27
12,102,079.88 4,540,090.64
(53,003,194.33) (75,680,627.85)
(8,900,766.41) (209,515.50) 221,348.71
154,041.67 7,561,341.08
328,956.24 3,137,095.65 1,226,864.90 3,549,385.14
336,179.88 2,797,352.86 (54,961,089.17)
60,954,156.29 208,589.77
2,095,280.91 63,258,026.97
(3,945,248.17) (1,068,219.99) (2,212,451.03) (7,225,919.19)
275,584.42 897,964.92 (2,225,457.51) (1,051,908.17) 19,110.44 24,249,065.00 $24,268,175.44

Kennesaw State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($64,321,156.41)
6,168,943.97 735,958.22 110,413.94 (245,094.47) 923,017.58
1,163,500.23 503,327.77
($54,961,089.17)
$14,984,033.81 $157,808.96
($22,611,643.74)

Kennesaw State University Annual Financial Report FY 2005 12

KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Kennesaw State University is reporting the activity for the Kennesaw State University Foundation, Inc. (the "Foundation".)
See Note 16, Component Units, for the 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the
Kennesaw State University Annual Financial Report FY 2005 13

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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 deposit 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 Statement 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
Kennesaw State University Annual Financial Report FY 2005 14

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 Resale inventories are carried at the lower of cost or market on 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 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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $22,556,108.74 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 compensated absences in the Statement of Net Assets, and as a component of benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Kennesaw State University had accrued liability for compensated
Kennesaw State University Annual Financial Report FY 2005 15

absences in the amount of $3,534,356.86 as of July 1, 2004. For FY2005, $2,623,572.91 was earned in compensated absences and employees were paid $2,120,245.14, for a net increase of $503,327.77. The ending balance as of June 30, 2005 in accrued liability for compensated absences was $4,037,684.63.

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 previously in Note 1 Capital Assets section.
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:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005
$67,015.96 365,500.09 121,612.34
2,432,734.55 $2,986,862.94

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 2005 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 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 U nre stric te d T ota l U nre stric te d N e t A sse ts

June 30, 2005
$3,841,801.73 6,760,662.24 842,275.78 567,956.53
$12,012,696.28

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the
Kennesaw State University Annual Financial Report FY 2005 17

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 scholarship allowances. Restatement of Prior Year net Assets Prior year net assets were restated due to a change in depreciation. The prior period adjustment on the Statement of Revenues, Expenses and Changes in Net Assets reflects this restatement of $1,620,415.99.
Kennesaw State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $9,727,317.92 of the university's deposits was uninsured. Of these uninsured deposits, $1,900,000.00 was collateralized with securities held by the financial institution's trust department or agent in the University's name, and $7,827,317.92 was uncollateralized.
Kennesaw State University Annual Financial Report FY 2005 19

Investments
Kennesaw State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The University's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Bond Fund Money Market Mutual Fund Commercial Paper Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$464,801.08 142,695.67 221,534.51 442,538.00 45,031.69

Less Than 1 Year $0.00
45,031.69

Investment Maturity

1-5

6 - 10

Years

Years

$456,194.09 77,557.25 109,819.74

$8,606.99 43,256.68 98,783.50

1,316,600.95 1,421,674.19

$45,031.69

$643,571.08

$150,647.17

17,194,841.68 1,064,646.02
146,917.33 79,798.65
$21,224,478.82

More than 10 Years
$0.00 21,881.74 12,931.27
$34,813.01

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.

The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any

Kennesaw State University Annual Financial Report FY 2005 20

department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2005, $1,316,600.95 of the University's applicable investments were uninsured and held by the investment's counterparty's trust department or agent, but not in the University's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk.

Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Bond Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value $607,496.75 221,534.51
45,031.69 442,538.00
$1,316,600.95

AAA $607,496.75
21,508.86

Quality Ratings

AA

A

$0.00

$0.00

34,435.66

165,589.99

$629,005.61

$34,435.66

$165,589.99

A1 $0.00

Unrated $0.00
45,031.69 442,538.00

$0.00

$487,569.69

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University does not have a formal policy for managing concentration of credit risk.

The University has investments of $17,194,841.68 with the BOR Short Term Fund and $1,064,646.02 with the BOR Legal Fund, representing 81% and 5% of total investments respectively.

Kennesaw State University Annual Financial Report FY 2005 21

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,203,574.16 116,038.58
1,176,888.50
3,719,688.31 6,216,189.55
215,322.32
$6,000,867.23

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $842,275.78
$842,275.78

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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 2005 22

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Restated Beginning Balances 7/1/2004
$3,302,820.87 2,106,675.86
711,616.47 6,121,113.20

Additions
$217,433.61 72,075.00
3,918,991.98 4,208,500.59

Reductions
$0.00
265,509.58 265,509.58

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,819,221.00 85,436,335.25 4,240,142.02 10,785,056.94 30,977,682.67 17,150,223.55
616,400.00 151,025,061.43

20,193,559.14
1,505,894.00 14,984,033.81
914,447.76
37,597,934.71

647,334.12 2,869.01
650,203.13

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

878,683.74 22,047,686.63 1,761,627.09 8,260,587.43 1,631,813.83 12,534,974.91
294,860.21 47,410,233.84

65,491.97 2,149,353.48
192,310.00 866,221.78 2,074,998.79 805,157.99 15,409.96 6,168,943.97

572,313.27 572,313.27

Total Capital Assets, Being Depreciated, Net

103,614,827.59

31,428,990.74

77,889.86

Capital Assets, net

$109,735,940.79

$35,637,491.33

$343,399.44

Ending Balance 6/30/2005
$3,520,254.48 2,178,750.86 4,365,098.87 10,064,104.21
1,819,221.00 105,629,894.39
4,240,142.02 11,643,616.82 45,961,716.48 18,061,802.30
616,400.00 187,972,793.01
944,175.71 24,197,040.11 1,953,937.09 8,554,495.94 3,706,812.62 13,340,132.90
310,270.17 53,006,864.54
134,965,928.47
$145,030,032.68

Capital additions included the completion of the Convocation Center, a multi-use office, classroom and arena complex, and additional classroom space in the College of Humanities and Social Sciences of which $22,556,108.74 was funded by the Georgia State Finance and Investment Commission (GSFIC) and transferred to the University. The University also entered into two additional capital leases with Kennesaw State University Foundation for an additional parking deck and additional office space.

Kennesaw State University Annual Financial Report FY 2005 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $8,791,739.86
2,701,524.74 $11,493,264.60

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$29,680,013.12

Additions $14,984,033.81

Reductions

Ending Balance June 30, 2005

$1,068,219.99

$43,595,826.94

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

3,534,356.86 3,534,356.86
$33,214,369.98

2,623,572.91 2,623,572.91
$17,607,606.72

2,120,245.14 2,120,245.14
$3,188,465.13

0.00 4,037,684.63 4,037,684.63
$47,633,511.57

Current Portion $1,074,836.65
1,950,201.67 1,950,201.67 $3,025,038.32

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of approximately $1,440,000 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Kennesaw 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.
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 2005 were $3,374,171.02 of which $2,212,451.03 represented interest and $93,500.00 represented management fees. Total principal paid on capital leases was $1,068,219.99 for the fiscal year ended June 30, 2005. Interest rates range from 2.00 percent to 9.14 percent.
Kennesaw State University Annual Financial Report FY 2005 24

The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Land Buildings Equipment Total Assets Held Under Capital Lease

$0.00 42,254,903.86
$42,254,903.86

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 five 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 expires April 2027. The outstanding liability at June 30, 2005 on this capital lease is $3,775,691.36.

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 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, 2005 on this capital lease is $22,327,339.50.

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 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. In December 2004, the University entered into a capital lease at 7.2% for additional space in the complex, bringing the value of the lease to $3,378,929.27. The outstanding liability at June 30, 2005 on these capital leases is $3,271,876.90.

In February 2004, the University entered into a capital lease of $200,000.00 at 2.0 percent whereby the University leases a house for a fifteen-year period that expires January 2019. The outstanding liability at June 30, 2005 on this capital lease is $183,569.35.

In September 2004, the University entered into a capital lease of $14,323,133.54 at 5.79 percent whereby the University leases a parking deck for a twenty-five year period that began September 2004 and expires August 31, 2029. The deck is constructed on land owned by the University and leased to Kennesaw State University Foundation, Inc. for $197,600.00 annually for a period of twenty-five years commencing in July 2005. At the expiration of the ground lease, ownership of the parking deck transfers to the University. The outstanding liability at June 30, 2005 on this capital lease is $14,037,349.82.

Kennesaw State University Annual Financial Report FY 2005 25

Operating Leases The University's non-cancelable operating leases having remaining terms of more than one year expire within the next two fiscal years from 2006 to 2007. 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.

Non-cancelable operating lease expenditures in 2005 were $1,453,647.42 for 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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$3,594,647.13 3,587,745.78 3,584,363.64 3,584,122.71 3,578,186.91
17,818,268.41 17,650,316.03 17,412,588.36
8,294,324.54

$1,826,221.62 1,416,390.00

79,104,563.51 33,377,521.60
2,131,214.97 $43,595,826.94

$3,242,611.62

Kennesaw State University Annual Financial Report FY 2005 26

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$3,491,043.35 $3,306,631.56 $3,182,344.59

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 2005 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 University's payroll for the year ended June 30, 2005, for employees covered by ERS was $76,618.40. The University's total payroll for all employees was $76,188,947.79.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee.
Total contributions to the plan made during fiscal year 2005 amounted to $9,246.86, of which $8,097.54 was made by the University and $1,149.32 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, 2005, 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable
Kennesaw State University Annual Financial Report FY 2005 28

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 2005, the employer contribution was 9.65% 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 $2,716,607.87 (9.65%) and $1,407,427.81 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports, which may be obtained through their respective corporate offices.
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 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 2005 amounted to $350,024.68 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Kennesaw State University Annual Financial Report FY 2005 29

Note 12. 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, 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. 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 2005 30

Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, 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, 2005, Kennesaw State University recognized as incurred $809,453.39 of expenditures, which was net of $272,126.52 of participant contributions.
Kennesaw State University Annual Financial Report FY 2005 31

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$35,957,052.30 6,594,686.50 8,998,164.36
721,802.88 676,431.00 328,078.48 6,884,406.72 227,604.87

$206,470.04 195,000.27 70,389.93
20,531.37 11,000.00
437.57 157,580.24
37,511.39

$719,958.86 1,995,485.59
567,280.00
134,507.29 6,959.79 43,664.93
682,635.12 2,468.37

$1,528,803.85 8,199,820.94 2,084,472.65
227,474.18 900.00
141,440.46 3,193,737.57 1,182,482.65

$700.00 5,168,178.45 1,184,687.27
71,435.57
79,596.97 1,334,630.63
215,442.10

$38,320.33 9,640,362.80 2,091,886.86
159,322.28 2,706,317.40
136,473.42 4,630,793.73
61,516.41

Total Expenses

$60,388,227.11

$698,920.81

$4,152,959.95

$16,559,132.30

$8,054,670.99

$19,464,993.23

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 3,256,694.58
796,727.71 (80,192.52)
12,817.51
1,963,729.24 7,003,278.01 2,521,792.32

$0.00 4,707,346.40

$310,032.44 2,377,380.84
574,810.46 80,192.52 57,157.66 1,272,080.07 71,027.31 8,959,606.07 1,920,125.86

$0.00

$15,474,846.85

$4,707,346.40

$15,622,413.23

$0.00

Total Expenses
$38,761,337.82 37,427,609.97 16,368,419.24
0.00 1,405,048.74 9,381,034.66 2,764,448.38 32,846,668.09 6,168,943.97
$145,123,510.87

Kennesaw State University Annual Financial Report FY 2005 32

Note 16. Component Units
Kennesaw State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Kennesaw State University (University). The Foundation constructs research and auxiliary buildings and facilities for use by the University and then leases the completed buildings to the institution. The seven-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $1,725,376.00 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:
Kennesaw State University Foundation, Inc. holds endowment investments in the amount of $15,281,343. 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, Inc., in conjunction with the donors, has established a spending plan whereby 4% of the earnings may be used for academic scholarships. The remaining 96% of the earnings are set aside as a reserve.

Investments:
Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Total Investments

Estimated Cost
$ 2 ,0 4 2 ,0 8 5 .2 4 2 ,9 9 2 ,2 6 4 .3 7 1 ,0 2 3 ,1 0 1 .7 5 5 ,3 6 9 ,1 8 8 .3 6 1 ,1 4 5 ,9 3 6 .9 7 1 3 ,8 0 0 .0 0
$ 1 2 ,5 8 6 ,3 7 6 .6 9

Fair Value
$ 2 ,0 4 2 ,0 8 5 .2 4 3 ,2 7 8 ,3 9 7 .2 3 1 ,1 0 5 ,5 6 9 .5 0 7 ,4 8 8 ,0 6 0 .6 0 1 ,3 6 7 ,2 3 0 .4 3 1 3 ,8 0 0 .0 0
$ 1 5 ,2 9 5 ,1 4 3 .0 0

Investment cost is an estimate based on available information.

Kennesaw State University Annual Financial Report FY 2005 33

Long Term Liabilities Student Housing Revenue Bonds are issued by Kennesaw State University Foundation, Inc. to finance student housing on University property. The bonds mature at term and are secured by pledges of gross receipts from student housing. The interest rate is variable. Parking Facility Revenue Bonds are issued by the Kennesaw State University Foundation, Inc. to finance parking facilities on University property. The bonds mature at term and are secured by pledges of gross receipts from parking deck rents at Kennesaw State University. The interest rate is variable. Education Facilities Revenue Bonds are issued by the Kennesaw State University Foundation, Inc. to finance the purchase of teaching and administrative facilities. The bonds mature serially and are serviced by a pledge of gross receipts of rents from the facilities financed by the bonds. The interest rate is variable. Lenders have provided three letters of credit to secure the bonds. The obligations of the Foundation to repay the amounts 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 its revenues. The University Manor note payable was issued by Wachovia Bank to finance the purchase of an existing apartment complex. The note is due in monthly installments of $19,752 through March 1, 2010 with a final payment of the entire outstanding balance on April 1, 2010. The note bears interest at a rate of 8.58%.
Kennesaw State University Annual Financial Report FY 2005 34

Changes in Long-Term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

Student Housing Facilities Bonds 2003A University Facilities Bonds 2003B Education Facilities Revenue Bonds University Manor Note Payable University Facilities Taxable Senior Series 2004B Student Housing Senior Series 2004A Student Housing Subordinate Series 2004C Student Housing Subordinate Series 2004D Series 2004 Parking Bonds Series 2004 Facilities Bonds Unamortized Cost of Issuance Unamortized Bond Premium
Total Long Term Debt

$85,705,785.00 25,045,000.00 13,655,000.00 2,474,836.00
$126,880,621.00

$0.00
8,050,000.00 49,715,000.00 18,240,000.00 34,275,000.00 36,380,000.00 8,400,000.00 (5,542,973.00) 4,279,421.00 $153,796,448.00

$85,705,785.00 25,045,000.00
650,000.00 2,474,836.00
$113,875,621.00

$0.00
13,005,000.00
8,050,000.00 49,715,000.00 18,240,000.00 34,275,000.00 36,380,000.00 8,400,000.00 (5,542,973.00) 4,279,421.00
$166,801,448.00

$0.00 680,000.00 770,000.00
860,000.00
$2,310,000.00

Annual debt service requirements to maturity for Student Housing, P arking, Education and Facilities bonds payable are as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipa l
$7,504,831.00 3,760,000.00 3,885,000.00 4,035,000.00 4,205,000.00
22,400,000.00 27,425,000.00 29,050,000.00 30,230,000.00 27,690,000.00 11,811,448.00
$171,996,279.00

Interest
$7,264,787.50 7,222,445.50 7,133,970.00 7,017,028.50 6,888,870.50 32,521,921.75 27,902,750.00 21,358,650.00 13,618,700.00 6,738,600.00
645,832.50
$138,313,556.25

Total
$14,769,618.50 10,982,445.50 11,018,970.00 11,052,028.50 11,093,870.50 54,921,921.75 55,327,750.00 50,408,650.00 43,848,700.00 34,428,600.00 12,457,280.50
$310,309,835.25

Kennesaw State University Annual Financial Report FY 2005 35

MACON STATE COLLEGE
Financial Report
For the Year Ended June 30, 2005

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 2005
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses, and Changes in Net Assets......................................... 10 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ..................................................... 14 Note 2 Deposits and Investments..................................................................................... 20 Note 3 Accounts Receivable............................................................................................ 23 Note 4 Inventories............................................................................................................ 24 Note 5 Notes/Loans Receivable....................................................................................... 24 Note 6 Capital Assets....................................................................................................... 24 Note 7 Deferred Revenue................................................................................................. 26 Note 8 Long-Term Liabilities .......................................................................................... 26 Note 9 Significant Commitments.................................................................26 Note 10 Lease Obligations................................................................................................ 26 Note 11 Retirement Plans ................................................................................................ 27 Note 12 Risk Management................................................................................................ 30 Note 13 Contingencies...................................................................................................... 31 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 31 Note 15 Natural Classifications With Functional Classifications..................................... 32 Note 16 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. Since that time other baccalaureate degrees have been added, and beginning Fall Semester 2005, the College will add a new baccalaureate degree in Early Childhood Education. These new programs and degrees have further expanded the College's level of programming and services to the region.

The College's main campus, located in Macon, Georgia, is complemented by the new Warner Robins Campus in Warner Robins, Georgia. Enrollment at the College has increased well over 50% since the mission changed in 1996. Enrollment for Fall 2004 continued to increase with a total enrollment of over 5,700 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

FY2005 FY2004 FY2003

177

5,733

166

5,403

159

4,991

Overview of the Financial Statements and Financial Analysis

Macon State College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

Macon State College Annual Financial Report FY 2005 1

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.

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 ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$8,419,477.44 45,752,374.81
1,101,985.14 55,273,837.39
3,803,194.02 384,516.73
4,187,710.75
45,752,374.81
787,026.43 53,430.60
4,493,294.80 $51,086,126.64

June 30, 2004
$6,823,233.69 26,844,400.65
1,117,041.14 34,784,675.48
3,694,634.39 342,662.36
4,037,296.75
26,844,400.65
1,121,092.78 53,430.60
2,728,454.70 $30,747,378.73

The total assets of the institution increased by $20,489,161.91. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $18,907,974.16 in investment in plant, net of accumulated depreciation. The Georgia State Financing and Investment Commission (GSFIC) transferred title to the Jones Building to Macon State College which accounted for over $15.3 Million of the increase. Another $3.7 Million was received from GSFIC for the Library renovation, and other capital additions contributed approximately
Macon State College Annual Financial Report FY 2005 2

$700,000. The addition of accumulated depreciation for the year resulted in a net increase in capital assets of $18,907,974.16. 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 $150,414.00 largely as a result of increases in Contracts Payable. The combination of the increase in total assets of $20,489,161.91 and the increase in total liabilities of $150,414.00 yields an increase in total net assets of $20,338,747.91 The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $18,907,974.16 as discussed above. 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.
Macon State College Annual Financial Report FY 2005 3

Statement of Revenues, Expenses and Changes in Net Assets, Condensed
June 30, 2005

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$11,065,436.19 36,905,065.32 (25,839,629.13) 25,792,609.56
(47,019.57) 20,385,767.48 20,338,747.91 30,747,378.73 30,747,378.73 $51,086,126.64

June 30, 2004
$16,073,358.15 33,743,569.60 (17,670,211.45) 17,864,669.52
194,458.07 6,085,040.81 6,279,498.88 24,467,879.85 24,467,879.85 $30,747,378.73

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:

Macon State College Annual Financial Report FY 2005 4

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$6,416,019.87
673,653.11 569,556.46 3,160,843.97 245,362.78
11,065,436.19
16,133,230.81 7,783,674.39 1,623,082.86
102,621.50 150,000.00 25,792,609.56
20,385,767.48
20,385,767.48
$57,243,813.23

June 30, 2004
$6,712,642.49 6,153,474.16 2,929,725.11 277,516.39
16,073,358.15
15,589,607.39 1,698,817.29 472,046.19 126,067.58 (21,868.93)
17,864,669.52
5,305,040.81 780,000.00
6,085,040.81 $40,023,068.48

Macon State College Annual Financial Report FY 2005 5

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$15,127,481.04
306,000.45 2,833,274.88 2,568,179.94 3,388,964.38 5,248,168.85 3,819,221.39 2,673,536.44
940,237.95
36,905,065.32
0.00
$36,905,065.32

June 30, 2004
$14,070,334.00
375,646.00 2,093,356.33 2,510,557.84 3,513,092.72 3,692,165.41 3,806,301.42 2,779,648.31
902,467.57
33,743,569.60
0.00
$33,743,569.60

Total revenue increased by $17,220,744.75. The majority of this increase was in capital gifts from GSFIC due to the previously discussed transfer of the Jones Building and renovation of the Library.

Operating revenue decreased by $5,007.921.96 due to a reclassification of grants and contract revenue between the categories of operating and non-operating. A corresponding increase can be seen in the non-operating category along with an increase in non-capitalized gifts of $1,151,036.67.

The decrease in Tuition and Fees of $296,622.62 is misleading in that tuition and fees actually increased, but a greater increase in scholarship allowances created a reduction in the net amount. Likewise the large increase in the Sales and Services line item is misleading due to a classification change.

Total expenses increased $3,161,495.72, or approximately 9%. There were modest increases in all areas except Public Service and Auxiliary Enterprises which actually showed a decrease in expenditures. Instruction expenditures increased $1,054,937.30 or 7% due to the increase in the number of students enrolled. The $1,556,003.44 increase in Plant Operations and Maintenance was primarily due to the one time purchase of furniture for the renovation of the Library. This expenditure will be reimbursed by GSFIC.

The compensation and employee benefits category increased by approximately $1,109,613.55. The majority of this increase is due to the addition of fifteen new faculty positions.

Macon State College Annual Financial Report FY 2005 6

Under non-operating revenues (expenses) state appropriations increased by approximately $543,623.42 despite the sluggish economy. Much of this was a one time increase for the operation and maintenance of the two new buildings at the Warner Robins Campus. Otherwise, state appropriations have been relatively flat for the past several years which has created a challenge for all institutions of the University System of Georgia and, thus, for Macon State College. We are hopeful that the economy is now on an upward trend.
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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($23,663,024.02) 23,960,317.78 (174,851.90) 91,803.64 214,245.50 3,978,819.89
$4,193,065.39

June 30, 2004
($15,769,492.13) 18,167,133.39 (528,362.10) 128,043.57 1,997,322.73 1,981,497.16
$3,978,819.89

Capital Assets
The College had two significant capital asset additions for facilities in fiscal year 2005. The $15,315,667 Jones Building was completed and title was turned over to the College by GSFIC. Macon State College also began a major renovation to the Library in fiscal year 2005. The Georgia State Finance and Investment Commission (GSFIC) is providing the $5 Million funding for this project. The renovated Library is expected to open in August 2005.

Macon State College Annual Financial Report FY 2005 7

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long Term Debt Macon State College had a total long-term debt of $811,216.73, of which $426,700.00 was reflected as current liability at June 30, 2005. 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, Macon State College has included the financial statements and notes for all required component units for FY2005. The Macon State College Foundation had endowment investments of $6,002,912 as of June 30, 2005. 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 relatively flat funding from the Legislature, 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 continue to monitor resources in order to maintain the institution's ability to react to unforeseen internal and external issues.
David A. Bell, Ph.D., President Macon State College
Macon State College Annual Financial Report FY 2005 8

Statement of Net Assets

MACON STATE COLLEGE STATEMENT OF NET ASSETS
June 30, 2005
Macon State College

AS S ETS Current Assets Cash and Cas h Equivalents Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - State General Appropriations Allotment Receivables - Other Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets , net Total Noncurrent Ass ets TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Dep o s it s Deferred Revenue Other Liabilities Deposits Held for Other Organizations Current Portion of Long-term Debt Compens ated Absences (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated Absences (noncurrent) Dep o s it s Liabilities under Split-Interest Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital As sets, net of related debt Restricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted TOTAL NET ASSETS

$4,193,065.39 100,000.00 345,827.02
3,243,290.65
532,755.94 4,538.44
8,419,477.44
1,097,629.03 4,356.11
45,752,374.81 46,854,359.95 55,273,837.39
780.96 85,572.03 417,205.31 2,100,868.50 250,237.56 521,829.66 426,700.00 3,803,194.02
384,516.73
384,516.73 4,187,710.75
45,752,374.81
787,026.43 53,430.60 4,493,294.80 $51,086,126.64

Macon State Col l ege
F o undati o n
$158,708.00
1,203,536.00
1,362,244.00
5,407,933.00 705,411.00
1,901,996.00 8,015,340.00 9,377,584.00
54,158.00
802,321.00 856,479.00
0.00 856,479.00 1,901,996.00 6,002,912.00 78,905.00
6,673.00 530,619.00 $8,521,105.00

Macon State College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets
MACON STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANG ES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES

Macon State College

Macon State College Foundation

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less : Scholars hip Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties A uxiliary Enterprises Res idence Halls Books tore Food Services Parkin g / Tran s p o rt at io n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Faculty Staff
Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellowships Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Peachtree State Univers ity
Total Operating Expens es Operating Income (loss)

$9,203,931.77 2,787,911.90
105,176.85 568,665.70
(189.44) 569,556.46
3,130,229.15 30,614.82
245,362.78 11,065,436.19
10,571,513.52 6,634,313.58 4,231,588.88
191,208.29 3,845,912.39 1,010,736.42 8,767,147.02 1,652,645.22 36,905,065.32 (25,839,629.13)

$0.00 334,333.00
92,373.00
55,615.00 482,321.00
60,257.00 751,097.00 811,354.00 (329,033.00)

Macon State College Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued

MACON STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANG ES in NET ASSETS
for the Year Ended June 30, 2005

Macon State College

Macon State College Foundation

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments , auxiliary and other) Interes t Expense (capital ass ets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expenses, gains , or los s Capital Grants and Gifts Federal State Other Additions to permanent endowments Total Other Revenues Increase in Net As sets
NET ASSETS
Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, res tated Net Assets-End of Year

16,133,230.81
7,285,148.54 35,297.00
463,228.85 1,623,082.86
102,621.50
150,000.00 25,792,609.56
(47,019.57)
20,385,767.48
20,385,767.48 20,338,747.91
30,747,378.73
30,747,378.73 $51,086,126.64

(61,781.00)
(61,781.00) (390,814.00)
85,910.00 85,910.00 (304,904.00) 8,826,009.00 8,826,009.00 $8,521,105.00

Macon State College Annual Financial Report FY 2005 11

Statement of Cash Flows
MACON STATE COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$9,371,553.33
618,665.48 557,726.82 (7,477,495.47) (21,159,170.83) (6,633,824.29)
282,880.65 (140,107.53)
(4,403.63) 921,151.45 (23,663,024.02)
16,133,230.81 41,134.61
7,785,952.36 23,960,317.78
3,915,716.17
(4,090,568.07)
(174,851.90)
10,817.64 80,986.00
91,803.64 214,245.50 3,978,819.89 $4,193,065.39

Macon State College Annual Financial Report FY 2005 12

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Change in Fair value of inves tments recognized as a component of interes t icome Gift of capital as s ets reducing proceeds of capital grants and gifts

($25,839,629.13)
1,652,645.22 (930,377.42)
(40,466.19) 145,254.04
12,825.24 1,858,820.96 (556,860.55)
34,763.81 ($23,663,024.02)
$21,635.50 ($16,052,846.00)

Macon State College Annual Financial Report FY 2005 13

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Macon State College is reporting the activity for the Macon State College Foundation.
See Note 16. Component Units, for foundation notes.
Macon State College Annual Financial Report FY 2005 14

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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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
Macon State College Annual Financial Report FY 2005 15

component of investment income in the Statement 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 Resale Inventories are valued at cost using the first in first out basis.
Noncurrent Cash and Investments Macon State College did not have any externally restricted cash at June 30, 2005.
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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $16,052,846 to Macon State College.
Deposits Macon State College did not hold any student deposits at June 30, 2005.
Macon State College Annual Financial Report FY 2005 16

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 Statement of Revenues, Expenses, and Changes in Net Assets. Macon State College had accrued liability for compensated absences in the amount of $776,452.92 as of 7-1-2004. For FY2005, $1,392,205.89 was earned in compensated absences and employees were paid $1,357,442.08, for a net increase of $34,763.81. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 811,216.73.
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 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 previously in Note 1 Capital Assets section.
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 2005 17

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005
($445.50) 88.58
65,503.31 721,880.04
$787,026.43

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 Other Unrestricted Total Unrestricted Net As sets

June 30, 2005 $881,180.32 1,462,409.09
2,149,705.39 $4,493,294.80

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.
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:
Macon State College Annual Financial Report FY 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Macon State College Annual Financial Report FY 2005 19

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $4,092,065.39 of the College's deposits were uninsured. Of these uninsured deposits, $4,087.610.45 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $5,454.94 were uncollateralized.
Macon State College Annual Financial Report FY 2005 20

B. Investments
Macon State College maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The College's investments as of June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements

Fair Value
$280,538.17
10,048.00 9,899.76

Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

300,485.93 797,143.10 846,880.39

Total Investments

$1,944,509.42

Less Than 1 Year
10,048.00 9,999.76
20,047.76

Investment Maturity

1-5 Years

6 - 10 Years

$280,538.17

More than
10 Years

280,538.17

0.00

0.00

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.
The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but

Macon State College Annual Financial Report FY 2005 21

does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price. The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63). Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The College does not have a formal policy for managing interest rate risk. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the College will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The College does not have a formal policy for managing custodial credit risk for investments. At June 30, 2005, $1,944,509.42 of the College's applicable investments were uninsured and held by the investment's counterparty in the College's name.
Macon State College Annual Financial Report FY 2005 22

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The College does not have a formal policy for managing credit quality risk.

Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value $280,538.17
$280,538.17

AAA $280,538.17
$280,538.17

Quality Ratings

AA

A

A1

Unrated

$0.00

$0.00

$0.00

$0.00

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The college does not have a formal policy for managing concentration of credit risk.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$211,610.54 456,166.13 345,827.02
2,586,093.40 3,599,697.09
10,579.42
$3,589,117.67

Macon State College Annual Financial Report FY 2005 23

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $532,755.94
$532,755.94

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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 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, 2005 the College did not have an allowance for uncollectible loans.

Macon State College Annual Financial Report FY 2005 24

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$607,411.84
607,411.84

Additions
$0.00 4,165,012.58 4,165,012.58

Reductions $0.00 0.00

32,461,162.22 1,720,336.00 1,951,824.62
3,248,604.94
39,381,927.78

15,315,667.00 737,179.00 215,102.59
127,658.21
16,395,606.80

115,990.01 21,118.00 137,108.01

8,285,179.08 591,251.49
1,421,565.81
2,846,942.59
13,144,938.97
26,236,988.81
$26,844,400.65

1,293,593.42 80,859.46 157,223.34
120,969.00
1,652,645.22
14,742,961.58
$18,907,974.16

115,990.01 21,118.00 137,108.01
0.00 $0.00

Ending Balance 6/30/2005
$607,411.84 4,165,012.58 4,772,424.42
0.00 47,776,829.22 2,457,515.00 2,050,937.20
0.00 3,355,145.15
0.00 55,640,426.57
0.00 9,578,772.50
672,110.95 1,462,799.14
0.00 2,946,793.59
0.00 14,660,476.18
40,979,950.39
$45,752,374.81

Macon State College Annual Financial Report FY 2005 25

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $2,029,988.52
70,879.98 $2,100,868.50

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

776,452.92 776,452.92
$776,452.92

1,392,205.89 1,392,205.89
$1,392,205.89

1,357,442.08 1,357,442.08
$1,357,442.08

0.00 811,216.73 811,216.73
$811,216.73

Current Portion
$0.00
426,700.00 426,700.00 $426,700.00

Note 9. Significant Commitments Macon State College did not have any unrecorded significant commitments as of June 30, 2005.
Note 10. Lease Obligations Macon State College had no capital leases or installment purchase agreements for the acquisition of real property during fiscal year 2005.

Macon State College Annual Financial Report FY 2005 26

Note 11. 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's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of 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 2005, 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

2005 2004 2003

100% 100% 100%

$945,644.90 $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 2005 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, 2005, for employees covered by ERS was $67,564.62. The College's total payroll for all employees was $17,178,850.51.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the College amounts 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 2005 amounted to $8,046.96, of which $7,033.50 was made by the College and $1,013.46 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, 2005, financial report, which may be obtained through ERS.
Macon State College Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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.
Macon State College and the covered employees made the required contributions of $489,412.03 (9.65%) and $253,581.99 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
Macon State College Annual Financial Report FY 2005 29

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 2005 amounted to $49,004.36 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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
Macon State College Annual Financial Report FY 2005 30

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 78 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Macon State College recognized as incurred $360,093.13 of expenditures, which was net of $164,719.87 of participant contributions.
Macon State College Annual Financial Report FY 2005 31

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$10,479,335.59 744,233.06
2,564,853.96
130,857.38
75,283.49 1,093,555.13
39,362.43

$0.00

$18,790.00 82,096.16 23,059.28
2,777.84
3,875.93 175,401.24

$13,653.56 1,557,651.57 423,297.47
11,147.18 150.00
57,247.73 540,110.15 230,017.22

$59,484.37 1,525,543.91
410,260.71
18,515.60 26,541.00 28,570.96 494,294.74 4,968.65

$0.00 1,855,591.40
543,862.31
21,644.96
55,368.48 910,408.41
2,088.82

Total Expenses

$15,127,481.04

$0.00

$306,000.45

$2,833,274.88

$2,568,179.94

$3,388,964.38

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2 0 0 5

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

$250.00 700,866.74 226,084.35

$0.00

$0.00 168,330.74
40,170.80

$0.00

2,621.33
786,923.84 3,099,789.31
431,633.28

3,819,221.39

3,644.00
3,465.99 2,453,588.04
4,336.87

940,237.95

$5,248,168.85

$3,819,221.39

$2,673,536.44

$940,237.95

Total Expens es
$10,571,513.52 6,634,313.58 4,231,588.88
191,208.29 3,845,912.39 1,010,736.42 8,767,147.02 1,652,645.22
$36,905,065.32

Macon State College Annual Financial Report FY 2005 32

Note 16. Component Units Macon State College Foundation (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 incomes, as defined by Section 512(a) (1) of the Code, are subject to federal income tax.
Twenty-eight 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 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
Investments for Component Units: Macon State College Foundation's endowment was $6,002,912 as of June 30, 2005. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Macon State College Foundation, in conjunction with the donors, has established a spending plan whereby 4-6% of the market value of the investments at year end, averaged over a rolling three year period, may be used within the parameters of the donor's restrictions.
Macon State College Annual Financial Report FY 2005 33

Macon State College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cost

Fai r Val ue

Cash held by inves tment organization Money Market A ccounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Inves tment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund
Total Investments

$0.00

$0.00

5,434,120.00 $5,434,120.00

5,407,933.00 $5,407,933.00

Macon State College Annual Financial Report FY 2005 34

MEDICAL COLLEGE OF GEORGIA
Financial Report
For the Year Ended June 30, 2005

Medical College of Georgia Augusta, Georgia

Daniel W. Rahn, M.D. President

Diane C. Wray, CPA Vice President for Finance/CFO

MEDICAL COLLEGE OF GEORGIA ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments.................................................................................... 22 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 Significant Commitments.................................................................28 Note 10 Lease Obligations................................................................................................ 28 Note 11 Retirement Plans ................................................................................................. 31 Note 12 Risk Management................................................................................................ 36 Note 13 Contingencies...................................................................................................... 36 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 37 Note 15 Natural Classifications With Functional Classifications..................................... 38 Note 16 Component Units ........................................................................ 39

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 baccalaureate, masters, doctoral and 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. A brief historical comparison of full time faculty and student levels is shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

667

2,759

646

2,526

625

2,453

Overview of the Financial Statements and Financial Analysis

Medical College of Georgia is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$96,966,290.04 222,875,170.17
43,855,716.79 363,697,177.00

June 30, 2004
$115,089,432.01 170,755,830.81 22,517,571.44 308,362,834.26

Liabilities : Current Liabilities Noncurrent Liabilities

79,863,004.95 13,392,551.92

65,742,978.97 14,086,444.49

Total Liabilities

93,255,556.87

79,829,423.46

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Res tricted - capital projects Unres tricted Total Net As s ets

220,119,373.41 1,649,294.54
61,094,628.38 472,712.23
(12,894,388.43) $270,441,620.13

166,746,503.57 1,669,065.78
48,261,364.73 22,352,303.00 (10,495,826.28) $228,533,410.80

The total assets of the institution increased by $55,334,342.74. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $52,119,339.36 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 $13,426,133.41. The primary cause for the increase was in current liabilities, primarily $6,772,300.88 in accounts payable. The combination of the increase in total assets of $55,334,342.74 and the increase in total liabilities of $13,426,133.41 yields an increase in total net assets of $41,908,209.33. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $53,372,869.84.

Medical College of Georgia Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Period A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$357,896,536.50 479,685,135.03 (121,788,598.53) 121,063,617.25
(724,981.28) 31,581,522.69 30,856,541.41 228,533,410.80 11,051,667.92 239,585,078.72 $270,441,620.13

$336,094,965.08 446,360,364.79 (110,265,399.71) 117,966,094.71
7,700,695.00 1,490,820.25 9,191,515.25 219,341,895.55
0.00 219,341,895.55 $228,533,410.80

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$15,931,248.71
327,413,037.45 6,791,023.26 6,560,098.33 1,201,128.75
357,896,536.50
111,638,934.99 7,498,680.12 802,897.24 996,952.57 239,763.29
121,177,228.21
31,486,789.84 94,732.85
31,581,522.69
$510,655,287.40

June 30, 2004
$15,950,698.23 304,750,650.48
6,653,351.45 6,674,361.66 2,065,903.26 336,094,965.08
106,404,347.20 11,174,456.00
888,589.28 (415,767.40) 118,051,625.08
1,480,700.52 10,119.73
1,490,820.25 $455,637,410.41

Medical College of Georgia Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$95,443,809.09 41,627,643.06 91,628,634.04 17,553,861.35 2,078,718.09 39,813,437.94 13,507,875.82 (213,695.56) 6,056,769.87
172,188,081.33 479,685,135.03
113,610.96
$479,798,745.99

June 30, 2004
$97,805,943.55 33,792,915.91 86,721,673.74 20,720,728.55
2,550,399.68 27,013,837.18
9,893,712.75 1,574,924.58 7,619,266.93
158,666,961.92 446,360,364.79
85,530.37
$446,445,895.16

State and other grants and contracts increased in the amount of $11,341,446.20. This is primarily a result of the increase in grant awards in the previous year and a sustained level of funding in fiscal year 2005.
The compensation and employee benefits category increased by approximately $16,275,391.90. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $1,266,979.54 during the past year. The increase was primarily associated with the increased costs of electrical power and natural gas experienced in fiscal year 2005.
Under non-operating revenues (expenses) state appropriations increased by approximately $5,234,587.79. It appears that the economy is now on an upward trend and there were no budget cuts in fiscal year 2005.
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 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
Medical College of Georgia Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($87,493,374.50) 114,129,304.30 (12,940,970.73) (20,590,355.33)
(6,895,396.26) 55,353,345.05
$48,457,948.79

June 30, 2004
($89,284,239.76) 116,678,985.47
(8,872,907.16) (9,551,744.58) 8,970,093.97 46,383,251.08
$55,353,345.05

Capital Assets
The College had capital asset additions for buildings and building improvements in fiscal year 2005. Numerous projects were completed during the fiscal year totaling $2,509,529.20.
Medical College of Georgia also completed major renovations to the Interdisciplinary Research Center in FY2005. A total of $7,957,351.59 for this project was funded by the Georgia State Finance and Investment Commission (GSFIC). Other on-going projects funded by the GSFIC included $23,448,672.45. Projected funding by GSFIC for FY2006 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.
Long Term Debt
Medical College of Georgia had a Long-Term Debt of $29,267,524.98 of which $15,874,973.06 was reflected as current liability at June 30, 2005.
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, Medical College of Georgia has included the financial statements and notes for all required component units for fiscal year 2005. Medical College of Georgia is reporting the activity for Medical College of Georgia Foundation, Inc., Medical College of Georgia Physicians Practice Group Foundation, Medical College of Georgia

Medical College of Georgia Annual Financial Report FY 2005 6

Research Institute, Medical College of Georgia Dental Foundation, and MCG Health, Inc. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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. Daniel W. Rahn, M.D., President Medical College of Georgia
Medical College of Georgia Annual Financial Report FY 2005 7

Statement of Net Assets

MEDICAL COLLEG E OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Component Units

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment M argin A llocation Funds Receivables - Other Leas es Receivable Pledges Receivable Contributions Receivable Due From Component Units Due from Primary Government In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other As s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Other As s ets Leas es Receivable Contributions Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Due to Component Units Due to Primary Government Es timated Third-Party Payor Settlements Compens ated A bs ences (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

Primary Government

MCG Health, Inc.

Medical College of Georgia Foundation,
Inc.

$48,457,948.79
3,751,837.29 7,458,093.00 10,057,235.56
18,149,685.30 426,774.53
8,664,715.57
96,966,290.04
39,209,576.99 4,646,139.80
222,875,170.17 266,730,886.96 363,697,177.00

$78,276,837.00 8,184,573.00
137,059,859.58
201,173.42 5,753,058.00
831,804.00 230,307,305.00
15,013,190.00
60,267,711.00 75,280,901.00 305,588,206.00

$16,078,399.00 337,212.00
254,478.00
187,129.00 80,826.00
16,938,044.00
216,720.00 99,116,075.00
113,513.00 280,379.00 2,414,803.00 4,373,735.00 106,515,225.00 123,453,269.00

36,505,683.96 1,167,525.15
876,227.86
20,244,277.25 2,785,167.29 2,207,125.96 879,485.12 202,024.42
14,995,487.94
79,863,004.95
1,876,311.64
11,516,240.28
13,392,551.92 93,255,556.87
220,119,373.41
1,649,294.54 61,094,628.38
472,712.23 (12,894,388.43) $270,441,620.13

11,781,557.00
219,612.00
1,098,111.00 10,067,509.00 10,369,000.00
8,892,686.00 40,189,161.00 82,617,636.00
2,636,435.00
8,826,000.00 11,462,435.00 94,080,071.00
56,344,004.00 155,164,131.00
$211,508,135.00

6,451.79
2,035,942.00
22,809.21
2,065,203.00
0.00 2,065,203.00 4,373,735.00 94,091,271.00 16,328,492.00 6,594,568.00 $121,388,066.00

Medical College of Georgia Annual Financial Report FY 2005 8

Statement of Net Assets, continued

MEDICAL COLLEG E OF G EORG IA STATEMENT OF NET ASSETS June 30, 2005

Com pone nt Units

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment M argin A llocation Funds Receivables - Other Leas es Receivable Pledges Receivable Contributions Receivable Due From Component Units Due from Primary Government In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other A s s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Other A s s ets Leas es Receivable Contributions Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Due to Component Units Due to Primary Government Es timated Third-Party Payor Settlements Compens ated A bs ences (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n exp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

Medical College of Georgia Dental Foundation

Medical College of Georgia Res earch
Ins titute

$524,636.81 3,423,390.02

$4,611,024.00 3,513,180.00 707,360.00

Medical College of Georgia Phys icians
Practice Group Foundation
$21,757,598.00 25,344,147.00
28,957.00

608,936.87 4,556,963.70

8,831,564.00

0.00 4,556,963.70
419,217.00

28,198.00 28,198.00 8,859,762.00
27,219.00

4,137,746.70 4,556,963.70

68,075.00 4,710,329.00 4,805,623.00

851.00
180,803.00 47,312,356.00
16,423,575.00 2,386,565.00
24,759,477.00 43,569,617.00 90,881,973.00
1,569,463.00
745,493.00
2,936,485.00
5,251,441.00

0.00 4,556,963.70

0.00 4,805,623.00
28,198.00

$0.00

4,025,941.00 $4,054,139.00

33,840,614.00 33,840,614.00 39,092,055.00
5,094,483.00
46,695,435.00 $51,789,918.00

Medical College of Georgia Annual Financial Report FY 2005 9

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, 2005
Component Units

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties Auxiliary Enterprises Res idence Halls Bo o ks to re Food Services Parkin g / Tran s p o rtatio n Health Services Intercollegiate Athletics Other Organizations Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains/(Losses) Interes t and Dividend Income Rent and Other Income Other Operating Revenues Total Operating Revenues
EXP ENS ES Operating Expenses
Salaries : Fa c u lt y Staff
Be n e fit s Other Personal Services T ra v e l Scholarships and Fellows hips Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Medical College of Georgia
Total Operating Expenses Operating Income (loss)

Primary Government

MCG Health, Inc.

Medical College of Ge or g i a
Foundation, Inc.

$17,285,413.27 1,354,164.56

$0.00

$0.00 4,660,225.00

46,016,380.81 147,491,670.11 133,904,986.53
6,791,023.26 347,716.85
798,571.33 1,451,951.77
912,447.18 831,514.05
2,565,614.00

310,336,817.00

853,411.90 357,896,536.50

7,213,266.00 317,550,083.00

(13,125.00) 1,276,863.00 1,469,105.00
7,393,068.00

94,292,144.44 161,049,670.44 66,883,403.88
2,228,938.32 533,456.16
6,663,321.06 134,608,060.45 13,426,140.28
479,685,135.03 (121,788,598.53)

133,959,407.00
36,927,136.00 38,647,963.00
398,315.00
3,246,541.00 109,139,056.00 16,323,600.00
338,642,018.00 (21,091,935.00)

473,936.37 144,896.63 25,427.00 17,704.00
288,873.00 275,790.00 12,200,000.00 13,426,627.00 (6,033,559.00)

Medical College of Georgia Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued
MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005
Component Units

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interes t Expense (capital ass ets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es, gains , or los s Capital Grants and Gifts Federal State Other Additions to permanent endowments Total Other Revenues Increase in Net As sets
NET ASSETS Net As sets-beginning of year, as originally reported Prior Year Adjus tments Net As sets-beginning of year, restated Net As sets-End of Year

Primary Government

MCG Health, Inc.

Medical College of Georgia
Foundation, Inc.

111,638,934.99

31,761,251.00

64,363.00

4,980,518.00

7,434,317.12 802,897.24 996,952.57 (113,610.96)
239,763.29 121,063,617.25
(724,981.28)

2,473,304.00
(7,458,093.00) (778,736.00)
30,978,244.00 9,886,309.00

7,299,401.00
9,941.00 7,309,342.00 1,275,783.00

29,631.40 31,486,789.84
65,101.45
31,581,522.69 30,856,541.41

0.00 9,886,309.00

3,753,476.00 3,753,476.00 5,029,259.00

228,533,410.80 11,051,667.92 239,585,078.72 $270,441,620.13

201,621,826.00
201,621,826.00 $211,508,135.00

116,358,807.00
116,358,807.00 $121,388,066.00

Medical College of Georgia Annual Financial Report FY 2005 11

Statement of Revenues, Expenses and Changes in Net Assets, Continued

MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per s pending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks to re Food Services Parkin g /Tran s p o rtatio n Health Services Intercollegiate Athletics Other Organizations Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains/(Losses) Interest and Dividend Income Rent and Other Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salarie s : Faculty Staff
Benefits Other Pers onal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Medical College of Georgia
Total Operating Expenses Operating Income (los s)

Component Units

Medical College of Georgia Dental
Foundation

Medical College of Georgia Research
Ins titute

Medical College of Georgia Physicians
Practice Group Foundation

$0.00

$0.00
75,122.00
41,377,823.00 7,416,498.00
112,400.00

$0.00 86,004,557.00

4,175,027.00

4,175,027.00

47,966.00 49,029,809.00

318,792.90 143,051.05
8,433.77 1,994,682.53
22,484.38
1,767,666.32
4,255,110.95 (80,083.95)

23,493.00
436,555.00 478.00
47,876,901.00 48,337,427.00
692,382.00

86,004,557.00
9,348,857.00 13,948,592.00
1,391,125.00 268,450.00 47,366.00
8,805,272.00 663,957.00
55,537,118.00 90,010,737.00 (4,006,180.00)

Medical College of Georgia Annual Financial Report FY 2005 12

Statement of Revenues, Expenses and Changes in Net Assets, Continued
MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

Component Units

Medical College of Georgia Dental
Foundation

Medical College of Georgia Research
Ins titute

Medical College of Georgia Physicians
Practice Group Foundation

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 los s Capital Grants and Gifts Federal State Other Additions to permanent endowments Total Other Revenues Increase in Net Assets
NET ASSETS Net Ass ets-beginning of year, as originally reported Prior Year Adjustments Net Ass ets-beginning of year, restated Net Ass ets-End of Year

80,083.95

80,083.95 (0.00)

0.00 692,382.00

2,976,725.00 (826,783.00)
110,280.00 2,260,222.00 (1,745,958.00)

0.00 (0.00)
0.00
0.00 ($0.00)

0.00 692,382.00
3,361,757.00
3,361,757.00 $4,054,139.00

0.00 (1,745,958.00)
53,535,876.00
53,535,876.00 $51,789,918.00

Medical College of Georgia Annual Financial Report FY 2005 13

Statement of Cash Flows
MEDICAL COLLEG E OF G EORG IA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Other Nonoperating Receipts Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$16,435,460.71
335,331,195.99 6,942,703.99
(201,702,953.86) (251,569,786.44)
(533,456.16) (1,178,801.75) 1,427,964.30
765,533.84 1,451,255.77
912,447.18 779,783.01
2,595,057.80 850,221.12
(87,493,374.50)
111,638,934.99 1,146,884.95 843,484.36 500,000.00
114,129,304.30
398,928.69 (11,868,407.41)
(1,357,881.05) (113,610.96)
(12,940,970.73)
1,176,820.80 (21,767,176.13) (20,590,355.33) (6,895,396.26) 55,353,345.05 $48,457,948.79

Medical College of Georgia Annual Financial Report FY 2005 14

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($121,788,598.53)
13,426,140.28 7,573,005.41 22,065.24 70,027.04 7,232,568.07 843,280.05 1,644,290.81 3,483,847.13
($87,493,374.50)
$104,350.57 ($179,868.23) ($31,581,522.69)

Medical College of Georgia Annual Financial Report FY 2005 15

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, 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 2005 16

See Note 16. 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 2005 17

Restatement of Prior Year Net Assets Beginning Of Year Margin allocation funds due from component units as of June 30, 2004, were reported as revenue by the College in the current fiscal period. A prior period adjustment in the amount of $11,051,667.92 was made to increase net assets July 1, 2004, for margin allocation funds earned in fiscal year 2004.
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 Statement 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. No provision has been made for uncollectible accounts.
Inventories Consumable supplies 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 first-in, first-out 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 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
Medical College of Georgia Annual Financial Report FY 2005 18

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 complete. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $31,486,789.84 to Medical College of Georgia.
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 $23,027,881.09 as of 7-1-2004. For FY2005, $18,357,293.84 was earned in compensated absences and employees were paid $14,873,446.71, for a net increase of $3,483,847.13. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 26,511,728.22.
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 previously in Note 1 Capital Assets section.
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
Medical College of Georgia Annual Financial Report FY 2005 19

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:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005
$48,123,744.60 6,010,244.39 1,588,509.80
5,372,129.59 $61,094,628.38

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 $472,712.23 in Restricted Net Assets-Capital Projects. These funds are on deposit with GSFIC and will be used for the construction of the Health Sciences Building and the Cancer Research Center, which will be capitalized when completed. Expected date of completion is 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.

Medical College of Georgia Annual Financial Report FY 2005 20

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005
$2,832,480.33 9,227,051.22 56,223.44
(25,010,143.42) ($12,894,388.43)

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.

Medical College of Georgia Annual Financial Report FY 2005 21

Note 2. Deposits and Investments
Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $47,257,079.44 of the College's deposits were uninsured and collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.
Medical College of Georgia Annual Financial Report FY 2005 22

Investments
Medical College of Georgia maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The College's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Bond Mutual Fund Repurchase Agreements
Other Investments Alternative Investments Equity Mutual Funds
Investment Pools Board of Regents
Total Return Fund Office of Treasury and Fiscal Services
Georgia Fund 1
Total Investments

Fair Value
$785,248.00 9,103,687.11 12,005,557.21 $278,000.00
22,172,492.32
1,734,129.25 8,158,249.45
7,022,571.25 1,307,461.07
$40,394,903.34

Investment Maturity

Less Than

1-5

1 Year

Years

$0.00 5,405,400.12
278,000.00

$785,248.00 3,698,286.99 12,005,557.21

$5,683,400.12

$16,489,092.20

The College does not have a formal policy addressing variable-rate securities. The College relies upon the judgment of its Investment Managers and the policies of the investment vehicles related to Medical College of Georgia's investment assets.
The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html
Medical College of Georgia Annual Financial Report FY 2005 23

The Weighted Average Maturity of the Total Return Fund is 4.4 years. Of the College's total investment of $7,022,571.25 in the Total Return Fund, $1,955,756.16 is invested in debt securities.
The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 24 days.
The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The College's Investment Policy and Guidelines manages interest rate risk by recognizing that short-term loss of principal may be necessary in order to achieve long-term safety and growth of principal; and that in order to maximize income from debt instruments with maturities longer than sixty days, market values may be exposed to shortterm price volatility.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the college/university will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The College does not have a formal policy for managing custodial credit risk for investments. Investment Managers are held accountable for custodial safety. The College's Investment Policy and Guidelines require that Managers be registered in good standing as investment advisors; and will be experienced with proven track records.
At June 30, 2005, $22,172,492.32 of the College's applicable investments were uninsured and held by the investment's counterparty's trust department or agent, but not in the College's name.
Medical College of Georgia Annual Financial Report FY 2005 24

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The College's Investment Policy and Guidelines for managing credit quality risk require that debt instruments have quality ratings no lower than BAA.

Rated Debt Inves tments U. S. A gencies Bond Mutual Fund Repurchas e Agreements - Underlying: U. S. Agency Securities
Totals by Ratings

Fair Value $9,103,687.11 12,005,557.21
278,000.00
$21,387,244.32

AAA $1,359,128.60
278,000.00 $1,637,128.60

Quality Ratings A1
$2,310,443.50
$2,310,443.50

Unrated $5,434,115.01 12,005,557.21
$17,439,672.22

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The College's Investment Policy and Guidelines for managing concentration of credit risk requires that stocks and debt issues be diversified. The College also relies upon the concentration of credit risk policy of the individual investment vehicles related to Medical College of Georgia's investment assets.
Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The College does not have a formal policy for managing exposure to foreign currency risk.

Medical College of Georgia Annual Financial Report FY 2005 25

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment M argin A llocation Funds Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$32,876.79 69,675.40
3,751,837.29
7,458,093.00 9,954,683.37 21,267,165.85
$21,267,165.85

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $350,539.08
76,235.45 $426,774.53

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005, no provision had been made for uncollectible loans.

Medical College of Georgia Annual Financial Report FY 2005 26

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$8,998,281.93 2,262,912.42 11,261,194.35

Additions
$0.00 28,983,435.66 28,983,435.66

Reductions
$0.00 2,509,529.20 2,509,529.20

221,755,661.34 2,339,679.00 53,139,283.04 4,783,845.50 14,088,617.10
296,107,085.98

32,046,692.20
6,384,241.81 104,350.57
1,195,454.00
39,730,738.58

2,658,586.89 543,060.27 226,530.72
3,428,177.88

91,585,281.48 1,339,511.39 33,363,129.05
906,840.53 9,417,687.07
136,612,449.52
159,494,636.46
$170,755,830.81

6,284,505.03 88,748.22
5,381,097.33 875,122.70 796,667.00
13,426,140.28
26,304,598.30
$55,288,033.96

2,317,175.90 225,305.86 226,530.72
2,769,012.48
659,165.40
$3,168,694.60

Ending Balance 6/30/2005
$8,998,281.93 28,736,818.88 37,735,100.81
0.00 253,802,353.54
2,339,679.00 56,864,937.96 4,345,135.80 15,057,540.38
0.00 332,409,646.68
0.00 97,869,786.51 1,428,259.61 36,427,050.48 1,556,657.37 9,987,823.35
0.00 147,269,577.32
185,140,069.36
$222,875,170.17

Medical College of Georgia Annual Financial Report FY 2005 27

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005
$3,993,443.21 10,514,688.81 5,736,145.23
$20,244,277.25

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$4,009,327.24

Additions $104,350.57

Reductions

Ending Balance June 30, 2005

$1,357,881.05

$2,755,796.76

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

23,027,881.09 23,027,881.09
$27,037,208.33

18,357,293.84 18,357,293.84
$18,461,644.41

14,873,446.71 14,873,446.71
$16,231,327.76

0.00 26,511,728.22 26,511,728.22
$29,267,524.98

Current Portion
$879,485.12
14,995,487.94 14,995,487.94 $15,874,973.06

Note 9. Significant Commitments
The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,655,351.35 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Medical College of Georgia is obligated under various operating leases for the use of equipment and also is obligated under capital leases and installment purchase agreements for the acquisition of equipment.
CAPITAL LEASES
Capital leases are generally payable in monthly installments and have terms expiring in various years between 2005 and 2009. Expenditures for fiscal year 2005 were $1,471,492.01 of which
Medical College of Georgia Annual Financial Report FY 2005 28

$113,610.96 represented interest. Total principal paid on capital leases was $1,357,881.05 for the fiscal year ended June 30, 2005. Interest rates range from 2.87 percent to 34.93 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Equipment

$2,788,478.43

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, 2005 in the amount of $2,755,796.76.
OPERATING LEASES
Medical College of Georgia's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 and 2007. 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 in fiscal year 2005 were $8,208.00 for real property.

Medical College of Georgia Annual Financial Report FY 2005 29

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$972,097.39 870,058.22 808,048.16 280,983.40

$8,208.00 1,644.00

2,931,187.17 175,390.41 0.00
$2,755,796.76

$9,852.00

Medical College of Georgia Annual Financial Report FY 2005 30

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$12,643,828.09 $12,164,375.94 $11,850,917.51

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

Medical College of Georgia Annual Financial Report FY 2005 31

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, 2005, for employees covered by ERS was $279,178.49. The College's total payroll for all employees was $251,838,980.94.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the College amount to 10.62% 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 2005 amounted to $33,844.26, of which $29,640.27 was made by the College and $4,203.99 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, 2005, financial report, which may be obtained through ERS.
Medical College of Georgia Annual Financial Report FY 2005 32

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $6,898,829.63 (9.65%) and $3,601,943.75 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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
Medical College of Georgia Annual Financial Report FY 2005 33

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 2005 amounted to $293,796.29 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
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 Bryan, Pendleton, Swats and McAllister. 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 2005 34

Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for Fiscal Year 2005 was as follows:

Total

Annual Required Contribution

$12,591,344.00

Interest on Net Pension Obligation

(699,833.69)

Adjustments on Annual Required Contribution 1,057,096.33

MCG $6,795,548.36 (638,860.45)
964,996.47

Other Units $5,795,795.64
(60,973.24) 92,099.86

Annual Pension Cost

$12,948,606.64 $7,121,684.38 $5,826,922.26

Contribution Made

$12,591,344.00 $6,795,548.36 $5,795,795.64

Increase (Decrease) in Net Pension Obligation $357,262.64 $326,136.02 $31,126.62 Net Pension Obligation Beginning of Year (9,331,115.89) (8,518,139.36) (812,976.53)

Net Pension Obligation End of Year

$(8,973,853.25) $(8,192,003.34) $(781,849.91)

Three-Year Trend Information

FY 2005

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year

Total

MCG

Other Units

$12,948,606.64 $7,121,684.38 $5,826,922.26

97.24%

95.42%

99.47%

$(8,973,853.25) $(8,192,003.34) $(781,849.90)

FY 2004

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation

Total

MCG

Other Units

$15,762,607.99 $8,703,107.02 $7,059,500.97

100.54%

98.97%

102.49%

$(9,331,115.89) $(8,518,139.36) $(812,976.53)

FY 2003

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation

Total

MCG

Other Units

$15,723,093.77 $8,676,620.11 $7,046,473.66

97.63%

93.53%

102.68%

$(9,245,376.60) $(8,608,016.38) $(637,360.22)

The annual required contribution for the current year was determined as part of the September 22, 2004 actuarial valuation using the Entry Age Actuarial cost method. Effective January 1, 2004, the remaining amortization period was extended 4 years to 15 years utilizing the Level Dollar, Closed method. The actuarial value of assets recognizes a portion of the difference between the market value of assets and the expected actuarial value of assets, based on the assumed interest rate of return. The amount recognized each year is 20% of the difference

Medical College of Georgia Annual Financial Report FY 2005 35

between market value and expected actuarial 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 12. 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.
Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are
Medical College of Georgia Annual Financial Report FY 2005 36

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, 2005. Note 14. 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, 2005, there were 2,044 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Medical College of Georgia recognized as incurred $6,103,644.07 of expenditures, which was net of $2,252,058.17 of participant contributions.
Medical College of Georgia Annual Financial Report FY 2005 37

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$37,971,155.10 22,533,947.61 15,898,479.10
760,794.89 557,360.77 680,528.68 11,698,993.82 5,342,549.12

$9,853,967.30 12,647,901.33 4,717,046.20
499,279.53 4,807.97 39,845.52
13,273,836.00 590,959.21

$39,146,404.29 32,131,188.81 12,169,508.29
373,593.46 12,832.73 194,992.77
6,310,044.00 1,290,069.69

$1,903,490.16 8,193,421.44 4,744,118.25
98,601.92 23,635.58 163,548.49 1,328,864.00 1,098,181.51

$0.00 1,181,001.63 275,774.99
23,941.36 2,413.16
18,993.48 537,361.68 39,231.79

$49,953.46 15,404,962.98 10,233,257.73
218,000.34 144,201.78 153,088.10 8,906,363.35 4,703,610.20

Total Expenses

$95,443,809.09

$41,627,643.06

$91,628,634.04

$17,553,861.35

$2,078,718.09

$39,813,437.94

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Scholarships & Fellowships

Functional Classification FY2005

Auxiliary Enterprises

Unallocated Expenses

MCG only Patient Care

$0.00 3,954,351.92 1,089,387.12

$0.00

$99,617.80 1,995,474.72
616,660.04

$0.00

$5,267,556.33 63,007,420.00
17,139,172.16

11,049.90
5,069,364.50 3,172,716.95
211,005.43

(213,695.56)

13,727.94 1,899.73 70,803.43 3,108,052.88 150,533.33

229,948.98
272,156.09 86,271,827.77

$13,507,875.82

($213,695.56)

$6,056,769.87

$0.00

$172,188,081.33

Total Expenses
$94,292,144.44 161,049,670.44 66,883,403.88
0.00 2,228,938.32
533,456.16 6,663,321.06 134,608,060.45 13,426,140.28
$479,685,135.03

Medical College of Georgia Annual Financial Report FY 2005 38

Note 16. Component Units
Medical College of Georgia Foundation, Inc. Medical College of Georgia Foundation, Inc. (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 Foundation functions as an independent corporation governed by its articles of incorporation, by-laws and its Board of Directors. 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 Statements for Not-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 July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $12.2 million to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation office at 919 15th Street, Augusta, GA 30912 or from the Foundation's website at www.mcgfoundation.org.
The Foundation's investments are comprised of the following amounts at June 30, 2005:

Properties held for investment Equities Mutual funds and other equities Bonds Short-term investments

Cost $1,117,212 15,680,723 43,472,657 16,877,870 10,637,930

Fair Value $1,117,212 21,942,874 48,966,127 16,789,142 10,637,932

Total investments

$87,786,392

$99,453,287

Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The Foundation receives and manages funds and property 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 the College for staff support. Resources of the Foundation are used for research and

Medical College of Georgia Annual Financial Report FY 2005 39

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 to be 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is from March 1, 2004 through February 28, 2005. Because the Foundation's year end differs from that of the College, amounts due to or due from the two entities are not consistent in this report.

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.

The Foundation's investments are comprised of the following amounts at June 30, 2005:

Certificates of deposit U.S. Treasury obligations Annuities Index fund Cash management fund Domestic equities

Cost $1,853,000
753,926 200,000 300,000
12,153 291,564

Fair Value $1,819,675 739,963 230,845 284,700 12,153 336,054

Total investments

$3,410,643

$3,423,390

Medical College of Georgia Research Institute Medical College of Georgia Research Institute, Inc. (Institute) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The Institute was established in 1980 to contribute to the educational, research and service functions of the College in obtaining contracts from individuals, industrial or other private organizations, government or other public agencies for the performance of sponsored research, development or other programs by the various departments or other 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.
Prior to the year ended June 30, 2005, the Institute followed accounting principles generally accepted in the United States of America as applicable to not-for-profit organizations. During

Medical College of Georgia Annual Financial Report FY 2005 40

the year ended June 30, 2005, the Institute adopted accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The Institute adopted this change in accounting principles in order to be consistent with the accounting principles followed by its primary government, Medical College of Georgia. The information for the year ended June 30, 2005 has been presented in a manner consistent with the newly adopted accounting principles. The change in accounting principles had no effect on beginning net assets or the change in net assets. The Institute's fiscal year is July 1 through June 30.
During the year ended June 2005, the Institute sub-contracted approximately $46 million of research projects to the College. Complete financial statements for the Institute can be obtained from the Medical College of Georgia's Office of Grants and Contracts at Medical College of Georgia, Augusta, GA 30912.
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 PPG 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 Medical College of Georgia Hospital and Clinics, which is operated by MCG 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. Georgia Esoteric and Molecular Labs, LLC was formed in 2004 by PPG to operate a specialized pathology laboratory with genetic or molecular testing capabilities. MCG-PPG Cancer Research Center, LLC was formed in 2004 by PPG to construct, own and operate a portion of a building to house a cancer research center on the campus of MCG. PPG is the sole partner and has sole voting control of each LLC. Because the PPG'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 PPG'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 the 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. Other adjustments required under accounting principles generally accepted in the United States 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
Medical College of Georgia Annual Financial Report FY 2005 41

share of the investee's income and losses with the income or losses included in a statement of activities. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The PPG's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the PPG distributed $55.5 million to the College for salaries and departmental support. Complete financial statements for the PPG can be obtained from the Administrative Office at 1499 Walton Way, Suite 1400, Augusta, Georgia 30901.
The PPG's investments are comprised of the following amounts at June 30, 2005:

U. S. Treasury bonds and notes Corporate bonds and notes Common stocks Federal Home Loan Bank Mortgage-backed securities Mutual funds

Cost $9,257,215 8,582,299 9,112,713
226,364 2,164,472 9,580,046

Fair Value $9,268,123 8,697,780 11,419,965 227,622 2,176,520 9,977,712

Total investments

$38,923,109 $41,767,722.00

MCG Health, Inc. MCG Health, Inc. (Company) is a legally, separate tax-exempt component unit of Medical College of Georgia (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 (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 issues 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.

At June 30, 2005, MCG Health, Inc.'s cash deposits totaled $78,276,837. Of that amount, $100,000 was insured by the FDIC and $78,176,837 was uninsured, uncollateralized, or collateralized by securities held by the pledging institution or by its trust department or agent in other than the Company's name.

Medical College of Georgia Annual Financial Report FY 2005 42

At June 30, 2005, MCH Health, Inc. maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.

The Company's investments as of June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Certificate of Deposit Accrued Interest and Dividends Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$0.00 20,405,831.00 1,147,969.00 21,553,800.00
118,243.00 76,651.00
$21,748,694.00

Less Than 1 Year
$0.00 7,737,025.00
252,655.00
$7,989,680.00

Investment Maturity

1-5

6 - 10

Years

Years

$0.00 12,668,806.00
895,314.00

$0.00

$13,564,120.00

$0.00

More than 10 Years
$0.00
$0.00

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. MCG Health, Inc. does not have a formal policy for managing interest rate risk.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Company will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Company does not have a formal policy for managing custodial credit risk for investments.

Medical College of Georgia Annual Financial Report FY 2005 43

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Company's policy for managing credit quality risk is as follows: The Company's assets may be invested only in investment grade bonds rated AA (or equivalent) or better. The Company's assets may be invested only in commercial paper rated A1 (or equivalent) or better. Fixed income maturity restrictions are as follows: Maximum maturity for any single security is five years, and weighted average portfolio maturity may not exceed 3 years. Securities comprising money market funds must be rated investment grade by Standard and Poors and/or Moody's.

Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value $20,405,831.00 1,147,969.00

AAA $0.00
447,465.00

$21,553,800.00

$447,465.00

Quality Ratings

AA

A

$0.00

$0.00

603,104.00

97,400.00

$603,104.00

$97,400.00

Unrated $20,405,831.00
$20,405,831.00

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Company limits investments in any single equity security and any single government agency to 10% and 30%, respectively, of its investment portfolio. Individual U.S. Treasury securities may represent up to 30% of the total investment portfolio, while the total allocation to U.S. Treasury notes and bonds may represent up to 100% of the Company's aggregate bond position.
Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Company does not have a policy for managing exposure to foreign currency risk.

Medical College of Georgia Annual Financial Report FY 2005 44

Long-Term Liabilities MCG Health, Inc. is the lessee of certain equipment under noncancellable leases expiring in various years through 2010. Interest rates range from 4.24% to 6.98%. Professional liability is the self-insured portion of professional liability risks. Accrued professional liability costs are determined actuarially.
Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Leases Lease Obligations Other Liabilities Professional Liabilities
Total Long Term Debt

Beginning Balance July 1, 2004
$2,094,713.00
6,328,000.00
$8,422,713.00

Additions $2,590,619.00 2,852,105.00 $5,442,724.00

Reductions $950,786.00 354,105.00 $1,304,891.00

Ending Balance June 30, 2005
$3,734,546.00
8,826,000.00
$12,560,546.00

Amounts due within
One Year $1,098,111.00
$1,098,111.00

Annual debt service requirements to maturity for capital leases are as follows:

Lease Obligations

Principal

Interest

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

$1,098,111.08 1,129,552.09 679,686.07 541,764.31 285,432.45

$196,325.02 128,808.27 71,996.92 36,961.61 6,398.21

$3,734,546.00

$440,490.03

Total
$1,294,436.10 1,258,360.36 751,682.99 578,725.92 291,830.66
$4,175,036.03

Medical College of Georgia Annual Financial Report FY 2005 45

MIDDLE GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2005

Middle Georgia College Cochran, Georgia

Richard J. Federinko
President

Lynn E. Hobbs
Vice President for Fiscal Affairs

MIDDLE GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 9 Statement of Revenues, Expenses, and Changes in Net Assets......................................... 10 Statement of Cash Flows ................................................................................................... 12 Note 1 Summary of Significant Accounting Policies ...................................................... 14 Note 2 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 Significant Commitments.................................................................25 Note 10 Lease Obligations................................................................................................ 25 Note 11 Retirement Plans ................................................................................................. 27 Note 12 Risk Management................................................................................................ 28 Note 13 Contingencies...................................................................................................... 29 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 30 Note 15 Natural Classifications With Functional Classifications..................................... 31 Note 16 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 50 majors and concentrations, with popular programs including business administration, education, nursing, engineering, and Georgia Academy of Mathematics, Engineering, and Science. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

133

2,627

135

2,517

126

2,214

Overview of the Financial Statements and Financial Analysis

Middle Georgia College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts

June 30, 2005
$4,624,212.30 28,316,387.46
1,106,616.91 34,047,216.67

June 30, 2004
$4,101,134.51 27,148,775.91
1,171,160.56 32,421,070.98

Liabilitie s: Current Liabilities Noncurrent Liabilities

2,587,183.57 324,330.33

2,109,682.80 256,729.09

Total Liabilitie s

2,911,513.90

2,366,411.89

Ne t Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Un rest rict ed Total Ne t Asse ts

28,308,464.24 31,698.12
1,169,668.62
1,625,871.79 $31,135,702.77

27,148,775.91 627,028.03 202,770.34
2,076,084.81 $30,054,659.09

The total assets of the institution increased by $1,626,145.69. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,167,611.55 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 $545,102.01. The primary cause for the increase was in current liabilities, primarily $720,901.57 in deferred revenue. Deferred revenue increased mainly as a result of $604,229.52 received from the College's food services contractor which will be used to cover improvements to the College's dining facilities. The increase in deferred revenue was partially offset by a $254,820.68 decrease in accounts payable. The combination of the increase in total assets of $1,626,145.69 and the increase in total liabilities of $545,102.01

Middle Georgia College Annual Financial Report FY 2005 2

yields an increase in total net assets of $1,081,043.68. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $1,159,688.33.

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, 2005

June 30, 2004

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

$10,683,023.87 22,537,237.45 (11,854,213.58) 9,875,407.23
(1,978,806.35) 3,059,850.03 1,081,043.68 30,054,659.09 30,054,659.09 $31,135,702.77

$9,646,277.14 20,956,234.95 (11,309,957.81) 11,175,127.07
(134,830.74) 10,081,031.30
9,946,200.56 20,108,458.53 20,108,458.53 $30,054,659.09

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$2,173,788.46
3,323,871.30 78,783.24
5,033,328.90 73,251.97
10,683,023.87
10,083,842.47 269,525.27 609,227.98 38,464.25
(1,124,817.19) 9,876,242.78
3,059,850.03
3,059,850.03
$23,619,116.68

June 30, 2004
$2,052,017.98 3,085,390.74 140,020.43 4,319,699.31 49,148.68 9,646,277.14
10,511,874.96 209,341.99 956,244.12 124,105.12 20,734.64
11,822,300.83
10,081,031.30
10,081,031.30 $31,549,609.27

Middle Georgia College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses
Nonoperating Expenses Other Nonoperating Expense
T otal Expenses

June 30, 2005
$5,228,420.82
14,646.00 1,734,247.81 1,945,982.98 2,115,466.23 3,225,765.62 3,286,407.94 4,986,300.05
22,537,237.45
835.55 $22,538,073.00

June 30, 2004
$5,361,779.11
73,967.76 1,536,561.20 1,896,582.02 2,260,637.43 2,717,714.49 3,052,550.89 4,056,442.05
20,956,234.95
647,173.76 $21,603,408.71

Total operating revenue increased by $1,036,746.73. The increase is mainly due to a $713,629.59 increase in auxiliary revenue and a $369,957.50 increase in student tuition and fees, net of allowance for doubtful accounts. Revenues associated with residence halls, bookstores, and food services all increased during the year. This increase, along with the increase in student tuition and fees, mainly resulted from increased enrollment.

Total operating expenses increased by $1,581,002.50. The increase is partially due to a $762,975.33 increase in supplies and other services. The compensation and employee benefits category increased by approximately $447,769.81. Additionally, depreciation increased by $355,363.01. Utilities decreased by approximately ($12,018.80) during the past year.

Under non-operating revenues (expenses) state appropriations decreased by approximately ($428,032.49). 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.

Included in other non-operating revenues (expenses) for the fiscal year ended June 30, 2005 is an impairment loss of $1,229,847.60 associated with damage due to a fire at Browning Residence Hall on March 16, 2005. The building was unoccupied at the time of the incident, and was being renovated for Fall Semester 2005 occupancy. The renovation is a project funded by the Georgia State Finance and Investment Commission (GSFIC). The impairment loss consists of the writeoff of construction-in-progress related to the Browning Hall renovation, less the value of stored materials. The College has not netted the impairment loss with an insurance recovery due to the amount, timing, and ultimate party responsible having not been determined as of June 30, 2005.

Middle Georgia College Annual Financial Report FY 2005 5

Piedmont Construction Group, LLC (PCG), construction contractor for the Browning Hall renovation, filed a claim with Great American for coverage on the new construction under their builder's risk insurance policy. On June 2, 2005 Great American filed for a Declaratory Judgment in the US District Court of North Georgia seeking a ruling as to whether they were responsible for the claim. They named BB&T Insurance Services and PCG as the defendants based on the reporting of projects. BB&T and PCG have both filed answers disputing the applicability of a Declaratory Judgment as well as asserting Great American is responsible for the payment of the claim. Additionally, PCG has filed a cross claim against BB&T asserting the claim should be paid by BB&T if Great American will not pay.
Department of Administrative Services (DOAS) made a claim with CNA, PCG's general liability carrier, for the balance of the damage to the facility. CNA in a letter to DOAS referred the claim to the liability carrier for the plumber, Allen Brothers Electric and Plumbing. Allen Brothers Electric and Plumbing was a subcontractor hired for the renovation. Their insurance carrier is Central Insurance Companies.
The damage to Browning Hall presents the college with a setback in its efforts to meet growing demands for student housing. The college is proceeding with the renovation of Browning Hall with the remaining allotment at GSFIC for this project. The renovation is scheduled for completion Fall Semester 2006.
The Middle Georgia College Real Estate Foundation, LLC was formed on July 1, 2005 to assist the College in meeting its demand for student housing. The College anticipates the Board of Regents entering a ground lease and rental agreement with the LLC during its development of student housing. The project is scheduled to seek Board or Regents approval in October 2005.
Statement of Cash Flows
The final statement presented by 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 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.
Middle Georgia College Annual Financial Report FY 2005 6

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capit al Financing Act ivit ies Capital and Relat ed Financing Activit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($10,057,416.66) 10,951,452.43 (605,649.98) 97,269.73 385,655.52 2,492,208.25
$2,877,863.77

June 30, 2004
($10,251,840.85) 10,916,735.42 (236,539.01) 4,215.46 432,571.02 2,059,637.23
$2,492,208.25

Capital Assets

The College had two significant capital asset additions for facilities in fiscal year 2005. The Talmadge Residence Hall renovation and the Dublin Center Annex building renovations were completed and placed into service in early fiscal year 2005. The Talmadge Hall renovation was a $3.9 million project, and the Dublin Center Annex renovation was a $2.0 million project. Both projects were funded by GSFIC. Talmadge was converted into a co-ed single occupancy residential hall with semi-private bathrooms. It includes 13,616 gross square feet, 47 dorm rooms, laundry facilities, an office and an apartment for the residential dorm director. Talmadge is the first residence hall on campus that requires a campus ID instead of a key to enter and exit the rooms inside the building. The renovation of the Dublin Center Annex converted a building donated by the Veterans Administration in a previous fiscal year into a classroom facility.

The campus loop project is currently in progress. This is a $16.3 million project funded by GSFIC that is currently scheduled for completion in January 2008.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt

Middle Georgia College had Long-Term Debt of $623,843.69 of which $299,513.36 was reflected as current liability at June 30, 2005.

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, Middle Georgia College has included the financial statements and notes for all required component units for FY2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Middle Georgia College Annual Financial Report FY 2005 7

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 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 2005 8

Statement of Net Assets

Mi ddl e Ge orgi a C ol l e ge S TATEMENT O F NET AS S ETS
June 30, 2005

AS S ETS C u rre n t As se ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Due from Component Unit s Due from P rimary Government Leases Receivable P ledges Receivable Invent ories P repaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s

Mi ddl e Ge orgi a C ol l e ge
$2,877,863.77
262,407.31 637,447.52
5,750.00
386,187.46 387,086.43
67,469.81 4,624,212.30

Non cu rre n t Asse ts Noncurrent Cash Due from Component Unit s Due from P rimary Government Short T erm Invest ment s Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s
TO TAL AS S ETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Due t o Component Unit s Due t o P rimary Government Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi l i ti e s Due t o Component Unit s Due t o P rimary Government Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

955,651.34 150,965.57
28,316,387.46 29,423,004.37 34,047,216.67
363,891.63 70,363.23
144,409.35 1,581,535.61
974.26 126,496.13
5,538.93 293,974.43 2,587,183.57
2,384.29 321,946.04
324,330.33 2,911,513.90
28,308,464.24 31,698.12
1,169,668.62 1,625,871.79 $31,135,702.77

Mi ddl e Ge orgi a C ol l e ge
Fou n dati on $145,026.00 181,708.00
1,209.00
327,943.00
118,292.00 639,374.00
63,150.00 820,816.00 1,148,759.00
5,750.00 5,750.00
0.00 5,750.00 63,150.00 723,094.00 320,406.00 1,524.00 34,835.00 $1,143,009.00

Middle Georgia College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets

MIDDLE GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES

Middle Georgia College

Middle Georgia College
Foundation

Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to or on behalf of Middle Georgia College
T otal Operating Expenses Operating Income (loss)

$4,220,414.94 2,046,626.48
3,323,871.30
78,783.24 916.00
1,444,027.81 1,426,485.50 1,599,581.02
42,737.32 339,141.47 181,355.78
72,335.97 10,683,023.87
4,262,107.56 4,909,142.04 2,578,551.00
(482.80) 88,347.52 1,398,501.56 957,959.12 6,965,383.49 1,377,727.96
22,537,237.45 (11,854,213.58)

$0.00 150,912.00
41,714.00
192,626.00
10,902.00 96,238.00 107,140.00 85,486.00

Middle Georgia College Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets, Continued

MIDDLE GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET ASS ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

Middle Georgia College
10,083,842.47

Middle Georgia College
Foundation

101,175.61 168,349.66 609,227.98
38,464.25 (835.55)
(1,124,817.19) 9,875,407.23 (1,978,806.35)

0.00 85,486.00

3,059,850.03
3,059,850.03 1,081,043.68 30,054,659.09 30,054,659.09 $31,135,702.77

1,000.00 1,000.00 86,486.00
1,056,523.00
1,056,523.00 $1,143,009.00

Middle Georgia College Annual Financial Report FY 2005 11

Statement of Cash Flows

MIDDLE G EO RGIA C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005

C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$4,237,043.41
3,178,203.04 102,318.94
(10,974,679.01) (9,123,913.26) (3,445,128.04) (2,777.00) 20,863.51
1,502,122.01 1,395,572.34 2,251,559.51
39,652.04 368,375.88 261,862.77 131,507.20 (10,057,416.66)
10,083,842.47 (6,143.29)
873,753.25 10,951,452.43
(596,486.28) (8,328.15) (835.55)
(605,649.98)
152,410.15 (55,140.42) 97,269.73 385,655.52 2,492,208.25 $2,877,863.77

Middle Georgia College Annual Financial Report FY 2005 12

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
Dep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of invest m ent s recognized as a com ponent of int erest incom e Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($11,854,213.58)
1,377,727.96 67,445.10 (25,591.50) 4,172.69
(280,688.91) 612,752.28
974.26 40,005.04 ($10,057,416.66)
$113,945.90 ($3,059,850.03)

Middle Georgia College Annual Financial Report FY 2005 13

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Middle Georgia College is reporting the activity for the Middle Georgia College Foundation, Inc.
See Note 16. 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the
Middle Georgia College Annual Financial Report FY 2005 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 Statement 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 2005 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred additions to a previously capitalized project for the Wellness Center to Middle Georgia College in the amount of $315,655.38. Additionally, the College had current year additions of $1,714,668.82 relating to GSFIC minor projects (Talmadge Hall, Dublin Center Annex & Browning Hall renovations). The College capitalized an additional $985,258.83 to bring GSFIC projects previously capitalized at their appraised value up to the amount reflected on GSFIC's books for these projects (Walker Hall renovation & Dillard Science addition.) The college also capitalized $44,267.00 during FY '05 in connection with GSFIC MRR project for Russell Hall renovations.
Middle Georgia College Annual Financial Report FY 2005 16

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. Middle Georgia College had accrued liability for compensated absences in the amount of $578,346.41 as of 7-1-2004. For FY2005, $346,017.10 was earned in compensated absences and employees were paid $308,443.04, for a net increase of $37,574.06. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 615,920.47.
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 previously in Note 1 Capital Assets section.
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.
Middle Georgia College Annual Financial Report FY 2005 17

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:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005
$31,695.07 167,386.63
4,780.37 653,658.15 312,148.40 $1,169,668.62

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 Reserv e fo r E n cum bran ces Reserve for Invent ory Ot her Unrest rict ed T o t al U nrest rict ed Net Asset s

June 30, 2005
$ 8 7 1 ,4 8 2 .8 9 9 6 4 ,9 2 4 .7 7 9 ,8 8 5 .4 4 (2 2 5 ,4 2 1 .3 1 )
$ 1 ,6 2 0 ,8 7 1 .7 9

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.

Middle Georgia College Annual Financial Report FY 2005 18

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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Middle Georgia College Annual Financial Report FY 2005 19

Note 2. Deposits and Investments
A. Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $2,310,654.81 of the college's deposits were uninsured. Of these uninsured deposits, $2,225,642.00 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the college's name and $85,022.81 were uncollateralized.
B. Investments
Middle Georgia College maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of
Middle Georgia College Annual Financial Report FY 2005 20

Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The college's investments as of June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$0.00 74,684.00 59,755.00

Less Than 1 Year
$0.00

Investment Maturity

1-5

6 - 10

Years

Years

$0.00 59,793.00 29,473.00

$0.00 14,891.00 30,282.00

More than 10 Years
$0.00

134,439.00

0.00

89,266.00

45,173.00

0.00

94,484.00 583,802.84

691,666.10 142,925.50

$1,647,317.44

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The college does not have a formal policy for managing interest rate risk.

Middle Georgia College Annual Financial Report FY 2005 21

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the college will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The college does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2005, $612,325.84 of the college's applicable investments were uninsured and held by the investment's counterparty in the college's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The college policy for managing credit quality risk for investments for the college's short term funds is that only obligations issued or guaranteed by the U.S. Government or selected U.S. Government agencies are allowed. The college policy for managing credit quality risk for investments for the college's endowment pooled investments is that these funds will be invested with the Board of Regents investment pool or a similar pool with similar or less risk. The college policy for managing credit quality risk for investments for the college's Cook endowment investments is that the overall portfolio quality rating must be maintained at a level of at
least "A".

Rated Debt Investments U. S. Agencies Corporate Debt Money Market Mutual Fund Commercial Paper Repurchase Agreements - Underlying: U. S. Agency Securities Corporate Debt Municipal Bonds
Totals by Ratings

Fair Value $74,684.00 $59,755.00
$134,439.00

AAA $74,684.00 29,473.00
$104,157.00

Quality Ratings

AA

A

$0.00

$0.00

30,282.00

$30,282.00

$0.00

A1 $0.00

Unrated $0.00

$0.00

$0.00

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The college does not have a formal policy for managing concentration of credit risk.
The College has 12% of its investments in Coca-Cola stock with a fair value of $200,400. This stock is part of the Harris Endowment and it was donated to the College in 1966.

Middle Georgia College Annual Financial Report FY 2005 22

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$47,219.43 156,602.99 262,407.31
477,482.84 943,712.57
43,107.74
$900,604.83

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Other
T otal

June 30, 2005 $376,984.67 9,202.79 $386,187.46

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005.

Middle Georgia College Annual Financial Report FY 2005 23

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$1,974,301.48 5,304,168.19 7,278,469.67

Additions
$45,793.45 1,876,831.26 1,922,624.71

Reductions
$0.00 6,454,394.35 6,454,394.35

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

524,691.00 32,073,003.74 2,576,233.50 2,049,305.54
2,268,182.94
39,491,416.72

6,697,547.05
187,535.09 16,251.37 56,924.84
6,958,258.35

222,301.22 150,816.63 32,018.33 405,136.18

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

385,765.36 13,731,671.79 1,960,586.36 1,546,510.97
1,996,576.00
19,621,110.48

10,421.95 1,118,862.75
17,272.69 172,758.16
4,875.41 53,537.00
1,377,727.96

242,900.31 1,727.27
247,341.40
32,018.00
523,986.98

Total Capital Assets, Being Depreciated, Net

19,870,306.24

5,580,530.39

(118,850.80)

Capital Assets, net

$27,148,775.91

$7,503,155.10

$6,335,543.55

Ending Balance 6/30/2005
$2,020,094.93 726,605.10
2,746,700.03
524,691.00 38,548,249.57 2,576,233.50 2,086,024.00
16,251.37 2,293,089.45
46,044,538.89
396,187.31 14,607,634.23 1,976,131.78 1,471,927.73
4,875.41 2,018,095.00
20,474,851.46
25,569,687.43
$28,316,387.46

Middle Georgia College Annual Financial Report FY 2005 24

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $766,552.22 814,983.39
$1,581,535.61

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance
July 1, 2004
$0.00

Additions $13,213.58

Reductions

Ending Balance June 30, 2005

$5,290.36

$7,923.22

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

578,346.41 578,346.41

346,017.10 346,017.10

308,443.04 308,443.04

615,920.47 615,920.47

Total Long Term Obligations

$578,346.41

$359,230.68

$313,733.40

$623,843.69

Current Portion
$5,538.93
293,974.43 293,974.43 $299,513.36

Note 9. Significant Commitments
The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2005.
Note 10. Lease Obligations
Middle Georgia College is obligated under various operating leases for the use of office equipment, and also is obligated under a capital lease agreement for the acquisition of a vehicle.
CAPITAL LEASES
The Capital lease agreement is payable in monthly installments and expires in fiscal year 2007. Expenditures for fiscal year 2005 were $5,787.60 of which $497.24 represented interest. Total principal paid on capital leases was $5,290.36 for the fiscal year ended June 30, 2005. The interest rate was 4.60 percent. The carrying value of the vehicle held under capital lease at June 30, 2005 was $11,375.96. The capital lease contains a bargain purchase option of one dollar that is exercisable at the expiration of the lease term.

Middle Georgia College Annual Financial Report FY 2005 25

OPERATING LEASES
Middle Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2009. 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.
Future commitments for capital leases and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 t hrough 2015 2016 t hrough 2020 2021 t hrough 2025 2026 t hrough 2030 2031 t hrough 2035 2036 t hrough 2040 2041 t hrough 2045 T ot al m inim um lease paym ent s
Less: Int erest Less: Execut ory cost s (if paid) P rincipal Out st anding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Real P roperty

Capit al Leases

Operat ing Leases

$5,787.60 2,411.50

$21,604.00 14,374.00 9,714.00 6,864.00

8,199.10 275.88
$7,923.22

$52,556.00

Middle Georgia College Annual Financial Report FY 2005 26

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$644,234.60 $629,787.72 $628,566.40

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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

Middle Georgia College Annual Financial Report FY 2005 27

with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $125,430.32 (9.65%) and $64,989.93 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $26,034.11 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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
Middle Georgia College Annual Financial Report FY 2005 28

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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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
Middle Georgia College Annual Financial Report FY 2005 29

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, 2005. Note 14. 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, 2005, 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, 2005, Middle Georgia College recognized as incurred $390,918.36 of expenditures, which was net of $206,553.75 of participant contributions.
Middle Georgia College Annual Financial Report FY 2005 30

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$4,234,556.14 647,128.93
1,130,093.33
22,875.70 (2,046,626.48)
58,785.35 561,715.36 619,892.49

$0.00

$0.00

14,646.00

$29,704.42 827,911.84 256,083.33
19,420.23
9,153.61 489,978.38 101,996.00

$0.00 896,996.87 233,203.85
25,975.02 12,099.98 12,039.30 714,610.61 51,057.35

($2,153.00) 1,159,795.60
520,404.65
13,301.21 63,921.85 19,954.52 327,415.94 12,825.46

Total Expenses

$5,228,420.82

$0.00 $14,646.00 $1,734,247.81 $1,945,982.98 $2,115,466.23

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 990,818.87 335,847.85 (327,626.58)
3,137.76
851,819.99 1,344,192.62
27,575.11

$0.00 3,286,407.94

$0.00 386,489.93 102,917.99 327,143.78
3,637.60 82,698.27
6,206.35
3,512,824.58 564,381.55

$0.00

$3,225,765.62 $3,286,407.94 $4,986,300.05

$0.00

T ot al Expenses
$4,262,107.56 4,909,142.04 2,578,551.00 (482.80) 88,347.52 1,398,501.56 957,959.12 6,965,383.49 1,377,727.96
$22,537,237.45

Middle Georgia College Annual Financial Report FY 2005 31

Note 16. Component Units Middle Georgia College Foundation (Foundation) is a legally separate, tax-exempt component unit of Middle 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 fifty-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 Not-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 July 1 through June 30. During the year ended June 30, 2005, the Foundation distributed $96,238 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation at 1100 Second St., SE, Cochran, GA 31014. Investments for Component Units: Middle Georgia College Foundation holds endowment investments in the amount of $639,374. 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, in conjunction with the donors, has established a spending plan whereby 100% of the earnings is available for current and future expenditures, except where restricted by the donor.
Middle Georgia College Annual Financial Report FY 2005 32

FASB Note for Investments (for component units)

Middle Georgia College Foundation, Inc. Investments are comprised of the following amounts at June 30, 2005:

Cos t

Fair Value

Cash held by investment organization
Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$34,572.00 74,948.00 71,478.00
322,808.00 115,494.00

$34,572.00 74,685.00 71,882.00
345,223.00 113,012.00

Total Investments

$619,300.00

$639,374.00

Middle Georgia College Annual Financial Report FY 2005 33

NORTH GEORGIA COLLEGE & STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

North Georgia College & State University Dahlonega, Georgia

David Potter President

Frank J. (Mac) McConnell Vice President for Business & Finance

NORTH GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments.................................................................................... 17 Note 3 Accounts Receivable........................................................................................... 20 Note 4 Inventories........................................................................................................... 20 Note 5 Notes/Loans Receivable...................................................................................... 20 Note 6 Capital Assets...................................................................................................... 21 Note 7 Deferred Revenue................................................................................................ 22 Note 8 Long-Term Liabilities ......................................................................................... 22 Note 9 Significant Commitments................................................................22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 23 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 27 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28 Note 16 Component Units..........................................................................29

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 4,000 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

197

4,060

190

3,900

181

3,467

Overview of the Financial Statements and Financial Analysis

North Georgia College & State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 & State University Annual Financial Report FY 2005 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

As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts

June 30, 2005
$10,978,921.64 52,433,994.54 3,579,038.29 66,991,954.47

June 30, 2004
$11,091,868.19 46,266,626.53 3,694,843.88 61,053,338.60

Liabilitie s: Current Liabilities Noncurrent Liabilities

4,138,719.23 600,110.20

4,441,306.76 494,910.00

Total Liabilitie s

4,738,829.43

4,936,216.76

Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

52,433,994.54 620,692.26
3,395,200.06
5,803,238.18 $62,253,125.04

46,266,626.53 596,552.92
3,461,631.15
5,792,311.24 $56,117,121.84

The total assets of the institution increased by $5,938,615.87. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $6,167,368.01 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 ($197,387.33). The combination of the increase in total assets of $5,938,615.87 and the decrease in total liabilities of ($197,387.33) yields an increase in total net assets of $6,136,003.20. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $6,167,368.01.

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

North Georgia College & State University Annual Financial Report FY 2005 2

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, 2005

June 30, 2004

Operating Revenues

$24,438,814.35

$23,029,556.07

Operating Expenses Operating Loss

47,005,397.52 (22,566,583.17)

45,414,312.07 (22,384,756.00)

Nonoperating Revenues and Expenses

22,510,425.42

20,741,085.40

Income (Loss) Before other revenues, expenses, gains or losses

(56,157.75)

(1,643,670.60)

Other revenues, expenses, gains or losses

6,192,160.95

1,807,727.16

Increase in Net Assets

6,136,003.20

164,056.56

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

56,117,121.84 56,117,121.84

55,953,065.28 55,953,065.28

Net Assets at End of Year

$62,253,125.04

$56,117,121.84

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 & State University Annual Financial Report FY 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$11,124,969.34
1,981,509.25 536,538.91
10,297,415.39 498,381.46
24,438,814.35
19,887,999.51 1,523,597.46 890,216.80 176,013.77 32,597.88
22,510,425.42
6,183,953.95 8,207.00
6,192,160.95
$53,141,400.72

June 30, 2004
$9,834,044.83 2,034,381.38 345,922.75 9,835,235.56 979,971.55
23,029,556.07
18,899,966.64 1,645,064.61 220,127.69 (24,073.54)
20,741,085.40
1,807,727.16 1,807,727.16 $45,578,368.63

North Georgia College & State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$19,915,428.22
3,512,188.38 3,104,016.27 4,417,070.96 4,971,900.01
964,822.71 10,119,970.97
47,005,397.52

June 30, 2004
$18,777,450.81
3,470,276.95 3,020,785.25 4,438,095.46 5,263,687.25 1,028,802.35 9,415,214.00
45,414,312.07

Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

$47,005,397.52

$45,414,312.07

Nongovernmental grants and contracts decreased in the amount of approximately ($51,196.15). The compensation and employee benefits category increased by approximately $979,416.55. This is primarily due to the two percent salary increases. Utilities increased by approximately $207,796.46 during the past year. The increase was primarily associated with the increased natural gas and electrical power.

Under non-operating revenues (expenses) state appropriations increased by approximately $988,032.87.

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 & State University Annual Financial Report FY 2005 5

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($20,737,164.15) 21,557,249.44 (2,225,994.73) 244,765.37 (1,161,144.07) 9,322,248.53
$8,161,104.46

June 30, 2004
($19,531,275.23) 20,719,961.04 (767,868.53) 140,461.52 561,278.80 8,760,969.73
$9,322,248.53

Capital Assets

The University converted the Plant Operations building to the Military Leadership Center and constructed a new Plant Operations and Materials Management building.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long-Term Debt

North Georgia College and State University had a total long-term debt of $1,236,746.31 of which $636,654.11 was reflected as current liability at June 30, 2005.

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, North Georgia College & State University has included the financial statements and notes for all required component units for FY2005.

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.

David Potter, President North Georgia College & State University

North Georgia College & State University Annual Financial Report FY 2005 6

Statement of Net Assets

NO RTH GEO RGIA C O LLEGE & S TATE UNIVERS ITY S TATEMENT O F NET AS S ETS June 30, 2005

North Ge orgi a College & State
Un i ve rsi ty

AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Leases Receivable P ledges Receivable Invent ories P repaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s

$7,193,200.52 49,078.65 63,641.29
1,675,309.03
1,177,813.52 819,878.63
10,978,921.64

Noncurre nt Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s
TO TAL AS S ETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Noncu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS SETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

967,903.94 1,539,747.45 1,071,386.90
52,433,994.54 56,013,032.83 66,991,954.47
297,552.18 147,942.52
46,870.52 580,452.53 2,315,352.90
3,699.39 110,195.08 636,654.11 4,138,719.23
600,110.20
600,110.20 4,738,829.43
52,433,994.54 620,692.26
3,395,200.06 5,803,238.18 $62,253,125.04

North Ge orgia College & State
Un i ve rsi ty Fou n dati on
$2,095,882.00
76,853.00 43,718.00 55,063.00 2,271,516.00
15,953,141.00
135,525.00 8,810,632.00 24,899,298.00 27,170,814.00
1,774,697.00
100,000.00 1,874,697.00
107,250.00 28,584.00
10,700,000.00 10,835,834.00 12,710,531.00
11,320,995.00 3,560,168.00 (420,880.00)
$14,460,283.00

North Georgia College & State University Annual Financial Report FY 2005 7

Statement of Revenues, Expenses and Changes in Net Assets
NO RTH GEO RGIA CO LLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo ok st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat io n Payments to or on behalf of North Georgia College & State University
T otal Operating Expenses Operating Income (loss)

North Ge orgia College & State
Unive rsity

North Ge orgia College & State
Fou n da ti o n

$12,294,712.55 1,169,743.21
1,981,509.25
536,538.91
2,581,818.63 2,995,610.52 2,475,820.25
332,158.30 538,811.20 1,203,734.01 169,462.48 498,381.46 24,438,814.35

$0.00 743,290.00 2,670,415.00
172,599.00 3,586,304.00

12,125,418.78 10,891,018.31
5,872,033.31
404,981.18 1,522,054.10 1,984,485.66 12,052,729.67 2,152,676.51
47,005,397.52 (22,566,583.17)

316,618.00 132,278.00
10,879.00
357,867.00 207,254.00 620,623.00 310,779.00 678,650.00 2,634,948.00 951,356.00

North Georgia College & State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
NO RTH GEO RGIA C O LLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and C HANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

North Ge orgia College & State
Unive rsity

North Ge orgia College & State
Fou n da ti o n

19,887,999.51

540,683.11 43,889.88
939,024.47 890,216.80 176,013.77
32,597.88 22,510,425.42
(56,157.75)

(547,106.00)
(547,106.00) 404,250.00

6,183,953.95 8,207.00
6,192,160.95 6,136,003.20
56,117,121.84
56,117,121.84 $62,253,125.04

299,089.00 299,089.00 703,339.00
13,756,944.00
13,756,944.00 $14,460,283.00

North Georgia College & State University Annual Financial Report FY 2005 9

Statement of Cash Flows
NORTH GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$12,276,643.53
1,636,216.93 479,904.12
(20,353,727.67) (22,956,108.01)
(2,691,797.31) (43,728.70) 52,309.77
2,644,704.51 2,860,436.87 2,482,010.67
352,652.92 531,230.73 1,226,755.37 181,115.84 584,216.28 (20,737,164.15)
19,887,999.51 (772,025.41) 2,441,275.34
21,557,249.44
8,207.00 (1,712,280.77)
(521,920.96)
(2,225,994.73)
73,868.51 176,013.77
(5,116.91) 244,765.37 (1,161,144.07) 9,322,248.53 $8,161,104.46

North Georgia College & State University Annual Financial Report FY 2005 10

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
D ep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($22,566,583.17)
2,152,676.51 (382,459.90)
(2,649.02) (116,983.87) (101,257.58) 196,541.00
28,260.28 55,291.60 ($20,737,164.15)
($6,183,953.95)

North Georgia College & State University Annual Financial Report FY 2005 11

NORTH GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY 2005, North Georgia College & State University is reporting the activity for the North Georgia College & State University Foundation.
See Note 16. 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
North Georgia College & State University Annual Financial Report FY 2005 12

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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 & State University Annual Financial Report FY 2005 13

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $6,183,953.95 to North Georgia College & State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
North Georgia College & State University Annual Financial Report FY 2005 14

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. North Georgia College & State University had accrued liability for compensated absences in the amount of $1,181,472.71 as of 7-1-2004. For FY2005, $807,011.33 was earned in compensated absences and employees were paid $751,719.73, for a net increase of $55,291.60. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $1,236,764.31.
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 previously in Note 1 Capital Assets section.
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 & State University Annual Financial Report FY 2005 15

Expendable Restricted Net Assets include the following:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005 $0.00
3,395,200.06 $3,395,200.06

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 Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s

June 30, 2005
$6,285,504.61 1,855,193.44 52,127.89 (2,389,587.76)
$5,803,238.18

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.

North Georgia College & State University Annual Financial Report FY 2005 16

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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.
North Georgia College & State University Annual Financial Report FY 2005 17

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 and 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.
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. At June 30, 2005, $2,555,051.50 of the University's deposits were uninsured. Of these uninsured deposits, $2,555,051.50 were collateralized with securities held by the financial institution's trust department or agent in the University's name.
North Georgia College & State University Annual Financial Report FY 2005 18

B. Investments
North Georgia College & State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
The University's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type
Debt Securities U.S. Savings Bond General Obligation Bonds
Other Investments Common Stock Other - GHEAC Real Estate Held for Investment Purposes
Investment Pools Office of Treasury and Fiscal Services
Georgia Fund 1
Total Investments

Fair Value
$3,204.30 970,057.60 973,261.90 557,485.55
9,000.00
6,661,592.03 $8,201,339.48

The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share.
The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).

North Georgia College & State University Annual Financial Report FY 2005 19

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$246,597.61 152,718.09 63,641.29
1,301,203.53 1,764,160.52
25,210.20
$1,738,950.32

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005 $1,131,628.76
46,184.76 $1,177,813.52

Note 5. Notes/Loans Receivable

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $25,210.20.

North Georgia College & State University Annual Financial Report FY 2005 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$1,179,845.43 1,000,856.17 2,180,701.60

Additions
$1,808,912.18 429,162.12
2,238,074.30

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

2,574,194.00 58,404,957.52 3,058,430.00 4,266,723.85
3,596,890.88
71,901,196.25

6,215,774.57 141,406.87 348,693.47
6,705,874.91

90,395.00 1,195,732.00
119,075.00 65,409.99
5,244.00
1,475,855.99

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

2,103,334.06 18,403,975.60 1,684,493.35 3,013,598.31
2,609,870.00
27,815,271.32

79,925.29 1,396,299.57
88,225.03 422,604.62
165,622.00
2,152,676.51

648,165.00 43,645.00 154,897.30
5,244.00
851,951.30

Total Capital Assets, Being Depreciated, Net

44,085,924.93

4,553,198.40

623,904.69

Capital Assets, net

$46,266,626.53

$6,791,272.70

$623,904.69

Ending Balance 6/30/2005
$2,988,757.61 1,430,018.29 4,418,775.90
2,483,799.00 63,425,000.09 2,939,355.00 4,342,720.73
0.00 3,940,340.35
0.00 77,131,215.17
2,183,259.35 19,152,110.17 1,729,073.38 3,281,305.63
0.00 2,770,248.00
0.00 29,115,996.53
48,015,218.64
$52,433,994.54

North Georgia College & State University Annual Financial Report FY 2005 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $1,955,539.18
359,813.72 $2,315,352.90

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

1,181,472.71 1,181,472.71

807,011.33 807,011.33

751,719.73 751,719.73

1,236,764.31 1,236,764.31

Total Long Term Obligations

$1,181,472.71

$807,011.33

$751,719.73 $1,236,764.31

Current Portion
$0.00
636,654.11 636,654.11 $636,654.11

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $228,063.32 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
North Georgia College & State University had no capital or operating lease agreements as of June 30, 2005.

North Georgia College & State University Annual Financial Report FY 2005 22

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,244,900.65 $1,896,346.17 $1,231,911.49

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 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain

North Georgia College & State University Annual Financial Report FY 2005 23

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, 2005, for employees covered by ERS was $119,071.31. The University's total payroll for all employees was $23,016,437.09.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, 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 2005 amounted to $14,233.92, of which $12,447.78 was made by the University and $1,786.14 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, 2005, financial report, which may be obtained through ERS.
North Georgia College & State University Annual Financial Report FY 2005 24

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $653,529.51 (9.65%) and $338,616.32 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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
North Georgia College & State University Annual Financial Report FY 2005 25

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 2005 amounted to $57,117.96 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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.
North Georgia College & State University Annual Financial Report FY 2005 26

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Note 14. 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, 2005, there were 194 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, North Georgia College & State University recognized as incurred $1,048,857.22 of expenditures, which was net of $250,765.35 of participant contributions.
North Georgia College & State University Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$11,915,432.08 1,981,203.83 3,086,768.31
244,318.44 92,572.00 143,862.81 2,241,626.83 209,643.92

$0.00

$0.00

$63,776.80 2,040,485.20
467,409.21
54,004.44
123,971.95 544,205.89 218,334.89

$40,010.00 1,725,278.55
439,010.25
29,920.51 200.00
45,097.75 818,622.11
5,877.10

$25,500.00 2,362,530.14 1,090,735.26
49,280.26 157,235.39 34,728.34 652,055.26 45,006.31

Total Expenses

$19,915,428.22

$0.00

$0.00 $3,512,188.38 $3,104,016.27 $4,417,070.96

Natural Classification
Facult y St aff Benefits Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Ent erprises

Unallocated Expenses

$0.00 1,653,037.74
526,687.52 (717,129.64)
2,667.18
1,483,468.72 925,453.74
1,097,714.75

$0.00
964,747.71 75.00

$80,699.90 1,128,482.85
261,422.76 717,129.64
24,790.35 307,299.00 153,356.09 6,870,690.84 576,099.54

$0.00

$4,971,900.01

$964,822.71

$10,119,970.97

$0.00

T ot al Expenses
$12,125,418.78 10,891,018.31 5,872,033.31 0.00 404,981.18 1,522,054.10 1,984,485.66 12,052,729.67 2,152,676.51
$47,005,397.52

North Georgia College & State University Annual Financial Report FY 2005 28

Note 16. Component Units
North Georgia College & State University Foundation (Foundation) is a legally separate, taxexempt component unit of North Georgia 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 twenty-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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $678,650.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 70 Alumni Drive, Dahlonega, GA 30533 or from the Foundation's website at www.ngcsu.edu.
Investments for Component Units:
North Georgia College & State University Foundation holds endowment investments in the amount of $11,320,995 dollars. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. North Georgia College & State University Foundation, in conjunction with the donors, has established a spending plan whereby 50% of the earnings may be used for academic scholarships. The remaining 50% of the earnings are set aside as a reserve.
North Georgia College & State University Foundation also holds investments in real property valued at $1,167,239.
North Georgia College & State University Annual Financial Report FY 2005 29

North Georgia College & State University Foundation Investments are comprised of the following amounts at June 30, 2005:

Cos t

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$1,209,406.00 261,198.00 700,339.00
2,119.00 11,766,166.00
1,167,239.00

Total Investments

$15,106,467.00

Fair Value $1,209,406.00 261,198.00 726,278.00 4,172.00 12,584,848.00 1,167,239.00
$15,953,141.00

Long Term Liabilities:
Compensated Absences Liabilities under Split Interest Agreements Other Long T erm Debt T otal Long T erm Debt

Beginning Balance July 1, 2004

Addit io ns

Reduct ion s

Ending Balance June 30, 2005

Amounts due wit hin
One Year

$0.00 $30,957.00 10,895,000.00
$10,925,957.00

$0.00 $3,080.00
$3,080.00

$0.00 $5,453.00 95,000.00
$100,453.00

$0.00 28,584.00 10,800,000.00
$10,828,584.00

$0.00 100,000.00 $100,000.00

Student Housing Bonds are issued by the North Georgia College & State University Foundation to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at North Georgia College & State University. The interest rate is 4.28%.
Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Fo un dat io n Student Housing
T otal Long T erm Debt

Beginning Balance July 1, 2004

Addit io n s

Reduct ions

Ending Balance June 30, 2005

Amounts due wit h in
One Year

$10,895,000.00 $10,895,000.00

$0.00 $0.00

$95,000.00 $95,000.00

$10,800,000.00 $10,800,000.00

$100,000.00 $100,000.00

North Georgia College & State University Annual Financial Report FY 2005 30

De bt Se rvice O bligations

Annual debt service requirements to maturity for Student Housing ( Foundation) revenue bonds payable are as follows:

2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Bonds Payable

Pri n ci pa l
$100,000.00 100,000.00 100,000.00 100,000.00 200,000.00
1,400,000.00 2,700,000.00 3,500,000.00 2,600,000.00

Inte re st
$459,000.00 450,500.00 446,250.00 442,000.00 433,500.00
2,010,250.00 1,538,500.00
867,000.00 114,750.00

Total
$559,000.00 550,500.00 546,250.00 542,000.00 633,500.00
3,410,250.00 4,238,500.00 4,367,000.00 2,714,750.00

$10,800,000.00 $6,761,750.00 $17,561,750.00

North Georgia College & State University Annual Financial Report FY 2005 31

SAVANNAH STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Savannah State University Savannah, Georgia

Dr. Carlton E. Brown
President

Arthur L. Moncrief
Vice President for Business and Finance

SAVANNAH STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments.................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 21 Note 5 Notes/Loans Receivable....................................................................................... 21 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 23 Note 8 Long-Term Liabilities .......................................................................................... 23 Note 9 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 25 Note 13 Contingencies...................................................................................................... 26 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 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 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 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

FY2005 FY2004 FY2003

136

2,507

124

2,504

122

2,071

Overview of the Financial Statements and Financial Analysis

Savannah State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$5,136,183.87 50,459,188.20
2,695,584.56 58,290,956.63
3,084,206.27 657,259.73
3,741,466.00
50,459,188.20 814,507.96 856,454.00
2,419,340.47 $54,549,490.63

June 30, 2004
$4,931,716.54 51,017,320.00
2,230,169.50 58,179,206.04
2,367,973.97 599,272.51
2,967,246.48
51,017,320.00 963,849.67
1,116,098.30
2,114,691.59 $55,211,959.56

The total assets of the institution increased by $111,750.59. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase in current assets of $204,467.33.
The total liabilities for the year increased by $774,219.52. The primary cause for the increase was the $716,232.30 increase in current liabilities. The increase in total assets of $111,750.59 and the increase in total liabilities of $774,219.52 combined with the decreases in restricted net assets yields a decrease in total net assets of ($662,468.93). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($558,131.80).

Savannah State University Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$25,763,451.90 44,370,963.44 (18,607,511.54) 17,408,209.12
(1,199,302.42) 536,833.49 (662,468.93)
55,211,959.56 55,211,959.56 $54,549,490.63

$23,908,691.35 41,874,940.16 (17,966,248.81) 16,800,822.88
(1,165,425.93) 14,921,930.28 13,756,504.35 41,455,455.21 41,455,455.21 $55,211,959.56

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$4,770,024.29
13,877,574.65 50,612.82
6,903,196.88 162,043.26
25,763,451.90
15,477,839.23 171,575.91
1,554,669.09 23,137.24
180,987.65 17,408,209.12
536,833.49
536,833.49
$43,708,494.51

June 30, 2004
$3,362,988.89 13,653,097.47
9,245.00 6,737,618.12
145,741.87 23,908,691.35
16,366,717.63 1,165,030.73 47,028.82 186,209.66
17,764,986.84
14,921,930.28 14,921,930.28 $56,595,608.47

Savannah State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$11,104,133.29 1,362,198.55 2,369,124.01 4,266,845.64 2,730,946.23 7,006,716.84 6,970,587.64 1,677,076.90 6,883,334.34
44,370,963.44
0.00
$44,370,963.44

June 30, 2004
$12,585,565.85 1,368,649.69 2,693,970.17 4,053,734.37 2,428,187.75 6,182,602.23 4,114,224.30 1,767,594.85 6,680,410.95
41,874,940.16
964,163.96
$42,839,104.12

Total operating revenues increased by $1,854,760.55. This is primarily a result of increases in net student tuition and fees in the amount of $1,407,035.40 and auxiliary enterprises in the amount of $165,578.76.
Under non-operating revenues (expenses) state appropriations decreased by approximately ($888,878.40). 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 2005 5

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($14,771,216.72) 17,002,387.49 (1,163,120.69) 23,137.24 1,091,187.32 252,254.12
$1,343,441.44

June 30, 2004
($16,599,419.87) 16,747,225.58 (482,865.09) 11,142.14 (323,917.24) 576,171.36
$252,254.12

Capital Assets
The University did not add any capital asset for facilities in fiscal year 2005. Savannah State University's renovations funded by the GSFIC included $536,833.49 for the science building and a residence hall. Projected funding by GSFIC for FY2006 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.
Long Term Debt
Savannah State University had a Long-Term Debt of $1,205,539.93 of which $548,279.20 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
Savannah State University's does not have any foundations or affiliated organizations that qualify as component units.
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.
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
Savannah State University Annual Financial Report FY 2005 6

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. Dr. Carlton E. Brown, President Savannah State University
Savannah State University Annual Financial Report FY 2005 7

Statement of Net Assets
SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2005
AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Inventories (note 4) Prepaid Items Other Assets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments Notes Receivable, net Capital A s s ets , net (note 6) Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compens ated A bs ences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

June 30, 2005
$505,611.44 408,275.65
1,793,655.75
2,326,837.65 52,325.21 49,478.17
5,136,183.87
837,830.00 1,090,057.82
767,696.74 50,459,188.20 53,154,772.76 58,290,956.63
525,306.21 216,784.80
218,195.92 425,375.81 344,837.35 805,426.98
548,279.20 3,084,206.27
657,259.73 657,259.73 3,741,466.00
50,459,188.20
814,507.96 856,454.00
2,419,340.47 $54,549,490.63

Savannah State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

SAVANNAH STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005

REVENUES

June 30, 2005

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Federal A ppropriations Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n
Total Operating Expens es Operating Income (los s )

$8,778,909.00 4,008,884.71
13,498,210.05 101,824.08 277,540.52 50,612.82 3,680.00
1,906,989.75 99,289.92
2,874,107.58 11,701.60
377,355.60 1,565,875.51
67,876.92 158,363.26 25,763,451.90
7,313,896.39 11,642,649.94 4,979,875.02
65.00 503,411.12 3,381,895.73 2,189,396.63 12,009,940.13 2,349,833.48 44,370,963.44 (18,607,511.54)

Savannah State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
SAVANNAH STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005
June 30, 2005

NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Other Total Other Revenues Increas e in Net A s s ets
NET AS S ETS Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated
Net A s s ets -End of Year

15,477,839.23
171,575.91 1,554,669.09
23,137.24 180,987.65 17,408,209.12 (1,199,302.42)
536,833.49 536,833.49 (662,468.93) 55,211,959.56 55,211,959.56 $54,549,490.63

Savannah State University Annual Financial Report FY 2005 10

Statement of Cash Flows
SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es
Other Nonoperating Receipts
Net Cas h Flows Provided by Non-capital Financing A ctivities CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es
Net Cas h us ed by Capital and Related Financing A ctivities CAS H FLOWS FROM INVES TING ACTIVITIES
Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments
Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$4,645,067.89
14,241,590.69 50,612.82
(18,514,250.92) (18,881,396.39)
(3,381,895.66) (97,799.50) 113,692.03
1,914,840.29 103,285.70
2,661,672.18 11,701.60 377,355.60
1,563,416.98 67,876.92
353,013.05 (14,771,216.72)
15,477,839.23 342,769.42 962,931.59 218,847.25
17,002,387.49
(1,163,120.69)
(1,163,120.69)
23,137.24
23,137.24 1,091,187.32
252,254.12 $1,343,441.44

Savannah State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Gift of capital as s ets reducing proceeds of capital grants and gifts

($18,607,511.54)
2,349,833.48 273,328.33 (1,290.91) 20,403.37 396,551.83 135,540.01 660,871.19 1,057.52
($14,771,216.72)
($536,833.49)

Savannah State University Annual Financial Report FY 2005 12

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the
Savannah State University Annual Financial Report FY 2005 13

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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 Statement 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.
Savannah State University Annual Financial Report FY 2005 14

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.
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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC did not transfer any capital additions to Savannah State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Savannah State University Annual Financial Report FY 2005 15

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. Savannah State University had accrued liability for compensated absences in the amount of $1,146,494.19 as of 7-1-2004. For FY2005, $806,249.32 was earned in compensated absences and employees were paid $ 747,204.58, for a net increase of $59,044.74. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 1,205,538.93.
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 previously in Note 1 Capital Assets section.
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.
Savannah State University Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $0.00
780,707.79 75,746.21
$856,454.00

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 Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005 $637,281.79 1,737,788.00 44,270.68
$2,419,340.47

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 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:
Savannah State University Annual Financial Report FY 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Savannah State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $2,466,925.30 of the Savannah State University's deposits were uninsured. Of these uninsured deposits, $373,410.63 were collateralized with securities held by the financial institution's trust department or agent in the University's name, $2,547.83 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $2,090,966.84 were uncollateralized.
Savannah State University Annual Financial Report FY 2005 19

B. Investments

At June 30, 2005, the carrying value of the university's investment was $ 1,371,974.97 which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$1,090,057.82 281,917.15

$1,371,974.97

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,030,819.02 257,166.00
1,897,769.78
1,104,621.65 4,290,376.45
169,883.05
$4,120,493.40

Savannah State University Annual Financial Report FY 2005 20

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $0.00
52,325.21 $52,325.21

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $21,051.03

Savannah State University Annual Financial Report FY 2005 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: In fras tru ctu re Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Ass ets Being Depreciated
Les s: Accumulated Depreciation In fras tru ctu re 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 7/1/2004
$575,975.16
575,975.16

Additions $0.00 0.00

Reductions $0.00 0.00

63,207,417.01 2,520,259.00 6,029,023.53
6,153,917.89 55,285.00
77,965,902.43

661,583.49
636,352.07
395,468.62 6,250.00
1,699,654.18

132,857.84
3,096.00 6,250.00 142,203.84

18,126,500.70 1,038,301.77 3,819,449.71
4,535,893.90 4,411.51
27,524,557.59
50,441,344.84
$51,017,320.00

1,426,141.63 128,509.30 493,571.91
300,228.51 1,382.13
2,349,833.48
(650,179.30)
($650,179.30)

88,828.56 102,284.65 43,138.13 234,251.34 (92,047.50) ($92,047.50)

Ending Balance 6/30/2005
$575,975.16 0.00
575,975.16
0.00 63,869,000.50 2,520,259.00 6,532,517.76
0.00 6,546,290.51
55,285.00 79,523,352.77
0.00 19,463,813.77 1,166,811.07 4,210,736.97
0.00 4,792,984.28
5,793.64 29,640,139.73
49,883,213.04
$50,459,188.20

Savannah State University Annual Financial Report FY 2005 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $0.00
425,375.81 $425,375.81

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

1,146,494.19 1,146,494.19
$1,146,494.19

806,249.32 806,249.32
$806,249.32

747,204.58 747,204.58
$747,204.58

0.00 1,205,538.93 1,205,538.93
$1,205,538.93

Current Portion
$0.00
548,279.20 548,279.20 $548,279.20

Note 9. Significant Commitments
The University did not have unearned, outstanding, construction or renovation contracts at June 30, 2005.
Note 10. Lease Obligations
The University did not have lease obligations at June 30, 2005.

Savannah State University Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,068,849.05 $1,157,294.27 $1,169,740.65

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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.

Savannah State University Annual Financial Report FY 2005 24

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 accordance with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $493,865.15 (9.65%) and $244,023.36 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $30,700.32 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Savannah State University Annual Financial Report FY 2005 25

Note 12. 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 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. 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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.
Savannah State University Annual Financial Report FY 2005 26

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, 2005. Note 14. 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, 2005, there were 197 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Savannah State University recognized as incurred $339,430.01 of expenditures, which was net of $289,203.19 of participant contributions.
Savannah State University Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$6,926,220.60 805,421.73
2,032,629.12
50,625.59 248,140.00 83,433.13 751,558.26 206,104.86

$273,472.56 103,542.30 83,024.44
63,073.36 411,062.93
2,462.47 387,792.32
37,768.17

$54,821.32 1,188,114.86 222,921.74
34,414.96 153,602.02 18,933.70 687,587.29
8,728.12

$31,799.99 2,218,782.39
539,720.57
92,637.64 1,542.00
64,584.84 961,384.27 356,393.94

$5,431.00 1,454,584.04
379,280.05
37,157.52 16,890.00 29,288.31 789,016.83 19,298.48

$22,150.92 3,555,573.40 1,099,331.75
65.00 177,583.29 427,312.09 65,048.37 1,548,204.82 111,447.20

Total Expenses

$11,104,133.29

$1,362,198.55

$2,369,124.01

$4,266,845.64

$2,730,946.23

$7,006,716.84

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

Auxiliary En terp ris es

Unallocated Exp en s es

$0.00 1,398,225.41 420,377.88 (315,838.01)
895.44
1,687,635.68 2,275,869.25 1,503,421.99

$0.00 1,677,076.90

$0.00 918,405.81 202,589.47 315,838.01 47,023.32 446,269.79 238,010.13 4,608,527.09 106,670.72

$0.00

$6,970,587.64

$1,677,076.90

$6,883,334.34

$0.00

Total Exp en s es
$7,313,896.39 11,642,649.94 4,979,875.02
65.00 503,411.12 3,381,895.73 2,189,396.63 12,009,940.13 2,349,833.48
$44,370,963.44

Savannah State University Annual Financial Report FY 2005 28

SKIDAWAY INSTITUTE OF OCEANOGRAPHY
Financial Report
For the Year Ended June 30, 2005

Skidaway Institute of Oceanography Savannah, Georgia

James G. Sanders
Director

Marc M. Mascolo
Assistant Director

SKIDAWAY INSTITUTE OF OCEANOGRAPHY ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments..................................................................................... 16 Note 3 Accounts Receivable............................................................................................ 17 Note 4 Inventories............................................................................................................ 17 Note 5 Notes/Loans Receivable....................................................................................... 17 Note 6 Capital Assets....................................................................................................... 18 Note 7 Deferred Revenue................................................................................................. 19 Note 8 Long-Term Liabilities .......................................................................................... 19 Note 9 Significant Commitments.................................................................19 Note 10 Lease Obligations................................................................................................ 19 Note 11 Retirement Plans ................................................................................................. 21 Note 12 Risk Management................................................................................................ 22 Note 13 Contingencies...................................................................................................... 23 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 23 Note 15 Natural Classifications With Functional Classifications..................................... 24

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 2005. 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 2004 and FY 2005.
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 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
Skidaway Institute of Oceanography Annual Financial Report FY 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005 $1,412,225.16
5,280,683.22 6,692,908.38
1,175,141.03 304,489.54
1,479,630.57
5,004,395.24
208,882.57 $5,213,277.81

June 30, 2004 $984,631.55 5,626,347.62 6,610,979.17
923,402.57 430,749.71 1,354,152.28
5,263,327.48
(6,500.59) $5,256,826.89

The total assets of the institution increased by $81,919.21. A review of the Statement of Net Assets will reveal that the increase was primarily due to three factors. First was an increase in cash and cash equivalents of $269,070.27. This increase is primarily due to the ability of the Institute to carry-forward indirect revenue funds as authorized by SB73. The anticipated use of those funds will be to outfit a new faculty member's lab in early fiscal year 2006. Second was a net increase in accounts receivable of 152,719.78. This is due to an increase in grant-related spending this year as well as a shift in the timing of that spending. Increased expenditures occurred in the final quarter of the year which resulted in an increase in accounts receivable as of June 30, 2005. These receivables will be collected in July and August of the new fiscal year. MRR expenditures were also significantly higher based on the completion of projects in June and subsequent collection from GSFIC in July. Third was a decrease in net capital assets of $345,664.40 which was the result of asset retirements and depreciation outpacing new asset acquisitions.
The total liabilities for the year increased by $125,478.29, due to increases in deferred revenue and an offsetting decrease in long term debt. The increase in deferred revenue is reflective of an increase in pre-funded awards posted in this fiscal year for work that will be completed in subsequent periods. The decrease in long term liabilities is related to the annual capital lease payment of the equipment for the Research Vessel Savannah. The combination of the increase in

Skidaway Institute of Oceanography Annual Financial Report FY 2005 2

total assets of $81,929.21 and the increase in total liabilities of $125,478.29 yields a decrease in total net assets of $43,549.08.

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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$6,137,764.88 8,325,881.28 (2,188,116.40) 2,144,567.32
(43,549.08)
(43,549.08) 5,256,826.89 5,256,826.89 $5,213,277.81

$6,285,181.97 8,051,333.17 (1,766,151.20) 2,137,379.37
371,228.17
371,228.17 4,885,598.72 4,885,598.72 $5,256,826.89

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a consistent year with a slight decrease in net assets at the end of the year. Operating Revenue decreased approximately 2% due to three factors: a decrease in federal grants and contracts of $247,673.30, an increase in rent income of $271,252, and a decrease in other operating revenue of $73,831.53. The decrease in federal funding was a direct result of the budget reductions of the Institute's major funding agencies, such as the National Science Foundation, National Oceanic and Atmospheric Administration, and the Office of Naval Research. Most of these reductions were based on the continued downturn of the economy and subsequent shrinking of the federal
Skidaway Institute of Oceanography Annual Financial Report FY 2005 3

budgets available for research. The increase in rent income was due to the increase in non-NSF funded ship days for the Research Vessel Savannah. Ship usage has increased approximately 22% in the past year due to the reliability of the ship, increased functionality available to the research community, and the consistency and capability of the crew resulting from no staffing changes over the past two years.
Operating expenses increased $215,049.47 due to investments in information technology equipment and startup funds available to new faculty members. A significant portion of the Institute's network infrastructure was repaired or replaced this year. The Institute has created a solid foundation that has increased functionality for the research community.
Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

June 30, 2005

June 30, 2004

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$0.00 5,532,943.15
31,025.75 43,266.50 530,529.48 6,137,764.88
1,991,551.00 200,889.12 14,953.11 (38,151.39)
2,169,241.84
0.00 $8,307,006.72

$0.00 5,846,646.26
60,338.80 45,087.90 333,109.01 6,285,181.97
2,019,704.62 169,344.36 4,657.14 (25,770.88)
2,167,935.24
0.00 $8,453,117.21

Under non-operating revenues (expenses) state appropriations decreased by $28,153.62. 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 Skidaway Institute of Oceanography. We are hopeful that the economy is now on an upward trend.

Skidaway Institute of Oceanography Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$117,072.39 4,691,390.73 1,022,277.40 1,241,507.17 1,214,177.46
39,456.13
8,325,881.28
24,674.52 $8,350,555.80

June 30, 2004
$359,629.95 4,600,702.32
977,607.01 947,146.35 1,136,826.89
29,420.65
8,051,333.17
30,555.87 $8,081,889.04

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 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, 2005 and 2004, Condensed

June 30, 2005

Cas h Provided (us ed) By:

Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities

($1,542,542.66) 2,192,440.12 (395,780.30) 14,953.11

Net Change in Cas h Cas h, Beginning of Year

269,070.27 97,075.41

June 30, 2004
($1,648,698.42) 2,267,457.72 (590,643.35) 4,657.14 32,773.09 64,302.32

Cas h, End of Year

$366,145.68

$97,075.41

The increase in cash was primarily due to the Institute's ability to carry forward funds generated from the indirect revenue from grants. This has resulted in greater flexibility of the Institute

Skidaway Institute of Oceanography Annual Financial Report FY 2005 5

when planning for upcoming faculty hires. It also allows the Institute to better match internal investments in research staffing and equipment with the actual period the research takes place. Capital Assets The Institute had no significant capital asset additions in fiscal year 2005. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long Term Liabilities (Debt) Skidaway Institute of Oceanography had total Long-Term Liabilities (Debt) of $622,200.90 of which $317,711.36 was reflected as current liability at June 30, 2005. For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Skidaway Institute of Oceanography did not have any component units to include in its financial statements and notes. 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 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 2005 6

Statement of Net Assets
SKIDWAY INSTITUTE OF OCEANOG RAPHY STATEMENT OF NET ASSETS June 30, 2005
AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Inventories (note 4) Prepaid Items Other Assets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments Notes Receivable, net Capital A s s ets , net (note 6) Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compens ated A bs ences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

June 30, 2005
$366,145.68
863,516.51 171,734.61 10,828.36 1,412,225.16
5,280,683.22 5,280,683.22 6,692,908.38
194,898.15
662,531.52
93,620.86 224,090.50 1,175,141.03 182,667.12 121,822.42 304,489.54 1,479,630.57
5,004,395.24
208,882.57 $5,213,277.81

Skidaway Institute of Oceanography Annual Financial Report FY 2005 7

Statement of Revenues, Expenses and Changes in Net Assets

SKIDWAY INSTITUTE OF OCEANOG RAPHY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005

REVENUES

June 30, 2005

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Federal A ppropriations Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n
Total Operating Expens es Operating Income (los s )

$0.00
5,264,564.72 218,290.07 50,088.36 31,025.75 435,345.00 36,403.00
6,863.50 95,184.48 6,137,764.88
1,074,002.88 2,552,977.19
910,868.99 158,235.70 266,957.16 2,770,952.73 591,886.63 8,325,881.28 (2,188,116.40)

Skidaway Institute of Oceanography Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
SKIDWAY INSTITUTE OF OCEANOG RAPHY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005
June 30, 2005

NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Other Total Other Revenues Increas e in Net A s s ets
NET AS S ETS Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated
Net A s s ets -End of Year

1,991,551.00
200,889.12 14,953.11 (24,674.52) (38,151.39)
2,144,567.32 (43,549.08)
0.00 (43,549.08) 5,256,826.89 5,256,826.89 $5,213,277.81

Skidaway Institute of Oceanography Annual Financial Report FY 2005 9

Statement of Cash Flows
SKIDWAY INSTITUTE OF OCEANOG RAPHY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005 $0.00
5,602,417.78 30,863.00
(4,111,160.91) (3,638,141.61)
36,403.00
6,743.37 530,332.71 (1,542,542.66) 1,991,551.00 200,889.12 2,192,440.12
(284,373.62) (86,732.16) (24,674.52) (395,780.30)
14,953.11 14,953.11 269,070.27 97,075.41 $366,145.68

Skidaway Institute of Oceanography Annual Financial Report FY 2005 10

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities

($2,188,116.40)
591,886.63 (152,719.78)
(5,803.56) (4,266.46) 221,834.89 (5,357.98) ($1,542,542.66)

Skidaway Ins titute of Oceanography had no NON-CA SH INVESTING, NON-CA PITA L FINA NCING, or CA PITA L and RELA TED FINA NCING TRA NSA CTIONS at June 30, 2005.

Skidaway Institute of Oceanography Annual Financial Report FY 2005 11

SKIDAWAY INSTITUTE OF OCEANOGRAPHY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations Skidaway Institute of Oceanography serves the state, national and international communities by providing research and instruction 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-six (36) 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in 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 FY2005, 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared
Skidaway Institute of Oceanography Annual Financial Report FY 2005 12

in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 they predominately take 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.
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 Institute's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Prepaid Items Prepaid items are payments made to vendors in advance of the receipt of goods and services that will benefit periods subsequent to the statement of net assets date.
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
Skidaway Institute of Oceanography Annual Financial Report FY 2005 13

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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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. For the year ended June 30, 2005, GSFIC did not transfer any capital additions to Skidaway Institute of Oceanography.
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. Skidaway Institute of Oceanography had accrued liability for compensated absences in the amount of $351,270.90 as of 7-1-2004. For FY2005, $264,705.72 was earned in compensated absences and employees were paid $270,063.70, for a net decrease of ($5,357.98). The ending balance as of 6-30-2005 in accrued liability for compensated absences was $345,912.92.
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 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
Skidaway Institute of Oceanography Annual Financial Report FY 2005 14

in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section.

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, Institute 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 Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005 $39,292.31 154,801.50
14,788.76 $208,882.57

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 sales and services of auxiliary enterprises and most Federal, state and local grants and contracts.
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.

Skidaway Institute of Oceanography Annual Financial Report FY 2005 15

Note 2. Deposits and Investments
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $548,535.65 of the institute's deposits were uninsured. Of these uninsured deposits, $548,535.65 were collateralized with securities held by the financial institution's trust department or agent in the institute's name.
Skidaway Institute of Oceanography Annual Financial Report FY 2005 16

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$0.00
863,516.51
171,734.61 1,035,251.12
0.00 $1,035,251.12

Note 4. Inventories The Institute did not have any inventories at June 30, 2005 Note 5. Notes/Loans Receivable At June 30, 2005 the Institute did not have any notes or loans receivable.

Skidaway Institute of Oceanography Annual Financial Report FY 2005 17

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$449,460.00
449,460.00

Additions $0.00 0.00

Reductions $0.00 0.00

4,525,125.35 335,818.00
4,328,877.78 594,986.38 171,083.07
9,955,890.58

280,549.23 3,824.39
284,373.62

220,683.86 220,683.86

1,771,044.47 132,619.23
2,534,214.61 183,454.13 157,670.52
4,779,002.96
5,176,887.62
$5,626,347.62

179,621.14 15,092.73 333,726.12 59,498.64 3,948.00
591,886.63
(307,513.01)
($307,513.01)

182,532.47
182,532.47 38,151.39 $38,151.39

Ending Balance 6/30/2005
$449,460.00 0.00
449,460.00
0.00 4,525,125.35
335,818.00 4,388,743.15
594,986.38 174,907.46
0.00 10,019,580.34
0.00 1,950,665.61
147,711.96 2,685,408.26
242,952.77 161,618.52
0.00 5,188,357.12
4,831,223.22
$5,280,683.22

Skidaway Institute of Oceanography Annual Financial Report FY 2005 18

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $0.00
662,531.52
$662,531.52

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$363,020.14

Additions $0.00

Reductions

Ending Balance June 30, 2005

$86,732.16

$276,287.98

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

351,270.90 351,270.90
$714,291.04

264,705.72 264,705.72
$264,705.72

270,063.70 270,063.70
$356,795.86

0.00 345,912.92 345,912.92
$622,200.90

Current Portion
$93,620.86
224,090.50 224,090.50 $317,711.36

Note 9. Significant Commitments
The Institute had no significant commitments as of June 30, 2005.
Note 10. Lease Obligations
Skidaway Institute of Oceanography is obligated under a capital lease for the acquisition of equipment. CAPITAL LEASES
The capital lease is payable in quarterly installments and expires in 2008. Expenditures for fiscal year 2005 were $111,406.68 of which $24,674.52 represented interest. Total principal paid on the capital lease was $86,732.16 for the fiscal year ended June 30, 2005. Interest rate associated with the capital lease is 8 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:
Skidaway Institute of Oceanography Annual Financial Report FY 2005 19

Land Buildings Equipment Total Assets Held Under Capital Lease

$0.00
594,986.38 $594,986.38

OPERATING LEASES
Skidaway Institute of Oceanography's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 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.
Noncancellable operating lease expenditures in 2005 were $6,263.84 for 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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$111,406.68 111,406.69 88,019.07

$8,099.76 8,099.76 3,347.92

310,832.44 34,544.46
0.00 $276,287.98

$19,547.44

Skidaway Institute of Oceanography Annual Financial Report FY 2005 20

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$ 230,078.02 $ 221,851.53 $ 245,897.98

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005 21

year 2005, the employer contribution was 9.65% 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 $80,233.60 (9.65%) and $41,571.85 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Note 12. 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 Institute 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. 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.
Skidaway Institute of Oceanography Annual Financial Report FY 2005 22

Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 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, 2005.
Note 14. 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, 2005, there were 27 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Skidaway Institute of Oceanography recognized as incurred $79,369.83 of expenditures, which was net of $37,253.42 of participant contributions.
Skidaway Institute of Oceanography Annual Financial Report FY 2005 23

Note 15. Natural Classifications with Functional Classifications

The Institute's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$71,505.21 27,985.68
17,581.50

$941,238.18 1,172,752.42
436,042.61
136,917.95
25,251.42 1,862,824.25
116,363.90

$0.00

$0.00 480,163.82 105,196.41
8,389.93
5,774.88 394,939.75
27,812.61

$0.00

$61,259.49 442,146.38 216,119.62
12,438.66

73,247.66 436,295.36

Total Expenses

$117,072.39

$4,691,390.73

$0.00

$1,022,277.40

$0.00

$1,241,507.17

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

Auxiliary En terp ris es

Unallocated Exp en s es

$0.00 456,508.32 125,203.29

$0.00

$0.00 1,406.25
321.38

$0.00

489.16

228,677.35 400,092.34
3,207.00

7,253.51 22,267.23
8,207.76

$1,214,177.46

$0.00

$39,456.13

$0.00

Total Exp en s es
$1,074,002.88 2,552,977.19 910,868.99 0.00 158,235.70 0.00 266,957.16 2,770,952.73 591,886.63
$8,325,881.28

Skidaway Institute of Oceanography Annual Financial Report FY 2005 24

SOUTH GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2005

John McElveen
Interim President

South Georgia College Douglas, Georgia
Wanda E. Lloyd
Vice President for Business Affairs

SOUTH GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments.................................................................................... 19 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 20 Note 5 Notes/Loans Receivable....................................................................................... 20 Note 6 Capital Assets....................................................................................................... 20 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments.................................................................22 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 25 Note 13 Contingencies...................................................................................................... 26 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28 Note 16 Component Units ........................................................................ 29

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 missions of the University System of Georgia. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

60

1,443

58

1,431

63

1,361

Overview of the Financial Statements and Financial Analysis

South Georgia College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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

South Georgia College Annual Financial Report FY 2005 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
As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$990,335.51 12,290,031.11
203,552.84 13,483,919.46
403,971.96 79,158.20
483,130.16
12,290,031.11 153,798.12 108,354.84
448,605.23 $13,000,789.30

June 30, 2004
$712,679.81 12,242,825.93
213,212.67 13,168,718.41
367,956.47 101,370.78
469,327.25
12,242,825.93 153,798.12 115,878.06
186,889.05 $12,699,391.16

The total assets of the institution increased by $315,201.05. 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 $13,802.91. The primary cause for the increase was in current liabilities, primarily in salaries payable and funds held for others. The combination of the increase in total assets of $315,201.05 and the increase in total liabilities of $13,802.91 yields an increase in total net assets of $301,398.14. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $47,205.18.

South Georgia College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$5,055,008.33 11,376,332.55 (6,321,324.22) 6,096,668.98
(224,655.24)
(224,655.24) 12,699,391.16
526,053.38 13,225,444.54 $13,000,789.30

$4,993,971.15 11,211,597.65 (6,217,626.50)
5,826,873.96
(390,752.54) 4,779,155.73 4,388,403.19 8,310,987.97 8,310,987.97 $12,699,391.16

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$938,156.29 2,338,569.81
95,322.08 1,571,521.08
111,439.07 5,055,008.33
5,594,794.00 317,347.83 16,180.62 168,346.53
6,096,668.98
0.00 $11,151,677.31

June 30, 2004
$846,795.45 2,228,873.67
305,698.79 1,491,443.59
121,159.65 4,993,971.15
5,302,694.10 205,976.77 318,655.10 3,455.00 (3,907.01)
5,826,873.96
4,779,155.73
4,779,155.73 $15,600,000.84

South Georgia College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$3,480,868.57
571,258.97 866,505.04 1,675,399.16 2,105,340.82 668,223.48 1,580,255.79 428,480.72 11,376,332.55
$11,376,332.55

June 30, 2004
$3,584,321.77
647,644.37 953,547.14 1,628,911.16 1,966,327.10 741,122.04 1,689,724.07
11,211,597.65
$11,211,597.65

Total operating revenue increased by $61,493.18. The $91,360.84 increase in operating revenue from tuition and fees was the result of an increase in tuition and fees of $35,179.62 and a decrease in scholarship allowances of $56,181.22. Operating revenues associated with the auxiliary enterprises of the College increased by $80,077.49. 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 approximately ($107,229.55). The decrease reflects reductions in staff necessitated by budget reductions.
Utilities increased by approximately $123,468.33 during the past year. The increase was primarily associated with the increased natural gas and electricity costs that were experienced in fiscal year 2005.
Under non-operating revenues (expenses) state appropriations increased by approximately $292,099.90. The increase of state appropriations reflected increases generated through formula funds for enrollment growth and increases in supported staff benefits. We are hopeful that the economy is now on an upward trend.
Statement of Cash Flows
The final statement presented by 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
South Georgia College Annual Financial Report FY 2005 5

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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($5,733,833.88) 5,997,756.41 (66,084.34) 16,180.62 214,018.81 149,330.86
$363,349.67

June 30, 2004
($5,750,849.95) 5,778,830.13 (36,343.77) 3,455.00 (4,908.59) 154,239.45
$149,330.86

Capital Assets
The College had no significant capital asset additions for facilities in fiscal year 2005. The College completed over $400,000 in MRR projects funded by the Georgia State Finance and Investment Commission (GSFIC). Projected MRR funding by GSFIC for FY2006 is expected to be an amount near the 2005 total.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Liabilities (Debt)
South Georgia College had Long-Term Liabilities (Debt) of $259,619.68 of which $180,461.48 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.

South Georgia College Annual Financial Report FY 2005 6

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 FY2005. The South Georgia College Foundation had investments of approximately $2.46 M as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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. John McElveen, Interim President South Georgia College
South Georgia College Annual Financial Report FY 2005 7

Statement of Net Assets

SOUTH G EORG IA COLLEG E STATEMENT OF NET ASSETS
June 30, 2005

S outh Georgia Col l e g e

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other A s s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$209,551.55
254,106.84 340,933.18
176,786.40 8,957.54
990,335.51
153,798.12 49,754.72
12,290,031.11 12,493,583.95 13,483,919.46
72,405.33 39,609.11
3,000.00 108,496.04 180,461.48 403,971.96
79,158.20
79,158.20 483,130.16
12,290,031.11 153,798.12 108,354.84 448,605.23
$13,000,789.30

Component Unit S outh Georgia College
Foundation $146,208.18
146,208.18 2,538,577.04 2,538,577.04 2,684,785.22
0.00
0.00 0.00 2,086,093.88 130,673.76 468,017.58 $2,684,785.22

South Georgia College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
SOUTH GEORG IA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2005

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Res idence Halls Books tore Food Services Parkin g /Tran s p o rta tio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Sa la rie s : Fa c u lt y Staff
Be n e fit s Other Pers onal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Peachtree State Univers ity
Total Operating Expenses Operating Income (los s)

South Georgia Col l e g e

Component Unit South Georgia College Foundation

$2,286,059.68 1,347,903.39
2,336,173.93
2,395.88 95,322.08
500,969.30 620,928.83 233,126.33
202,329.13 14,167.49
111,439.07 5,055,008.33
2,029,814.16 2,879,249.05 1,445,863.18
49,194.71 809,080.18 786,340.66 2,664,512.44 712,278.17
11,376,332.55 (6,321,324.22)

$0.00 80,747.89
1,137.08 81,884.97
7,519.11 186,115.77 193,634.88 (111,749.91)

South Georgia College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
SOUTH GEORG IA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2005

South Georgia Col l e g e

Component Unit South Georgia College Foundation

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments, auxiliary and other) Interest Expens e (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses , gains , or loss Capital Grants and Gifts Fe d e ra l State Other Additions to permanent endowments Total Other Revenues Increase in Net Ass ets
NET ASSETS Net Ass ets -beginning of year, as originally reported Prior Year A djustments Net Ass ets -beginning of year, restated Net Ass ets -End of Year

5,594,794.00

317,347.83 16,180.62
168,346.53 6,096,668.98 (224,655.24)

49,792.20
49,792.20 (61,957.71)

0.00 (224,655.24)
12,699,391.16 526,053.38
13,225,444.54 $13,000,789.30

149,106.58 149,106.58
87,148.87
2,597,636.35
2,597,636.35 $2,684,785.22

South Georgia College Annual Financial Report FY 2005 10

Statement of Cash Flows
SOUTH G EORG IA COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$2,273,079.28
2,204,982.21 103,117.53
(4,912,507.36) (4,897,110.13) (2,157,479.57)
479,126.65 612,637.55 235,366.34
202,382.67 14,167.49 108,403.46 (5,733,833.88)
5,594,794.00 85,614.58 317,347.83
5,997,756.41
(66,084.34)
(66,084.34)
16,180.62
16,180.62 214,018.81 149,330.86 $363,349.67

South Georgia College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
South Georgia College had no NON-CA SH INVESTING, NON-CA PITA L FINA NCING,or CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS at June 30, 2005

($6,321,324.22)
712,278.17
(126,099.70) (16,983.01) 27,460.15 43,552.15
(2,160.00) (25,666.54) (24,890.88)
($5,733,833.88)

South Georgia College Annual Financial Report FY 2005 12

SOUTH GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, South Georgia College is reporting the activity for the South Georgia College Foundation.
See Note 16. 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 implemented GASB
South Georgia College Annual Financial Report FY 2005 13

Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 which must be reported in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools.
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
South Georgia College Annual Financial Report FY 2005 14

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. The college has no other 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 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC did not transfer any capital additions to South Georgia College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. South Georgia College has no deposits to report.
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.
South Georgia College Annual Financial Report FY 2005 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. South Georgia College had accrued liability for compensated absences in the amount of $284,509.65 as of 7-1-2004. For FY2005, $240,650.86 was earned in compensated absences and employees were paid $265,540.83, for a net decrease of ($24,889.97). The ending balance as of 6-30-2005 in accrued liability for compensated absences was $259,619.68.
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 previously in Note 1 Capital Assets section.
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 2005 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $56,849.01 51,505.83
$108,354.84

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.

R & R Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005 $142,004.71 221,533.00
85,067.52 $448,605.23

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.
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:
South Georgia College Annual Financial Report FY 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances. Restatement of Prior Year Net Assets Prior year net assets were restated due to a $526,053.38 correction in capital assets. This is shown as a prior year adjustment on the Statement of Revenues, Expenses and Changes in Net Assets.
South Georgia College Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $352,444.47 of the college's deposits were uninsured. Of these uninsured deposits, none were collateralized with securities held by the financial institution's trust department or agent in the college's name, $302,444.47 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the college's name and $50,000.00 were uncollateralized.
South Georgia College Annual Financial Report FY 2005 19

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$43,461.13 28,628.53
254,106.84
287,843.52 614,040.02
19,000.00
$595,040.02

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $176,786.40
$176,786.40

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $4,479.00.

South Georgia College Annual Financial Report FY 2005 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Restated Beginning Balances 7/1/2004
$197,146.48
197,146.48

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

1,293,392.00 20,887,418.24 1,297,293.00 1,399,725.32
1,246,639.88
26,124,468.44

38,772.17 27,312.17 66,084.34

57,680.00 416,996.16
474,676.16

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

305,667.49 10,218,645.28
833,539.76 1,009,027.28
1,185,855.80
13,552,735.61

46,562.11 575,902.03 23,288.76 50,048.22
16,477.05
712,278.17

(53,456.06) 574,056.73 50,660.22 93,034.85
(22,273.95)
642,021.79

Total Capital Assets, Being Depreciated, Net

12,571,732.83

(646,193.83)

(167,345.63)

Capital Assets, net

$12,768,879.31

($646,193.83)

($167,345.63)

Ending Balance 6/30/2005
$197,146.48 0.00
197,146.48
1,293,392.00 20,887,418.24 1,239,613.00 1,021,501.33
0.00 1,273,952.05
0.00 25,715,876.62
405,685.66 10,220,490.58
806,168.30 966,040.65
0.00 1,224,606.80
0.00 13,622,991.99
12,092,884.63
$12,290,031.11

South Georgia College Annual Financial Report FY 2005 21

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $0.00
3,000.00 $3,000.00

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

Current Portion
$0.00

284,509.65 284,509.65
$284,509.65

240,650.86 240,650.86
$240,650.86

265,540.83 265,540.83
$265,540.83

0.00 259,619.68 259,619.68
$259,619.68

0.00 180,461.48 180,461.48
$180,461.48

Note 9. Significant Commitments
The College had no significant unearned, outstanding, construction or renovation contracts executed.

South Georgia College Annual Financial Report FY 2005 22

Note 10. Lease Obligations
South Georgia College is obligated under various operating leases for the use of equipment.
OPERATING 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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$0.00

$40,545.00 9,078.00

0.00 $0.00

$49,623.00

South Georgia College Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$308,137.24 $324,941.52 $332,260.92

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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

South Georgia College Annual Financial Report FY 2005 24

with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $96,594.92 (9.65%) and $50,061.44 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $15,433.58 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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
South Georgia College Annual Financial Report FY 2005 25

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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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
South Georgia College Annual Financial Report FY 2005 26

pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2005. Note 14. 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, 2005, there were 73 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, South Georgia College recognized as incurred $279,283.86 of expenditures, which was net of $93,559.06 of participant contributions.
South Georgia College Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$2,020,157.37 397,498.40 609,039.02
11,976.98
33,674.99 210,984.52 197,537.29

$0.00

$0.00

$0.00 363,437.13 109,799.49
604.54
3,694.36 77,246.40 16,477.05

$0.00 535,987.45 142,611.47
20,002.63 1,250.00 8,939.67
153,208.78 4,505.04

$0.00 826,629.50 390,409.79
12,482.75 114,027.70 12,397.70 318,664.72
787.00

Total Expenses

$3,480,868.57

$0.00

$0.00

$571,258.97

$866,505.04

$1,675,399.16

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

A u xilia ry En terp ris es

Unallocated Exp en s es

$0.00 671,829.30 187,203.71 (206,167.95)
3,177.85
714,715.98 729,673.31
4,908.62

$0.00 668,223.48

$9,656.79 83,867.27
6,799.70 206,167.95
949.96 25,579.00 12,917.96 1,174,734.71 59,582.45

$0.00 428,480.72

$2,105,340.82

$668,223.48

$1,580,255.79

$428,480.72

Total Exp en s es
$2,029,814.16 2,879,249.05 1,445,863.18
0.00 49,194.71 809,080.18 786,340.66 2,664,512.44 712,278.17
$11,376,332.55

South Georgia College Annual Financial Report FY 2005 28

Note 16. 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 thirty-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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2005, the Foundation distributed $186,115.77 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Vice President for Business Affairs at 100 West College Park Drive, Douglas, GA 31533.

Investments for Component Units:

South Georgia College 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.

South Georgia College Foundation also holds investments in real property valued at $13,500.

Investments are comprised of the following amounts at June 30, 2005:

Cost

Fair Value

Cash held by investment organization Corporate Bonds Equity Securities Real Estate Georgia Investment Pools
BOR Total Return Fund

$0.00
154,978.05 13,500.00
2,479,397.00

$0.00
154,978.05 13,500.00
2,370,098.99

Total Investments

$2,647,875.05 $2,538,577.04

South Georgia College Annual Financial Report FY 2005 29

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Southern Polytechnic State University Marietta, Georgia

Lisa A. Rossbacher
President

Patrick B. McCord
Vice President for Business and Finance

SOUTHERN POLYTECHNIC STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 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 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 24 Note 12 Risk Management................................................................................................ 26 Note 13 Contingencies...................................................................................................... 26 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 27 Note 15 Natural Classifications With Functional Classifications..................................... 28 Note 16 Component Units ........................................................................ 29

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Southern Polytechnic State University is one of the 34 Universities of the University System of Georgia. The University, located in Marietta, Georgia, 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 of Georgia. The campus currently encompasses approximately 193 acres and contains 31 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 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 below.

Faculty

Students

FY2005 FY2004 FY2003

181

3,803

181

3,770

178

3,684

Overview of the Financial Statements and Financial Analysis

Southern Polytechnic State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 non-

Southern Polytechnic State University Annual Financial Report FY 2005 1

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 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 University for any lawful purpose.

Statement of Net Assets, Condensed
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

June 30, 2005
$5,684,643.91 47,242,179.37
3,357,809.10 56,284,632.38
4,289,493.15 277,444.62
4,566,937.77
47,242,179.37 1,447,394.41 2,046,395.53
981,725.30 $51,717,694.61

June 30, 2004
$5,816,647.26 46,665,135.92
3,558,792.04 56,040,575.22
4,991,532.01 255,654.68
5,247,186.69
46,665,135.92 1,401,388.24 1,868,166.61
858,697.76 $50,793,388.53

The total assets of the University increased by $244,057.16. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $577,043.45 of investment in plant, net of accumulated depreciation. The consumption of assets follows the philosophy to use available resources to acquire and improve all areas to better serve the instruction, research and public service missions of the University.

The total liabilities for the year decreased by ($680,248.92). The primary cause for the decrease was in current liabilities, primarily ($558,637.78) in deferred revenue due to the privatization of the University's housing operations. This also contributed to the decrease in unrestricted net assets. The combination of the increase in total assets of $244,057.16 and the decrease in total

Southern Polytechnic State University Annual Financial Report FY 2005 2

liabilities of ($680,248.92) yields an increase in total net assets of $924,306.08. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $577,043.45.

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 University, both operating and nonoperating, and the expenses paid by the University, operating and non-operating, 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 the 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.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed
June 30, 2005

June 30, 2004

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

$13,319,154.56 35,200,217.48 (21,881,062.92) 21,243,428.14
(637,634.78) 1,561,940.86
924,306.08 50,793,388.53 50,793,388.53 $51,717,694.61

$16,102,960.64 38,046,770.12 (21,943,809.48) 19,514,442.60
(2,429,366.88)
(2,429,366.88) 64,717,993.76 (11,495,238.35) 53,222,755.41 $50,793,388.53

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:

Southern Polytechnic State University Annual Financial Report FY 2005 3

State appropriations increased this year in the area of non-operating revenue. This increase is due to positive signs of improvement in the State of Georgia's economy during the fiscal year.

Utility expenses decreased significantly during the year due primarily to the privatization of Housing which significantly reduced the required utility needs paid by the University.

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

June 30, 2005

June 30, 2004

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$9,696,277.39
344,538.32 929,657.76 2,157,028.78 191,652.31
13,319,154.56
19,116,015.61 2,017,088.93
95,330.07 14,993.53 21,243,428.14
1,441,460.37 120,480.49
1,561,940.86
$36,124,523.56

$10,034,070.17
2,253,928.95 916,636.95
2,726,744.97 171,579.60
16,102,960.64
18,728,175.77 304,089.01 876,009.93 152,762.56 (546,594.67)
19,514,442.60
0.00 $35,617,403.24

Southern Polytechnic State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses In st ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005
$17,370,130.62 31,895.58
2,683,623.51 3,154,711.21 5,254,104.46 3,609,483.30
984,714.46 2,111,554.34
35,200,217.48

June 30, 2004
$19,113,429.67 94,699.81
377,380.62 2,130,605.36 2,814,534.89 5,593,156.27 3,636,817.01 1,502,880.64 2,783,265.85
38,046,770.12

Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

$35,200,217.48

$38,046,770.12

Auxiliary revenues decreased significantly this fiscal year due primarily to the privatization of Housing. As expected, Auxiliary Enterprise expenses also decreased due to the privatization project.

The compensation and employee benefits category decreased by approximately ($1,257,571.60). The decrease reflects a reduction in the number of full time faculty employees with benefits. Utility expenses decreased by approximately ($197,326.58) during the past year. The decrease was primarily associated with the housing privatization project which significantly decreased the University's utility needs.

Under non-operating revenues state appropriations increased by approximately $387,839.84. This increase follows years of System-wide appropriation cuts and is due to the positive growth in the State's economy. We are hopeful that the economy continues on an upward trend.

Statement of Cash Flows

The final statement presented by the 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 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

Southern Polytechnic State University Annual Financial Report FY 2005 5

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, 2005 and 2004, Condensed

Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Act ivit ies Invest ing Act ivit ies
Net Change in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($22,247,059.60) 21,207,016.81 2,408,064.74 95,330.07 1,463,352.02 1,009,767.49
$2,473,119.51

June 30, 2004
($19,505,580.73) 19,599,029.74 (415,610.48) 67,081.41 (255,080.06) 1,264,847.55
$1,009,767.49

Capital Assets

Southern Polytechnic State University did not have any major capital projects during the fiscal year.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Liabilities (Debt)

Southern Polytechnic State University had Long-Term Liabilities (Debt) of $898,169.69 of which $620,725.07 was reflected as current liability at June 30, 2005.

For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.

Component Units In compliance with GASB Statement No. 39, Southern Polytechnic State University included the financial statements and notes for all required component units for FY2005. The Southern Polytechnic State University Foundation had endowment investments of $6,418,988.16 as of June 30, 2005. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Southern Polytechnic State University Annual Financial Report FY 2005 6

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. Lisa A. Rossbacher, President Southern Polytechnic State University
Southern Polytechnic State University Annual Financial Report FY 2005 7

Statement of Net Assets

S ou the rn Pol yte ch n i c S tate Un i ve rsi ty S TATEMENT O F NET AS S ETS June 30, 2005

AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net Receivables - Federal Financial Assist ance Receivables - St at e General Appropriat ions Allot ment Receivables - Ot her Leases Receivable P ledges Receivable Invent ories P repaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s

Southe rn Polyte chnic S tate Un i ve rsti y
$2,473,119.51
91,547.37 2,436,605.17
683,371.86
5,684,643.91

Noncurre nt Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Asset s, net T ot al Noncurrent Asset s
TO TAL AS S ETS
LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable Deposit s Deferred Revenue Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Current P ort ion of Long-t erm Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies T ot al Noncurrent Liabilit ies TO TAL LIABILITIES
NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

2,955,100.08 402,709.02
47,242,179.37 50,599,988.47 56,284,632.38
215,499.68 102,249.11
12,766.99 1,924,826.44
217,685.15 1,195,740.71
620,725.07 4,289,493.15
277,444.62
277,444.62 4,566,937.77
47,242,179.37 1,447,394.41 2,046,395.53 981,725.30
$51,717,694.61

Southe rn Polyte chnic S tate Un i ve rsti y Fou n dati on
$817,665.02
428,333.53 38,014.06 96,306.83
1,380,319.44
6,418,988.16
29,472,197.33 35,891,185.49 37,271,504.93
630,277.50
31,667.41 139,152.00 (258,394.99) 850,000.00 1,392,701.92
34,840,000.00 34,840,000.00 36,232,701.92
(1,787,656.67) 867,369.00 411,555.25
1,547,535.43 $1,038,803.01

Southern Polytechnic State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

REVENUES

S ou th e rn Polytechnic State
Unive rsity

S ou th e rn Polytechnic State
Unive rsity Fou n da ti on

Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Boo kst ore Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Ben efit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat ion Payments to or on behalf of Southern Polytechnic State University
T otal Operating Expenses Operating Income (loss)

$10,736,024.71 1,039,747.32
235,058.02 34,025.60 75,454.70
929,657.76
107,564.14 90,478.14
654,900.91 196,957.00 203,756.39 804,904.17
98,468.03 191,652.31 13,319,154.56

$0.00 733,314.25 140,123.68
3,167,440.00
4,040,877.93

9,120,361.95 10,791,602.09
4,936,503.18 (227,678.99) 207,457.69 1,229,048.52 1,175,694.80 6,117,041.99 1,850,186.25
35,200,217.48 (21,881,062.92)

274,195.66 30,323.20
252,726.02 1,447,382.96 1,382,828.00
510,560.60 3,898,016.44
142,861.49

Southern Polytechnic State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

S ou th e rn Polytechnic State
Unive rsity
19,116,015.61

S ou th e rn Polyte chnic State
Unive rsity Fo u n da ti o n

2,005,014.21

12,074.72

95,330.07
14,993.53 21,243,428.14
(637,634.78)

6,887.16 (1,374,274.81)
(1,367,387.65) (1,224,526.16)

1,441,460.37 120,480.49
1,561,940.86 924,306.08
50,793,388.53
50,793,388.53 $51,717,694.61

83,501.00 83,501.00 (1,141,025.16)
2,179,828.17
2,179,828.17 $1,038,803.01

Southern Polytechnic State University Annual Financial Report FY 2005 10

Statement of Cash Flows
S OUTHERN POLYTECHNIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart m ent s P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$10,344,050.74
1,282,993.39 928,221.26
(12,897,591.99) (19,644,068.06)
(1,229,048.52)
(12,903.13) 63,757.30 348,701.47 173,296.84 169,050.59 701,102.16 68,168.77 (2,542,790.42) (22,247,059.60)
19,116,015.61 (208,002.73) 2,299,003.93
21,207,016.81
6,782,182.10
(4,374,117.36)
2,408,064.74
95,330.07
95,330.07 1,463,352.02 1,009,767.49 $2,473,119.51

Southern Polytechnic State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
D ep r eciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($21,881,062.92)
1,850,186.25 1,142,620.18 (2,723,749.85) (255,398.89) (254,266.92) (132,153.09)
6,765.64 ($22,247,059.60)
($1,441,460.37)

Southern Polytechnic State University Annual Financial Report FY 2005 12

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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 that advances 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 comprise 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 institution's budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member colleges and universities. 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 University. These statements (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Southern Polytechnic State University is reporting the activity for the Southern Polytechnic State University Foundation, Inc.
See Note 16. 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
Southern Polytechnic State University Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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, units 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-institution 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 Statement 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 2005 14

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.
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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, capital additions from GSFIC totaled $1,441,460.37.
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
Southern Polytechnic State University Annual Financial Report FY 2005 15

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 $891,404.05 as of 7-1-2004. For FY2005, $1,988,938.50 was earned in compensated absences and employees were paid $1,982,172.86, for a net increase of $6,765.64. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $898,169.69.

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 previously in Note 1 Capital Assets section.

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 a 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:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005
$1,173,607.37 492,150.69 141,243.10
239,394.37 $2,046,395.53

Southern Polytechnic State University Annual Financial Report FY 2005 16

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 Reserv e fo r En cum bran ces Reserv e fo r Inv en t ory Ot h er Unrest rict ed T o t al Unrest rict ed Net Asset s

June 30, 2005
$ 4 ,7 9 9 .7 7 2 ,8 3 8 ,3 3 9 .1 3
(1 ,8 6 1 ,4 1 3 .6 0 ) $ 9 8 1 ,7 2 5 .3 0

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.

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 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.

Southern Polytechnic State University Annual Financial Report FY 2005 17

Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Southern Polytechnic State University Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $3,275,143.79 of the university's deposits were uninsured. Of these uninsured deposits, none were collateralized as per Georgia Code 45-8-11.
B. Investments
Southern Polytechnic State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
Southern Polytechnic State University Annual Financial Report FY 2005 19

The University's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

$0.00 2,523.60
448,577.97 471,273.18 2,481,303.30
$3,403,678.05

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have any instruments vulnerable to this form of investment risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the university will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2005, $2,523.60 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name.

Southern Polytechnic State University Annual Financial Report FY 2005 20

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$1,309,318.06 384,277.62 91,547.37
1,234,486.23 3,019,629.28
491,476.74
$2,528,152.54

Note 4. Inventories
Southern Polytechnic State University had no inventories at June 30, 2005.
Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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. Southern Polytechnic State University had no allowance for uncollectible loans at June 30, 2005.

Southern Polytechnic State University Annual Financial Report FY 2005 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$753,396.56
753,396.56

Additions
$0.00 156,511.68 156,511.68

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

1,623,504.00 59,036,530.03
567,531.00 7,707,624.02
5,394,177.15 30,500.00
74,359,866.20

4,654,093.65 877,330.62 284,153.46
5,815,577.73

7,316,319.87 346,575.71 66,394.76
7,729,290.34

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

661,848.46 16,627,728.18
480,136.87 6,590,809.91
4,075,293.00 12,310.42
28,448,126.84

136,915.50 449,086.81 111,955.70 553,015.83
598,322.82 889.59
1,850,186.25

72,516.52 3,355,050.38
94,888.88 282,058.49
379,852.82 63.54
4,184,430.63

Total Capital Assets, Being Depreciated, Net

45,911,739.36

3,965,391.48

3,544,859.71

Capital Assets, net

$46,665,135.92

$4,121,903.16

$3,544,859.71

Ending Balance 6/30/2005
$753,396.56 156,511.68 909,908.24
1,623,504.00 56,374,303.81
567,531.00 8,238,378.93
0.00 5,611,935.85
30,500.00 72,446,153.59
726,247.44 13,721,764.61
497,203.69 6,861,767.25
0.00 4,293,763.00
13,136.47 26,113,882.46
46,332,271.13
$47,242,179.37

Southern Polytechnic State University Annual Financial Report FY 2005 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $1,561,525.49
363,300.95 $1,924,826.44

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

891,404.05 891,404.05

1,988,938.50 1,988,938.50

1,982,172.86 1,982,172.86

898,169.69 898,169.69

Total Long Term Obligations

$891,404.05

$1,988,938.50

$1,982,172.86

$898,169.69

Current Portion
$0.00
620,725.07 620,725.07 $620,725.07

Note 9. Significant Commitments The University did not have significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2005. Note 10. Lease Obligations Capital Leases Southern Polytechnic State University did not have Capital Leases during fiscal year 2005. Operating Leases Southern Polytechnic State University did not have Operating Leases during fiscal year 2005.

Southern Polytechnic State University Annual Financial Report FY 2005 23

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,006,474.78 $1,116,496.27 $1,219,223.44

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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

Southern Polytechnic State University Annual Financial Report FY 2005 24

Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution was 9.65% 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 $651,016.48 (9.65%) and $337,328.42 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $75,165.38 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Southern Polytechnic State University Annual Financial Report FY 2005 25

Note 12. 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. 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 Southern Polytechnic State University expects such amounts, if any, to be immaterial to its overall financial position.
Southern Polytechnic State University Annual Financial Report FY 2005 26

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, 2005. Note 14. 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, 2005, there were 171 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Southern Polytechnic State University recognized as incurred $759,868.39 of expenditures, which was net of $239,005.00 of participant contributions.
Southern Polytechnic State University Annual Financial Report FY 2005 27

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$9,094,760.95 2,724,588.12 2,542,123.35
100,191.33 16,593.00 56,876.56 1,416,044.10 1,418,953.21

$10,000.00 1,709.62 1,744.50 1,169.52
17,271.94

$0.00

$3,950.20 1,657,697.58
359,661.81
36,155.73
29,259.35 555,813.44 41,085.40

$12,750.80 1,744,729.27
417,255.23
28,560.99
17,141.12 931,197.86
3,075.94

($1,100.00) 2,882,785.83 1,126,740.10
28,737.45 10,126.06 (9,501.22) 1,157,105.95 59,210.29

Total Expenses

$17,370,130.62

$31,895.58

$0.00 $2,683,623.51 $3,154,711.21 $5,254,104.46

Natural Classification
Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 1,333,157.07
378,714.98 (325,255.70)
2,607.16
1,063,921.15 833,106.74 323,231.90

$0.00 984,714.46

$0.00 446,934.60 110,263.21
97,576.71 10,035.51 217,615.00 17,997.84 1,206,501.96
4,629.51

$0.00

$3,609,483.30

$984,714.46 $2,111,554.34

$0.00

T ot al Expenses
$9,120,361.95 10,791,602.09
4,936,503.18 (227,678.99) 207,457.69 1,229,048.52 1,175,694.80 6,117,041.99 1,850,186.25
$35,200,217.48

Southern Polytechnic State University Annual Financial Report FY 2005 28

Note 16. Component Units
Southern Polytechnic State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Southern Polytechnic 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 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $510,561 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Advancement Office, Southern Polytechnic State University, 1100 South Marietta Pkwy., Marietta, GA, 30060-2896.
Investments for Component Units:
Southern Polytechnic State University Foundation holds endowment investments in the amount of $897,000. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Southern Polytechnic State University Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the rolling three year average of market value may be used for academic scholarships or other academic activities as specified by the endowment agreement.
The Southern Polytechnic State University Foundation Endowments are invested in the Board of Regents Total Return Fund. Total investments held by the Foundation held a fair value of $6,418,988.16.
Southern Polytechnic State University Annual Financial Report FY 2005 29

Southern Polytechnic State University Investments are comprised of the following amounts at June 30, 2005:

Cos t

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$1,230,456.03

$1,230,465.03

5,140,021.77

5,188,523.13

Total Investments

$6,370,477.80

$6,418,988.16

Southern Polytechnic State University Annual Financial Report FY 2005 30

GEORGIA INSTITUTE OF TECHNOLOGY
Financial Report
For the Year Ended June 30, 2005

Georgia Institute of Technology Atlanta, Georgia

Dr. G. Wayne Clough
President

Robert Thompson
Senior Vice President for Administration & Finance

GEORGIA INSTITUTE OF TECHNOLOGY ANNUAL FINANCIAL REPORT FY 2005
Table of Contents
Management's Discussion and Analysis ................................................................... 1 Statement of Net Assets .............................................................................................. 8 Statement of Revenues, Expenses and Changes in Net Assets................................. 11 Statement of Cash Flows .......................................................................................... 14 Note 1. Summary of Significant Accounting Policies ............................................ 16 Note 2. Deposits and Investments........................................................................... 22 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. Significant Commitments........................................................................... 28 Note 10. Lease Obligations..................................................................................... 28 Note 11. Retirement Plans ...................................................................................... 32 Note 12. Risk Management..................................................................................... 35 Note 13. Contingencies............................................................................................ 36 Note 14. Post-Employment Benefits Other Than Pension Benefits ....................... 37 Note 15. Natural Classifications with Functional Classifications .......................... 38 Note 16. Component Units ...................................................................................... 39

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, with approximately $400 million expended on sponsored research activities and providing a focused, technology 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, with four schools in the College of Engineering listed among the country's top five. Georgia Tech offers degrees through the Colleges of Architecture, Engineering, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technology 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 2005 (FY 2005), which began July 1, 2004 and ended June 30, 2005. 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; restrictedexpendable; and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for FY 2004 and FY 2005.
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.
Georgia Institute of Technology Annual Financial Report FY 2005 1

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 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, 2004 and June 30, 2005:

Statement of Net Assets, Condensed

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$128,558,615.37 1,135,752,856.00
61,463,979.77 1,325,775,451.14

June 30, 2004
$141,708,345.03 1,066,511,750.53
61,332,907.17 1,269,553,002.73

Liabilities : Current Liabilities Noncurrent Liabilities

76,862,980.76 343,414,915.30

75,857,183.45 274,487,956.45

Total Liabilities

420,277,896.06

350,345,139.90

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

797,714,559.53 45,926,483.32 29,916,051.09 18,849,526.19 13,090,934.95
$905,497,555.08

798,306,374.22 43,493,399.60 23,642,629.32 25,042,987.70 28,722,471.99
$919,207,862.83

The total assets of the institution increased by $56,222,448.41 mainly due to the addition of the Married and Family Housing complex. Approximately $13.1 million in unrestricted net assets and approximately $48.8 million in restricted net assets are available for future operations.
The total liabilities for the year increased by $69,932,756.16 , primarily due to the addition of a long term capital lease on the Married and Family Housing complex. The combination of the increase in total assets of $56,222,448.41 and the increase in total liabilities of $69,932,756.16 yields a decrease in total net assets of ($13,710,307.75). The primary causes for the decrease in total net assets is attributed to: (1) A one time loss on disposal of capital assets prior to complete depreciation (buildings demolished to make way for new construction); and (2) The use of unrestricted reserves to cover current year operating costs.

Georgia Institute of Technology Annual Financial Report FY 2005 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, 2004 and June 30, 2005:

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$575,614,395.39 815,538,916.21 (239,924,520.82) 219,615,955.97
(20,308,564.85) 6,598,257.10
(13,710,307.75) 919,207,862.83
0.00 919,207,862.83 $905,497,555.08

$565,567,339.32 780,468,418.90 (214,901,079.58) 203,871,395.37
(11,029,684.21) 140,822,362.39 129,792,678.18 814,026,675.04 (24,611,490.39) 789,415,184.65 $919,207,862.83

The Statement of Revenues, Expenses, and Changes in Net Assets reflects continued increases in Operating Revenues, primarily in the area of Federal, State, and Other Grants and Contracts. Operating Revenues increased by $10 million, of which $7.4 million is attributable to growth in Federal Grants and Contracts revenue. Revenue generated by Tuition and Fees and Sales, Services and Other remained relatively flat from FY 2004 to FY 2005. Revenue from state appropriations increased slightly, from $207.8 million to $213.5 million. Total revenues (operating, non-operating, and other) for the year ended June 30, 2005 decreased by $116.5 million from the previous year, primarily due to a reduction in capital construction gifts from the state and affiliated organizations and the taking of a one time loss on the disposal of capital
Georgia Institute of Technology Annual Financial Report FY 2005 3

assets. Capital gift revenue is subject to annual fluctuations, because under current policy, these items are gifted only upon completion of a project.
The graph below compares current and prior year revenue:

Georgia Institute of Technology Revenue
(dollars in millions)
FY 2005 $805.5 FY 2004 $922.0

$450 $400 $350 $300 $250 $200 $150 $100
$50 $-

$399.1 $381.9

$97.7 $97.0

$140.9

$88.6 $94.4

$213.5 $207.8

$6.6

Tuition and Fees Gifts, Grants and Capital Gifts and Sales, Services,

State

Contracts

Grants

and Other

Appropriations

Georgia Institute of Technology Annual Financial Report FY 2005 4

Total operating expenses for the year were approximately $815.5 million, an increase of $35 million, or 4.5%, over the previous year. The graph below shows year-to-year expenditure change by object of expenditure:
Georgia Institute of Technology Operating Expenses by Object of Expediture Classification
(dollars in millions)

$600 $500 $400 $300 $200 $100
$0

510.0 502.0
Salaries and Benef its

FY 2005 $815.5

FY 2004 $780.5

222.4 198.6

51.2 49.8

Travel, Supplies and Other

Depreciation

20.1 16.9 Utilities

11.8 13.2
Scholarships and Fellow ships

The functional chart below shows year-to-year expenditure changes by functional area:

$600 $500

$538.0 $541.7

$400

$300

$200

$100

$0
Instruction, Research, and Public Service

Georgia Institute of Technology Expenses by Functional Classification
(dollars in millions)

FY 2005 $815.5

FY 2004 $780.5

$89.4 $84.8

$76.4 $49.7

Academic, Student, and Institutional
Support

Operations and Maintenance of
Plant

$54.3 $46.0
Auxiliary Enterprises

$11.8 $13.2

$45.6 $45.1

Scholarships and Unallocated

Fellowships

Depreciation

Georgia Institute of Technology Annual Financial Report FY 2005 5

Statement of Cash Flows
The final statement presented by the Georgia Institute of Technology is the Statement of Cash Flows. The statement presents detailed information about the cash activity of the Institute during the year. The statement is divided into five parts. The first part presents operating cash flows and shows the net cash used by the operating activities. The second section shows cash flows from non-capital financing activities. This section reflects the cash received and spent for nonoperating, non-investing, and non-capital financing purposes. The third section presents cash flows from capital and related financing activities used for the acquisition and construction of capital and related items. The fourth section shows the cash flows from investing activities and includes purchases, proceeds, and interest received. 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($191,098,536.14) 235,286,465.66 (61,484,144.17) 13,776,564.84 (3,519,649.81) 61,317,672.00
$57,798,022.19

June 30, 2004
($169,613,293.86) 211,824,207.23 (36,593,637.31) 3,512,389.18 9,129,665.24 52,188,006.76
$61,317,672.00

Capital Assets
The Institute had three significant capital asset facility additions in fiscal year 2005. The Married and Family Housing complex and parking deck, the Food Processing Technology Building and the Penny and Roe Stamps Student Center Commons were completed and placed into service in fiscal year 2005.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt
Georgia Institute of Technology had a Long-Term Debt of $366,479,364.76 of which $23,064,449.46 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.

Georgia Institute of Technology Annual Financial Report FY 2005 6

Component Units
In compliance with GASB Statement No. 39, Georgia Tech has included the financial statements and notes for all required component units for fiscal year 2005. These units are: Georgia Tech Foundation, Inc., Georgia Tech Athletic Association, Georgia Tech Research Corporation, Georgia Tech Facilities, Inc., Georgia Tech Alumni Association, and Georgia Advanced Technology Ventures, Inc. Significant investment and long-term liabilities balances for these organizations are as follows:
Georgia Tech Athletic Association contracts with the Georgia Tech Foundation for investment services. The Foundation held approximately $61.4 million in investments for the benefit of the Athletic Association at June 30, 2005. The Athletic Association has outstanding long-term debt, net of discounts and premiums, totaling approximately $108.5 million.
Georgia Advanced Technology Ventures, Inc. has a capital lease payable with a balance of $49.6 million.
Georgia Tech Facilities, Inc. holds investments of approximately $208.7 million. Facilities, Inc. has four bond issues outstanding with balances totaling approximately $175.2 million.
Georgia Tech Foundation, Inc. holds investments of approximately $1.0 billion, of which approximately $310.8 million is the corpus of the endowment. The foundation has three bond issues outstanding with balances totaling approximately $222.1 million, net of discounts.
Further details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.
Economic Outlook
The Institute's overall financial position remains strong. Revenue collections for the State of Georgia are up when compared to prior years, so there are expectations that state appropriations, which have declined from a high of $258.8 million in fiscal year 2001 to $213.5 million in the current year, will show improvement. An approved 8% tuition increase for fiscal year 2006 will have a positive impact on revenue, along with projected growth in the sponsored research program. The Institute's ability to generate funding from tuition, sponsored programs and other revenue generating activities has carried programs through the recent economic downturn, although some program cuts and layoffs have been necessary in FY 2004 and FY 2005. Additional state support and capital investments will be necessary to regain recent momentum and realize the potential of the Institute to contribute to the state and greater Atlanta economy.
Dr. G. Wayne Clough President
Georgia Institute of Technology Annual Financial Report FY 2005 7

Statement of Net Assets

G E O RG IA INS T IT UT E O F T E CHNO LO G Y S TATEMENT OF NE T AS S E TS
June 30, 2005

CO MP O NE NT UNIT

AS S ETS Cu rre n t As s e ts
Cas h an d Cas h Eq u ivalen ts S h ort-term In ves tm en ts Accou n ts Receivab le, n et (n ote 3)
Receivab les - Fed eral Fin an cial As s is tan ce Receivab les - S tate Gen eral Ap p rop riation s Allotm en t Receivab les - Oth er Leas es Receivab le P led g es Receivab le Du e from Com p on en t Un its Du e from P rim ary Govern m en t In ven tories (n ote 4) P rep aid Item s Notes an d Mortg ag es Receivab le Oth er As s ets
Total Cu rren t As s ets

P RIMARY G O VE RNME NT

G E O RG IA T E CH AT HLE T IC
AS S O CIAT IO N

$57,572,088.32 4,137,224.70 9,809,205.85 10,901,907.03
40,005,864.08 496,331.01
5,635,994.38
128,558,615.37

$7,335,336.00
1,241,436.00 3,719,002.00
27,000.00
388,032.00 510,579.00 13,221,385.00

No n c u rre n t As s e ts Non cu rren t Cas h Du e from Com p on en t Un its Du e from P rim ary Govern m en t In ves tm en ts (In clu d in g Real Es tate) Notes Receivab le, n et Leas es Receivab le P led g es Receivab le Oth er As s ets Cap ital As s ets , n et (n ote 6) Total Non cu rren t As s ets
TOTAL AS S ETS
LIAB ILIT IE S Cu rre n t Lia b ilitie s
Accou n ts P ayab le S alaries P ayab le Ben efits P ayab le Con tracts P ayab le Dep os its Deferred Reven u e (n ote 7) Oth er Liab ilities Dep os its Held for Oth er Org an ization s Du e to Com p on en t Un its Du e to P rim ary Govern m en t Cu rren t P ortion of Lon g -term Deb t, n et Com p en s ated Ab s en ces (cu rren t p ortion )
Total Cu rren t Liab ilities No n c u rre n t Lia b ilitie s ( n o te 8 )
Du e to Com p on en t Un its Du e to P rim ary Govern m en t Leas e P u rch as e Ob lig ation s (n on cu rren t) Deferred Reven u e (n on cu rren t) an d Oth er Non cu rren t Liab ilities , n et Com p en s ated Ab s en ces (n on cu rren t)
Total Non cu rren t Liab ilities T O T AL LIAB ILIT IE S

225,933.87
53,552,297.42 7,685,748.48
1,135,752,856.00 1,197,216,835.77 1,325,775,451.14
7,056,224.23 557,054.33 153,017.06 854,541.52
17,122,022.46 23,094,224.63
1,791,443.45 3,170,003.62
7,118,968.57 15,945,480.89 76,862,980.76
330,919,327.90
12,495,587.40 343,414,915.30 420,277,896.06

61,369,437.00
7,775,926.00 2,872,088.00 105,438,994.00 177,456,445.00 190,677,830.00
2,058,377.00
5,565,801.00 767,501.00
235,897.00 1,779,481.00
751,616.00 11,158,673.00
108,994,692.00 108,994,692.00 120,153,365.00

NET AS S ETS
In ves ted in Cap ital As s ets , n et of related d eb t Res tricted for
Non exp en d ab le Exp en d ab le Cap ital P rojects Un res tricted TOTAL NET AS S ETS

797,714,559.53
45,926,483.32 29,916,051.09 18,849,526.19 13,090,934.95 $905,497,555.08

(945,636.00)
12,467,317.00 43,646,392.00
15,356,392.00 $70,524,465.00

Georgia Institute of Technology Annual Financial Report FY 2005 8

Statement of Net Assets, Continued

AS S ETS Cu rre n t As s e ts
Cas h an d Cas h Eq u ivalen ts S h ort-term In ves tm en ts Accou n ts Receivab le, n et (n ote 3)
Receivab les - Fed eral Fin an cial As s is tan ce Receivab les - S tate Gen eral Ap p rop riation s Allotm en t Receivab les - Oth er Leas es Receivab le P led g es Receivab le Du e from Com p on en t Un its Du e from P rim ary Govern m en t In ven tories (n ote 4) P rep aid Item s Notes an d Mortg ag es Receivab le Oth er As s ets
Total Cu rren t As s ets

G E O RG IA ADVANCED T E CHNOLOGY VENTURES

CO MP O NE NT UNIT S

G E O RG IA T E CH ALUMNI
AS S O CIAT IO N

G E O RG IA T E CH FACILIT IE S , INC.

$1,583,777.00

$1,837.00

$63,000.00

1,513,345.00 3,097,122.00

1,178,991.00
11,406.00 3,539.00 1,195,773.00

7,296,000.00 1,905,000.00 10,302,000.00
19,566,000.00

No n c u rre n t As s e ts Non cu rren t Cas h Du e from Com p on en t Un its Du e from P rim ary Govern m en t In ves tm en ts (In clu d in g Real Es tate) Notes Receivab le, n et Leas es Receivab le P led g es Receivab le Oth er As s ets Cap ital As s ets , n et (n ote 6) Total Non cu rren t As s ets
TOTAL AS S ETS
LIAB ILIT IE S Cu rre n t Lia b ilitie s
Accou n ts P ayab le S alaries P ayab le Ben efits P ayab le Con tracts P ayab le Dep os its Deferred Reven u e (n ote 7) Oth er Liab ilities Dep os its Held for Oth er Org an ization s Du e to Com p on en t Un its Du e to P rim ary Govern m en t Cu rren t P ortion of Lon g -term Deb t, n et Com p en s ated Ab s en ces (cu rren t p ortion )
Total Cu rren t Liab ilities No n c u rre n t Lia b ilitie s ( n o te 8 )
Du e to Com p on en t Un its Du e to P rim ary Govern m en t Leas e P u rch as e Ob lig ation s (n on cu rren t) Deferred Reven u e (n on cu rren t) an d Oth er Non cu rren t Liab ilities , n et Com p en s ated Ab s en ces (n on cu rren t)
Total Non cu rren t Liab ilities T O T AL LIAB ILIT IE S

76,585,105.00 76,585,105.00 79,682,227.00
849,726.00
1,500,000.00
75,632.00 14,374.00 2,439,732.00
49,631,945.00 6,821,580.00
56,453,525.00 58,893,257.00

578,346.00
484,954.00 1,063,300.00 2,259,073.00
336,742.00
500,000.00 300,000.00
33,539.00 174,885.00 156,752.00 1,501,918.00
1,501,918.00

208,717,000.00
4,243,000.00 13,240,000.00 226,200,000.00 245,766,000.00
11,017,000.00
2,150,000.00 13,167,000.00
227,493,000.00 227,493,000.00 240,660,000.00

NET AS S ETS
In ves ted in Cap ital As s ets , n et of related d eb t Res tricted for
Non exp en d ab le Exp en d ab le Cap ital P rojects Un res tricted TOTAL NET AS S ETS

20,076,225.00 712,745.00
$20,788,970.00

484,954.00
272,201.00 $757,155.00

(1,311,000.00) 12,125,000.00
(5,708,000.00) $5,106,000.00

Georgia Institute of Technology Annual Financial Report FY 2005 9

Statement of Net Assets, Continued

AS S ETS Cu rre n t As s e ts
Cas h an d Cas h Eq u ivalen ts S h ort-term In ves tm en ts Accou n ts Receivab le, n et (n ote 3)
Receivab les - Fed eral Fin an cial As s is tan ce Receivab les - S tate Gen eral Ap p rop riation s Allotm en t Receivab les - Oth er Leas es Receivab le P led g es Receivab le Du e from Com p on en t Un its Du e from P rim ary Govern m en t In ven tories (n ote 4) P rep aid Item s Notes an d Mortg ag es Receivab le Oth er As s ets
Total Cu rren t As s ets

CO MP O NE NT UNIT S

G E O RG IA T E CH FO UNDAT IO N

G E O RG IA T E CH RES EARCH
CO RP O RAT IO N

$3,125,000.00 4,800,000.00

$35,665,205.00 1,387,956.00

5,941,918.33 6,539.00
728,000.00 6,263,233.19 20,864,690.52

29,210,625.00
17,310.00 66,281,096.00

No n c u rre n t As s e ts Non cu rren t Cas h Du e from Com p on en t Un its Du e from P rim ary Govern m en t In ves tm en ts (In clu d in g Real Es tate) Notes Receivab le, n et Leas es Receivab le P led g es Receivab le Oth er As s ets Cap ital As s ets , n et (n ote 6) Total Non cu rren t As s ets
TOTAL AS S ETS
LIAB ILIT IE S Cu rre n t Lia b ilitie s
Accou n ts P ayab le S alaries P ayab le Ben efits P ayab le Con tracts P ayab le Dep os its Deferred Reven u e (n ote 7) Oth er Liab ilities Dep os its Held for Oth er Org an ization s Du e to Com p on en t Un its Du e to P rim ary Govern m en t Cu rren t P ortion of Lon g -term Deb t, n et Com p en s ated Ab s en ces (cu rren t p ortion )
Total Cu rren t Liab ilities No n c u rre n t Lia b ilitie s ( n o te 8 )
Du e to Com p on en t Un its Du e to P rim ary Govern m en t Leas e P u rch as e Ob lig ation s (n on cu rren t) Deferred Reven u e (n on cu rren t) an d Oth er Non cu rren t Liab ilities , n et Com p en s ated Ab s en ces (n on cu rren t)
Total Non cu rren t Liab ilities T O T AL LIAB ILIT IE S

1,003,837,000.00 1,284,000.00
175,409,227.81 5,182,081.67
21,540,000.00 42,842,000.00 1,250,094,309.48 1,270,959,000.00
1,517,592.87
9,575,932.07
10,302,000.00 5,131,821.08 4,115,633.03 268,430.75
30,911,409.80
61,369,437.00
285,073,153.20
346,442,590.20 377,354,000.00

31,409,896.00 2,428,892.00 33,838,788.00 100,119,884.00
1,967,309.00
34,387,629.00 36,354,938.00
26,989,798.00 26,989,798.00 63,344,736.00

NET AS S ETS
In ves ted in Cap ital As s ets , n et of related d eb t Res tricted for
Non exp en d ab le Exp en d ab le Cap ital P rojects Un res tricted TOTAL NET AS S ETS

3,175,346.57
296,172,000.00 266,785,093.97
12,031,906.03 315,440,653.43 $893,605,000.00

2,428,892.00
34,346,256.00 $36,775,148.00

Georgia Institute of Technology Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA INS TITUTE OF TECHNOLOGY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS
for the Year Ended June 30, 2005

REVENUES Operating Revenues
Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances
Gifts and Contributions Endowment Income (per s pending plan) Federal A ppropriations Grants and Contracts
Fe d e ra l State Oth er Sales and Services Rents and Royalties A uxiliary Enterpris es
Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENS ES Operating Expens es Salaries : Fa c u lt y Staff Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n Other Operating Expens e Payments to or on behalf of Georgia Ins titute of Technology Total Operating Expens es Operating Income (los s ) NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Ot h er Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) and Other Nonoperating Expens es Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Ot h er A dditions to permanent endowments Total Other Revenues Increas e in Net A s s ets NET AS S ETS Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated
Net A s s ets -End of Year

PRIMARY GOVERNMENT
$116,371,964.24 18,711,275.00
273,374,298.21 14,948,498.23 98,072,330.13 12,291,224.09 512,963.60
31,693,636.79 978,594.93
15,074,636.68 9,435,139.70 4,761,307.91 1,938,719.14 1,566,044.70
13,306,312.04 575,614,395.39
208,714,703.64 218,241,340.51
79,925,058.75 3,175,389.01
13,698,906.69 11,765,454.00 20,092,302.86 208,671,418.61 51,254,342.14
815,538,916.21 (239,924,520.82)
213,543,998.00
12,697,964.81 9,250,513.80 (3,701,584.35)
(12,174,936.29) 219,615,955.97 (20,308,564.85)
4,235,621.08 2,362,636.02
6,598,257.10 (13,710,307.75)
919,207,862.83
919,207,862.83 $905,497,555.08

COMPONENT UNIT GEORGIA TECH ATHLETIC AS S OCIATION
$0.00
18,440,665.00
2,970,825.00 21,411,490.00
11,300,620.00 2,046,925.00 9,559.00 1,918,443.00 1,055,859.00 1,040,721.00 7,404,566.00 4,706,126.00 8,070,895.00
37,553,714.00 (16,142,224.00)
9,772,230.00 6,112,591.00 (6,093,557.00) 9,791,264.00 (6,350,960.00)
0.00 (6,350,960.00) 76,875,425.00 76,875,425.00 $70,524,465.00

Georgia Institute of Technology Annual Financial Report FY 2005 11

Statement of Revenues, Expenses and Changes in Net Assets, Continued

REVENUES Operating Revenues
Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances
Gifts and Contributions Endowment Income (per s pending plan) Federal Appropriations Grants and Contracts
Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es
Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENS ES Operating Expens es Salaries : Fa c u lt y Staff Be n e fit s Other Pers onal Services Travel Scholars hips and Fellows hips Utilities Supplies and Other Services Depreciation Other Operating Expens e Payments to or on behalf of Georgia Ins titute of Technology Total Operating Expens es Operating Income (los s ) NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) and Other Nonoperating Expens es Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Federal State Other Additions to permanent endowments Total Other Revenues Increas e in Net As s ets NET AS S ETS Net As s ets -beginning of year, as originally reported Prior Year Adjus tments Net As s ets -beginning of year, res tated
Net As s ets -End of Year

GEORGIA ADVANCED TECHNOLOGY VENTURES

COMPONENT UNITS GEORGIA TECH ALUMNI AS S OCIATION

$0.00

$0.00

14,195.00 1,009,611.00 5,377,562.00

716,873.00 1,290,128.00

1,039,919.00 7,441,287.00
29,715.00 7,221.00 7,980.00
316,448.00 3,667,734.00 1,461,968.00
5,491,066.00 1,950,221.00

179,238.00 2,186,239.00
2,528,886.00 643,424.00 45,815.00 253,821.00 94,179.00
1,258,962.00 136,251.00
801,262.00 5,762,600.00 (3,576,361.00)

23,142.00 19,494.00 (2,763,828.00)
(2,721,192.00) (770,971.00)

3,745,381.00 97,202.00 (5,007.00)
3,837,576.00 261,215.00

0.00 (770,971.00)
21,559,941.00
21,559,941.00 $20,788,970.00

0.00 261,215.00
495,940.00
495,940.00 $757,155.00

GEORGIA TECH FACILITIES , INC.
$0.00
228,000.00 745,000.00
612,000.00 1,585,000.00
462,000.00 60,000.00
522,000.00 1,063,000.00
(133,000.00) 1,829,000.00 (8,505,000.00) (6,809,000.00) (5,746,000.00)
0.00 (5,746,000.00) 10,852,000.00 10,852,000.00 $5,106,000.00

Georgia Institute of Technology Annual Financial Report FY 2005 12

Statement of Revenues, Expenses and Changes in Net Assets, Continued

REVENUES Operating Revenues
Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances
Gifts and Contributions Endowment Income (per s pending plan) Federal A ppropriations Grants and Contracts
Fe d e ra l State Ot h e r Sales and Services Rents and Royalties A uxiliary Enterpris es
Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENS ES Operating Expens es Salaries : Fa c u lt y Staff Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n Other Operating Expens e Payments to or on behalf of Georgia Ins titute of Technology Total Operating Expens es Operating Income (los s ) NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) and Other Nonoperating Expens es Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Other A dditions to permanent endowments Total Other Revenues Increas e in Net A s s ets NET AS S ETS Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated
Net A s s ets -End of Year

COMPONENT UNITS

GEORGIA TECH

GEORGIA TECH

RES EARCH

FOUNDATION

CORPORATION

$0.00
32,612,406.77 34,569,665.86

$0.00

15,472,000.00

263,242,490.00 12,999,629.00 48,748,609.00

1,264,000.00 83,918,072.63
1,551,000.00 321,000.00
50,000.00
1,000.00 6,145,000.00 2,353,000.00
49,839,000.00 60,260,000.00 23,658,072.63

6,639,834.00 331,630,562.00
674,442.00 5,385,669.00 322,162,494.00 328,222,605.00 3,407,957.00

53,582,334.14 (13,276,000.00) 40,306,334.14 63,964,406.77
16,822,593.23 16,822,593.23 80,787,000.00 812,818,000.00 812,818,000.00 $893,605,000.00

756,705.00 (4,724,833.00) 5,406,456.00 1,438,328.00 4,846,285.00
0.00 4,846,285.00 31,928,863.00 31,928,863.00 $36,775,148.00

Georgia Institute of Technology Annual Financial Report FY 2005 13

Statement of Cash Flows
G EORG IA INSTITUTE OF TECHNOLOG Y STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Other Nonoperating Receipts (Us ed) Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$94,668,514.21
378,377,530.98 12,291,224.09 (326,427,072.79) (424,128,213.12) (11,765,454.00) (2,279,517.27)
1,859,560.44
31,611,030.64 978,594.93
15,068,301.51 9,446,592.22 4,762,656.91 1,938,719.14 1,529,472.59
20,969,523.38 (191,098,536.14)
213,543,998.00 (3,473,994.63) 14,562,259.04 10,654,203.25
235,286,465.66
4,235,621.08 61,447.50
(44,529,564.83) (5,561,395.47)
(15,690,252.45) (61,484,144.17)
4,115,542.38 9,661,022.46
13,776,564.84 (3,519,649.81) 61,317,672.00 $57,798,022.19

Georgia Institute of Technology Annual Financial Report FY 2005 14

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($239,924,520.82)
51,254,342.14 (3,269,050.68)
(5,483.19) (1,991,574.21) 1,279,800.11 (2,701,701.56) 1,996,136.01 2,263,516.06 ($191,098,536.14)
$75,394,315.63 $293,507.02
($2,362,636.02)

Georgia Institute of Technology Annual Financial Report FY 2005 15

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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 2005 (FY2005). 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 FY2005, Georgia Institute of Technology is reporting activity for the following:
Georgia Tech Athletic Association and its subsidiary Alexander-Tharpe Fund Georgia Advanced Technology Ventures, Inc. Georgia Tech Alumni Association, Inc. Georgia Tech Facilities, Inc. Georgia Tech Foundation, Inc. Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research
Corporation
Georgia Institute of Technology Annual Financial Report FY 2005 16

See Note 16, Component Units, for more details.
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.
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 Diversified Fund is included under Investments.
Georgia Institute of Technology Annual Financial Report FY 2005 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 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. 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 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 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 75 years for infrastructure and land improvements, 10 years for library books, and 5 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings, and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions (equipment and building renovations) valued at $4,235,621.08 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 2005 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 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 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 Institute of Technology had accrued liability for compensated absences in the amount of $26,177,552.23 as of July 1, 2004. For FY2005, $16,726,859.82 was earned in compensated absences and employees were paid $14,463,343.76, for a net increase of $2,263,516.06. The ending balance as of June 30, 2005 in accrued liability for compensated absences was $ 28,441,068.29.
Noncurrent Liabilities Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year, and; (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as non-current assets.
Net Assets The 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 previously in Note 1 Capital Assets section.
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.
Georgia Institute of Technology Annual Financial Report FY 2005 19

The Institute's Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005
$4,146,075.70 6,567,699.92 3,895,545.37
15,306,730.10 $29,916,051.09

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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2005
$11,580,523.87 23,001,450.83 491,540.35 (21,982,580.10)
$13,090,934.95

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 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 Revenues 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:
Georgia Institute of Technology Annual Financial Report FY 2005 20

Operating revenues: Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and Institute supported scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and Institute supported 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 revenue includes 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. Scholarship Allowances Student tuition and fee revenue, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 non-operating 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 scholarship allowances.
Georgia Institute of Technology Annual Financial Report FY 2005 21

Note 2. Deposits and Investments
State of Georgia Collateralization Statutes and Policies
A. Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, Georgia Institute of Technology (the Institute) deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $17,591,727.80 of the Institute's deposits were uninsured. Of these uninsured deposits, $17,518,927.25 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name, $72,800.55 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Institute's name.
Georgia Institute of Technology Annual Financial Report FY 2005 22

B. Investments

The Institute maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with Board of Regents policy, applicable federal and state laws, and donor intent.

The Institute's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Corporate Debt Mortgage Backed Securities (US Agencies) Certificates of Deposit/Time Deposits
Other Investments Equity Mutual Funds Fixed Income Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents
Diversified Fund Short Term Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$6,746,327.73 2,517,448.55 2,579,031.30
326,044.24 35,000.00
12,203,851.82
261,688.47 168,366.57 966,814.34
1,458.11

Less Than 1 Year $453,688.20 484,304.25 207,061.10
$1,145,053.55

Investment Maturity

1-5

6 - 10

Years

Years

$3,838,287.78 1,283,226.80 1,155,840.90
72,323.00 35,000.00

$2,358,291.75 749,917.50
1,216,129.30 76,073.06

$6,384,678.48

$4,400,411.61

More than 10 Years
$96,060.00
177,648.18
$273,708.18

39,988,147.97 19,972,437.28
1,197,775.92 4,102,224.70
$78,862,765.18

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html
The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share.
The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset

Georgia Institute of Technology Annual Financial Report FY 2005 23

Value (NAV) is calculated daily to determine current share price, which was $1.98 at June 30, 2005.

The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Institute's policy for managing interest rate risk is to comply with Regents policy and applicable federal and state laws.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Institute will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. If the Institute's investments are exposed to custodial credit risk (note that any policy described must have been formally adopted in some way by the appropriate governing body): The Institute's policy for managing custodial credit risk for investments is an integral part of it's current investment policies dated May 16, 2005, which specifies how counterparties are selected and how investments are to be held on behalf of the Institute.

At June 30, 2005, $11,721,317.47 of the Institute's applicable investments were uninsured and held by the investment's counterparty in the Institute's name and $1,759,750.37 were uninsured and held by the investment's counterparty's trust department or agent, but not in the Institute's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk for investments is an integral part of its current investment policies dated May 16, 2005, which identifies approved investment products, and specifies the required credit quality, as applicable, for each investment based upon approved credit rating agencies.

Rated Debt Inves tments U. S. Agencies Corporate Debt Mortgage Backed Securities (US Agencies) Money Market Equity Fund Money Market Bond Fund Certificates of Deposit/Time Deposits

Fair Value $2,517,448.55 2,579,031.30
326,044.24

Aaa $2,517,448.55
72,275.70 318,269.57

Quality Ratings (Per Moody's)

Aa

A

Baa

Ba

$0.00

$0.00

$0.00 $0.00

775,805.30

1,165,078.10 565,872.20

Unrated $0.00
7,774.67

35,000.00 $5,457,524.09

$2,907,993.82

$775,805.30

$1,165,078.10 $565,872.20 $0.00

35,000.00 $42,774.67

Georgia Institute of Technology Annual Financial Report FY 2005 24

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Institute's investment in a single issuer. The Institute's policy for managing concentration of credit risk is an integral part of it's current investment policies dated May 16, 2005, which overviews concentration guidelines not allowing more than 20% of the total investment portfolio to be concentrated in anyone other than the US Treasury or other Federal Government agencies.
Georgia Institute of Technology Annual Financial Report FY 2005 25

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$673,855.79 1,306,381.41 33,955,081.97
26,433,799.54 62,369,118.71 1,652,141.75
$60,716,976.96

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005
$0.00
229,768.95 266,562.06 $496,331.01

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, 2005. 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, 2005 the allowance for uncollectible loans was $58,884.77.

Georgia Institute of Technology Annual Financial Report FY 2005 26

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Capitalized Collections
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 July 1, 2004
$42,937,634.97 67,720,959.49 3,398,775.00 114,057,369.46
42,408,986.97 869,864,873.54 14,201,288.12 295,117,855.75 66,881,254.30 75,176,928.39
1,363,651,187.07
7,724,831.91 162,727,414.43
6,235,179.36 175,379,666.88
6,424,002.65 52,705,710.77
0.00 411,196,806.00
952,454,381.07
$1,066,511,750.53

Additions
$0.00 22,364,506.53
22,364,506.53

Reductions
$0.00 61,034,357.99
61,034,357.99

Ending Balance June 30, 2005
$42,937,634.97 29,051,108.03 3,398,775.00 75,387,518.00

2,523,903.04 132,269,903.51
165,324.86 23,787,387.03 5,553,352.00 5,375,497.16
169,675,367.60

7,528,712.27
20,768,059.55 58,043.12 3,898.00
28,358,712.94

44,932,890.01 994,606,064.78 14,366,612.98 298,137,183.23 72,376,563.18 80,548,527.55
0.00 1,504,967,841.73

924,860.56 19,388,483.14
310,517.28 23,924,561.38 3,241,839.78 3,464,080.00
51,254,342.14
118,421,025.46
$140,785,531.99

1,985,417.91
15,826,372.98 32,955.52 3,898.00
17,848,644.41
10,510,068.53
$71,544,426.52

8,649,692.47 180,130,479.66
6,545,696.64 183,477,855.28
9,632,886.91 56,165,892.77
0.00 444,602,503.73
1,060,365,338.00
$1,135,752,856.00

Georgia Institute of Technology Annual Financial Report FY 2005 27

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005
$10,773,477.85 9,766,112.87 2,554,633.91
$23,094,224.63

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$268,205,376.31

Additions $75,394,315.63

Reductions

Ending Balance June 30, 2005

$5,561,395.47

$338,038,296.47

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

26,177,552.23 26,177,552.23
$294,382,928.54

16,726,859.82 16,726,859.82
$92,121,175.45

14,463,343.76 14,463,343.76
$20,024,739.23

0.00 28,441,068.29 28,441,068.29
$366,479,364.76

Current Portion $7,118,968.57
15,945,480.89 15,945,480.89 $23,064,449.46

Note 9. Significant Commitments
Georgia Institute of Technology had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,684,961.52 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. 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.
CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2005 and 2035. Expenditures for fiscal year 2005 were $21,251,647.92 of which $15,690,252.45 represented interest. Total principal paid on capital leases was $5,561,395.47 for the fiscal year ended June 30, 2005. Interest rates range from 3.36
Georgia Institute of Technology Annual Financial Report FY 2005 28

percent to 11 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Land Buildings Equipment Total Assets Held Under Capital Lease

$11,315,863.31 337,945,496.64
5,995,632.02 $355,256,991.97

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 four capital leases with related parties in fiscal year 2005. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000.00 for the Parker H. Petit 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, 2005 the remaining long-term debt obligation (principal) under the lease was $19,495,000.00, and the amount due (principal and interest) in the next fiscal year is $1,425,453.76.
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, 2005 the remaining long-term debt obligation (principal) under the lease was $137,275,320.00, and the amount due (principal and interest) in the next fiscal year is $9,936,557.29.
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 February 2001 and expires February 2031. At June 30, 2005 the remaining long-term debt obligation (principal) under the lease was $43,430,000.00, and the amount due (principal and interest) in the next fiscal year is $3,068,017.52.
In May 2005 Georgia Institute of Technology entered into a capital lease of $70,320,000.00 with Georgia Tech Facilities, Inc., a discretely presented component unit, for a complex of buildings collectively named "Married Family Housing". The lease term is for 25 years and expires in June, 2030. At June 30, 2005 the remaining long-term debt obligation under the lease was $70,320,000.00 and the amount due (principal and interest) in the next fiscal year is $4,742,545.02.
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, 2005 the remaining long-
Georgia Institute of Technology Annual Financial Report FY 2005 29

term debt obligation (principal) under the lease was $63,399,609.54 and the amount due (principal and interest) in the next fiscal year is $4,012,528.01. 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 also has various capital leases for equipment with an outstanding balance at June 30, 2005 totaling $4,118,366.93.
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 2006 through 2009. 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 in Arlington, Virginia. The current agreement is for July 1, 2005 through June 30, 2006 for monthly fees of $16,231.92. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $194,783.04 in fiscal year 2006.
In 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Marietta, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 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 2006.
In 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in the Centennial Research Building in Atlanta, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 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 2006.
In 2000, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Fairburn, Ohio. The current agreement is for July 1, 2005 through June 30, 2006 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 2006.
In 2002, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Orlando, Florida. The current agreement is for July 1, 2005 through June 30, 2006 for monthly fees of $3,556.53. The agreement does contain a renewal option. Under this
Georgia Institute of Technology Annual Financial Report FY 2005 30

agreement, Georgia Institute of Technology is obligated to pay GTRC $42,678.36 in fiscal year 2006.
In 2003, Georgia Institute of Technology entered into a real property operating lease with Georgia Advanced Technology Ventures, Inc. a related party, for office space in the Centergy One Building located at 55 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 for monthly fees of $67,897.60. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $814,771.20 in fiscal year 2006.
In 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 1, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc. a related party, for office and lab space located at 575 14th Street in Atlanta, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 for monthly fees of $61,644.63. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc. a minimum of $739,735.56 in fiscal year 2006.
In 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 2, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc. a related party, for office space located at 650 Ethel Street in Atlanta, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 for monthly fees of $22,314.40. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP2, Inc. $267,772.80 in fiscal year 2006.
In 2004, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Marietta, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 with monthly fees ranging from $1,920.00 to $2,016.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $24,000.00 in fiscal year 2006.
In 2005, Georgia Institute of Technology entered into a real property operating lease with Georgia Advanced Technology Ventures, Inc. a related party, for office space in Columbus, Georgia. The current agreement is for July 1, 2005 through June 30, 2006 for monthly fees of $2,068.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $24,816.00 in fiscal year 2006.
Non-cancelable operating lease expenditures in 2005 were $7,575,307.72 for real property.
Georgia Institute of Technology Annual Financial Report FY 2005 31

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$24,460,986.12 24,864,036.34 24,795,646.01 24,924,228.90 24,069,962.29
121,305,852.75 126,816,684.44 126,987,859.44
87,042,748.74 19,724,796.28

$8,410,520.22

604,992,801.31 266,954,504.84
0.00 $338,038,296.47

$8,410,520.22

Note 11. 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 2005, 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:

Georgia Institute of Technology Annual Financial Report FY 2005 32

Fiscal Year

Percentage Contributed

Required Contribution

2005 2004 2003

100% 100% 100%

$16,731,285.81 $16,699,191.29 $15,907,134.52

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. Post-retirement 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

Georgia Institute of Technology Annual Financial Report FY 2005 33

Institute's payroll for the year ended June 30, 2005, for employees covered by ERS was $297,202.46. The Institute's total payroll for all employees was $430,131,433.16.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the Institute was 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 2005 amounted to $35,406.52, of which $29,158.97 was made by the Institute and $6,247.55 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, 2005, 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. The four approved annuity providers are AIG-VALIC, American Century, Fidelity Investments, and TIAA-CREF.
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 2005, the employer contribution was 9.65% 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 $15,214,736.44 (9.65%) and $7,905,637.98 (5%), respectively in fiscal year 2005.
Georgia Institute of Technology Annual Financial Report FY 2005 34

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 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 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 2005 amounted to $881,267.58 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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.
Georgia Institute of Technology Annual Financial Report FY 2005 35

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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
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 taxable and 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. The project has been approved by the Board of Regents, with a construction budget of $34 million. The ground lease and rental agreement have not been completed as of June 30, 2005.
Georgia Institute of Technology Annual Financial Report FY 2005 36

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 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 land 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 an annual agreement with options to renew on a year-to-year basis. 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 14. 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, 2005, there were 1,131 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Georgia Institute of Technology recognized as incurred $5,255,674.34 of expenditures, which was net of $2,013,638.22 of participant contributions.
Georgia Institute of Technology Annual Financial Report FY 2005 37

Note 15. Natural Classifications with Functional Classifications

The Institute's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$79,602,534.90 42,116,844.60 21,759,674.31 1,823,331.63 2,058,207.50
187,283.99 24,986,247.83

$117,500,165.61 82,240,930.68 34,058,242.87
321,885.91 9,297,891.40

$6,877,999.19 9,806,983.61 3,240,095.41
662,633.27 1,218,226.16

$3,935,863.93 16,969,464.11 4,098,499.64
50,080.74 497,547.75

205,140.51 85,669,237.40

1,708.32 14,381,017.27

6,034,825.16

$112,468.28 9,615,484.84 1,724,356.05
66,296.10 210,130.64
11,398,722.17

$560,589.69 20,490,987.79
7,208,827.14 73,061.61
216,208.87
12,855.64 6,116,921.71

Total Expenses

$172,534,124.76

$329,293,494.38

$36,188,663.23

$31,586,281.33

$23,127,458.08

$34,679,452.45

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

Auxiliary En terp ris es

Depreciation Exp en s es

$125,082.04 24,023,650.53
4,964,185.05 178,099.75 81,100.49
14,931,149.85 32,142,904.71

$0.00 11,765,454.00

$0.00 12,976,994.35
2,871,178.28
119,593.88
4,754,164.55 27,941,542.36
5,623,173.44

$0.00 45,631,168.70

$76,446,172.42

$11,765,454.00

$54,286,646.86

$45,631,168.70

Total Exp en s es
$208,714,703.64 218,241,340.51 79,925,058.75 3,175,389.01 13,698,906.69 11,765,454.00 20,092,302.86 208,671,418.61 51,254,342.14
$815,538,916.21

Georgia Institute of Technology Annual Financial Report FY 2005 38

Note 16. Component Units
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.
During the year ended June 30, 2005, the Association distributed $4,672,816.87 to the Institute for scholarships and $3,398,077.78 in other payments that were either expense reimbursements or support for Institute programs. The Institute distributed to the Association, $1,991,697.34 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 Advanced Technology Ventures, Inc. (GATV) is a Georgia non-profit organization formed to support Georgia Institute of Technology's technology transfer and economic development mission and its Advanced Technology Development Center (ATDC) incubator program. GATV provides capital and operating support for technology transfer and economic activities including ATDC incubator facilities and services to ATDC affiliated companies.
GATV 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. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. Georgia Advanced Technology Ventures fiscal year is July 1 through June 30. Complete financial statements for GATV can be requested at the following address:
Georgia Institute of Technology Annual Financial Report FY 2005 39

Georgia Advanced Technology Ventures, 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 presentation features are different from the Institute's GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. The Alumni Association's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Alumni Association paid $801,262.00 to the Institute primarily for employee salary and insurance costs. The Institute funded $145,497.00 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
Georgia Tech Facilities, Inc., (Facilities) is a legally separate, tax-exempt component unit 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.
Georgia Institute of Technology Annual Financial Report FY 2005 40

The Georgia Tech Facilities, Inc 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. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. Facilities fiscal year is July 1 through June 30.
Investments carried as capital assets valued at $208,717,000.00 and bonds payable are included in Facilities financial statements. The corresponding buildings and associated long-term debt are included in the Institute's report. Note 10 of this financial report provides information on related party leases. Complete financial statements for Facilities can be requested at the following address:
Georgia Tech Facilities, Inc. Treasurer's Office
Lyman Hall, Room 315 Atlanta, GA 30332-0257
Attention: Joel Hercik
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 FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $49,839,000.00 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 Institute of Technology Annual Financial Report FY 2005 41

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 component units 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.
The Georgia Tech Research Corporation 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. The FASB reports were reclassified to the GASB presentation format for external financial reporting purposes in these financial statements. The Research Corporation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, GTRC distributed $34,387,628.00 to the Institute, primarily as reimbursement for research and other sponsored activities conducted on campus. The Institute distributed $3,187,047.72 to GTRC, primarily for related-party rental payments. Note 10 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
Investments for Component Units The Georgia Tech Athletic Association utilizes the services of the Georgia Tech Foundation, Inc. for investment purposes. At June 30, 2005, the Foundation held $61,369,437.00 in investments for the Athletic Association. This amount is reflected as a Due To/From Component Units on the Statement of Net Assets for the respective organizations.
Georgia Tech Alumni Association holds investments in mutual funds valued at $578,346.00.
Georgia Tech Facilities, Inc. lists investments totaling $208,717,000.00 on its balance sheet, which is composed of investments in U.S. Treasury Notes totaling $65,458,000.00 and investments in real estate totaling $143,259,000.00. The U. S. Treasury notes will be used to construct facilities that will be leased by Georgia Institute of Technology.
The Georgia Tech Foundation, Inc. (GTF) holds investments totaling $1.0 billion as of June 30, 2005, of which $310.8 million is the corpus of the endowment (permanently restricted). The corpus in 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 (12) quarter average market value of the endowment
Georgia Institute of Technology Annual Financial Report FY 2005 42

funds are allocated from the earnings for expenditure. In fiscal year 2005, the Foundation allocated 5.35% of that average.
Georgia Tech Research Corporation (GTRC) holds investments in the amount of $1.4 million. Investments consist of marketable securities.
Long Term Liabilities for Component Units The Georgia Tech Athletic Association, Inc. has one bond issue outstanding with a balance of $108,465,000 and one unsecured note payable totaling $1,012,694. The combined balance for the two is $109,477,694. The bonds payable total does not include an unamortized discount of $966,978 and an unamortized "swaption" premium of $2,263,457. 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.
Georgia Advanced Technology Ventures, Inc. has two long-term leases and two notes payable, one secured and one unsecured. The leases are for Centergy Floors 1-3 with an interest rate of 6.25% and Centergy Floors 4-5 with an interest rate of 7.75%. The balances for both leases total $49,631,945.00. The secured note payable has a balance of $6,000,000.00 and an interest rate of LIBOR plus 5.10%. The unsecured note has a balance of $215,939.00 and an interest rate of 6%. There is $605,641.00 in accrued interest payable associated with the discount on the capital lease.
Georgia Tech Facilities, Inc. has four bond issues outstanding with balances totaling $175,155,000. 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 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.
Georgia Tech Foundation, Inc. has three bond issues outstanding with balances totaling $222,055,000 (not including an unamortized bond discount of $1,683,000). 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 3.0% to 6.6%. Details of outstanding balances and current year activity for the three bond issues are shown in the statements, which follow.
Georgia Institute of Technology Annual Financial Report FY 2005 43

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Georgia Tech Foundation, Inc. Bonds Payable
Series 2001A Series 2001A (Tax Exempt) Series 2002A (Taxable) Georgia Tech Facilities, Inc. Bonds Payable Series 1997A Series 1997B Series 2003 Series 2004 Georgia Tech Athletic Association Bonds and Notes Payable Series 2001 and Note Payable Georgia Advanced Technology Ventures Capital Lease Payable Centergy Floor 1-5
Total Long Term Debt

Be g in n in g Balance
July 1, 2004

A d d it io n s

Re d u c t io n s

En d in g Balance June 3, 2005

Amounts due within
One Year

$44,220,000.00 109,255,000.00 72,585,000.00

$0.00

$790,000.00 1,900,000.00 1,315,000.00

$43,430,000.00 107,355,000.00 71,270,000.00

$825,000.00 1,975,000.00 1,380,000.00

10,370,000.00 19,945,000.00 70,320,000.00 75,205,000.00

235,000.00 450,000.00

10,370,000.00 19,710,000.00 69,870,000.00 75,205,000.00

245,000.00 470,000.00 1,435,000.00

112,536,503.00

1,762,330.00

110,774,173.00

1,779,481.00

33,365,772.00 $547,802,275.00

23,087,753.00 $23,087,753.00

$6,452,330.00

56,453,525.00 $564,437,698.00

14,374.00 $8,123,855.00

Debt Service Obligations Annual debt service requirements to maturity for Georgia Tech Foundation, Inc. Series 2001A, 2002A, and 2002B bonds payable are as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2032

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

P rinc ipa l
$4,180,000.00 4,385,000.00 4,605,000.00 4,825,000.00 5,060,000.00 29,685,000.00 39,445,000.00 47,005,000.00 57,960,000.00 24,905,000.00

Interest
$12,079,973.78 11,879,629.78 11,662,200.03 11,437,490.53 11,203,636.65 51,584,868.85 41,821,414.47 29,440,424.40 15,293,067.00 1,326,603.00

Total
$16,259,973.78 16,264,629.78 16,267,200.03 16,262,490.53 16,263,636.65 81,269,868.85 81,266,414.47 76,445,424.40 73,253,067.00 26,231,603.00

$222,055,000.00

$197,729,308.49

$419,784,308.49

Georgia Institute of Technology Annual Financial Report FY 2005 44

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: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipa l
$2,150,000.00 2,550,000.00 3,920,000.00 4,040,000.00 4,185,000.00 23,820,000.00 30,480,000.00 39,400,000.00 39,330,000.00 20,535,000.00 4,745,000.00
$175,155,000.00

Interest
$8,449,238.78 8,383,616.28 8,309,060.65 8,186,708.76 8,049,312.50 37,307,903.17 30,647,177.80 21,742,330.18 11,327,250.01 4,366,750.00
237,247.00
$147,006,595.13

Total
$10,599,238.78 10,933,616.28 12,229,060.65 12,226,708.76 12,234,312.50 61,127,903.17 61,127,177.80 61,142,330.18 50,657,250.01 24,901,750.00 4,982,247.00
$322,161,595.13

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:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Unamortized Premium Unamortized Discount

Bonds and Note Payable Principal Interest

$1,779,481.00 1,855,480.00 1,951,979.00 2,052,978.00 2,149,479.00
12,445,864.00 16,309,323.00 21,066,775.00 27,916,335.00
1,950,000.00

$5,554,895.00 5,475,095.00 5,380,006.00 5,279,962.00 5,182,909.00
24,208,391.00 20,347,028.00 15,585,039.00
9,398,861.00 1,744,037.00

$109,477,694.00

$98,156,223.00

2,263,457.00 (966,978.00) $110,774,173.00

Total
$7,334,376.00 7,330,575.00 7,331,985.00 7,332,940.00 7,332,388.00
36,654,255.00 36,656,351.00 36,651,814.00 37,315,196.00 23,694,037.00
0.00 0.00
$207,633,917.00

Georgia Institute of Technology Annual Financial Report FY 2005 45

Annual debt service requirements to maturity for the Georgia Advanced Technology Ventures, Inc. capital lease payable are as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P rinc ipa l
$0.00
1,218,496.90 4,867,377.41 10,000,767.57 17,160,042.26 18,153,011.58

Interest
$3,020,724.12 3,112,687.44 3,200,365.32 3,288,293.04 3,383,249.64 17,195,213.43 16,219,404.80 13,771,186.41 9,332,038.78 2,482,777.26

Total
$3,020,724.12 3,112,687.44 3,200,365.32 3,288,293.04 3,383,249.64 18,413,710.33 21,086,782.21 23,771,953.98 26,492,081.04 20,635,788.84

$51,399,695.72

$75,005,940.24

$126,405,635.96

Unammortized Premium Unamortized Discount

($1,767,750.72) 6,821,580.00
$56,453,525.00

Georgia Institute of Technology Annual Financial Report FY 2005 46

THE UNIVERSITY OF GEORGIA
Financial Report For the Year Ended
June 30, 2005
The University of Georgia Athens, Georgia

THE UNIVERSITY OF GEORGIA ANNUAL FINANCIAL REPORT
FY 2005
Table of Contents
Management's Discussion and Analysis ..................................................................................... 1 Statement of Net Assets ............................................................................................................. 9 Statement of Revenues, Expenses, and Changes in Net Assets................................................. 11 Statement of Cash Flow ...........................................................................................................13 Note 1. Summary of Significant Accounting Policies ............................................................. 15 Note 2. Deposits and Investments............................................................................................ 21 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. Significant Commitments........................................................................................... 27 Note 10. Lease Obligations...................................................................................................... 27 Note 11. Retirement Plans ....................................................................................................... 30 Note 12. Risk Management...................................................................................................... 33 Note 13. Contingencies............................................................................................................ 34 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................ 35 Note 15. Natural Classifications with Functional Classifications ........................................... 36 Note 16. Component Units ...................................................................................................... 37

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 and number of faculty have slightly decreased this fiscal year.

Faculty

Students

FY2005 FY2004 FY2003

1707 1754 1790

33,405 33,878 32,941

Overview of the Financial Statements and Financial Analysis

The University of Georgia is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

University of Georgia Annual Financial Report FY 2005 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 ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$191,614,424.15 1,031,318,453.66
84,995,353.43 1,307,928,231.24

June 30, 2004
$135,612,765.45 912,119,052.26 124,093,395.94 1,171,825,213.65

Liabilities : Current Liabilities Noncurrent Liabilities Total Liabilities

111,874,105.42 160,243,460.54 272,117,565.96

100,823,985.22 73,675,768.50 174,499,753.72

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

881,930,856.52 46,931,620.93 48,112,738.84
425,718.71 58,409,730.28 $1,035,810,665.28

837,741,091.00 39,805,097.20 53,135,898.44
225,602.92 66,417,770.37 $997,325,459.93

University of Georgia Annual Financial Report FY 2005 2

The total assets of the institution increased by $136,103,017.59. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase 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 $97,617,812.24. The primary cause for the increase was in non-current liabilities, primarily $86,509,039.57 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 $136,103,017.59 and the increase in total liabilities of $97,617,812.24 yields an increase in total net assets of $38,485,205.35. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $44,189,765.52. 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 2005 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:

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated Net A s s ets at End of Year

June 30, 2005
$498,493,773.51 921,597,853.85 (423,104,080.34)
433,277,007.03
10,172,926.69 28,312,278.66 38,485,205.35 997,325,459.93 997,325,459.93 $1,035,810,665.28

June 30, 2004
$516,740,861.37 938,898,788.27 (422,157,926.90)
439,467,429.30
17,309,502.40 114,252,783.04 131,562,285.44 863,053,802.78
2,709,371.71 865,763,174.49 $997,325,459.93

University of Georgia Annual Financial Report FY 2005 4

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts
Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30, 2005

June 30, 2004

$160,897,414.50 11,537,500.71 194,013,693.63
34,355,450.39 95,627,980.05 2,061,734.23
498,493,773.51
384,462,459.26 17,528,913.04 19,546,997.79 4,645,207.76 17,095,455.11 443,279,032.96
16,125,619.33 12,186,659.33 28,312,278.66
$970,085,085.13

$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
396,939,319.13 22,345,981.87
8,770,610.51 3,441,694.21 11,669,019.05 443,166,624.77
72,682,973.34 41,569,809.70 114,252,783.04
$1,074,160,269.18

University of Georgia Annual Financial Report FY 2005 5

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

June 30, 2005

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support
Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only) Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

$194,351,084.80 262,422,942.84 124,397,237.70 82,990,011.91 26,252,863.20 50,281,956.80 68,133,379.18 14,143,363.76 98,625,013.66
921,597,853.85
10,002,025.93
$931,599,879.78

June 30, 2004
$192,411,258.48 261,396,541.85 132,224,608.90 86,567,257.55 25,905,469.68 69,500,257.02 73,464,538.81 19,298,310.93
78,130,545.05
938,898,788.27
3,699,195.47 $942,597,983.74

Tuition and fees increased by $10.7 million from fiscal year 2004 to fiscal year 2005, a result of a 5% increase in general tuition and small increases in mandatory fees. Contracts and Grants revenues decreased from approximately $223 million in fiscal year 2004 to approximately $194 million in fiscal year 2005. Auxiliary revenues increased by approximately $6.1 million, mostly attributable to increased revenues from increased participation in Food Services meal plan options and the new East Village Dining Commons. An increase in student housing with the Fall 2004 opening of the new East Campus Village (ECV) complex also attributed to the increase in Auxiliary revenues. The ECV complex of four apartment-style residence halls delivers an unprecedented level of comfort and privacy to over 1,200 students. Auxiliary Bookstore revenues decreased by approximately $3.9 million due to the management of the University Bookstore being transferred to a private vendor during December 2003.
The compensation and employee benefits category decreased by approximately ($3,905,394.68), reflecting a reduction of staff and related benefit costs due to budget constraints.
Utilities increased by approximately $3,758,476.93 during the past year. The increase was primarily associated with the increased electricity, natural gas, and coal costs that were experienced in fiscal year 2005.
Under non-operating revenues (expenses) state appropriations decreased by (12,476,859.87). 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 approximately $397 million to
University of Georgia Annual Financial Report FY 2005 6

approximately $384 million due to budget reductions related to lagging state revenues and surplused funds. Fiscal year 2005 state capital gifts shows a significant decrease, from approximately $72.7 million in fiscal year 2004 to approximately $16.1 million in fiscal year 2005. This decrease was due to the GSFIC funded Student Learning Center being completed and recognized by the University in fiscal year 2004. No significant assets funded by GSFIC were completed in fiscal year 2005. Finally, the Other Capital Grants and Gifts category for fiscal year 2005 decreased by approximately $29 million due to no significant assets completed and funded by the University of Georgia Athletic Association, Inc. on athletic facilities owned by the University.
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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($278,901,028.77) 436,194,580.99 (77,587,340.20) (22,982,988.93) 56,723,223.09 72,705,357.59
$129,428,580.68

June 30, 2004
($341,903,550.64) 432,718,008.05 (62,750,260.52) (51,889,424.81) (23,825,227.92) 96,530,585.51
$72,705,357.59

Capital Assets
The University added several significant facilities in fiscal year 2005, including the East Campus Village residence halls and the East Village Commons dining hall. The Veterinary Bio-Resource Facility was completed during fiscal year 2005 as well as the Hull Street parking deck. The South Campus parking deck expansion was also completed during fiscal year 2005, adding approximately 480 parking spaces.

University of Georgia Annual Financial Report FY 2005 7

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long Term Debt The University of Georgia had a Long-Term Debt of $184,609,224.79 of which $24,365,764.25 was reflected as current liability at June 30, 2005. For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements. Economic Outlook The University of Georgia ended fiscal year 2005 in the midst of an economic recovery, which is slowly generating state revenue growth. As a result, state funding for fiscal year 2005 was still less than the previous year. At the beginning of fiscal year 2005, the University had vacant faculty lines due to the need to reduce expenditures. However, a 5% increase in tuition allowed the University to start filling those vacant faculty lines. This action will contribute to the instruction and research mission of the University of Georgia. The University will continue to monitor its resources, but overall the University's financial position is strong. Even with a decrease in revenues overall, the University was able to generate a modest increase in Net Assets. Michael F. Adams President The University of Georgia
University of Georgia Annual Financial Report FY 2005 8

Statement of Net Assets

THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2005

COMPONENT UNITS

University of University of

Georgia

Georgia

University of

Research

Athletic

Georgia

June 30, 2005 Foundation, Inc. Association, Inc Foundation

ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Receivables - Pledges Due from Component Unit Due from Primary Government Inventories (note 4) Prepaid Items Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Investments Notes Receivable, net Notes Receivable from Component Unit Notes Receivable from Primary Government Pledges Receivable Other Assets Capital Assets, net (note 6) Total Noncurrent Assets TOTAL ASSETS

$122,083,688.45

$3,388,932.00

20,114,900.20 17,091,713.89
23,779,721.04
3,872,328.36 4,672,072.21
191,614,424.15
7,344,892.23 66,460,760.47 8,539,173.73 2,650,527.00
1,031,318,453.66 1,116,313,807.09 1,307,928,231.24

24,326,885.00
473,569.00
14,326,065.00 42,515,451.00
33,557,355.00
7,687,500.00 497,425.00 607,158.00
42,349,438.00 84,864,889.00

$42,713,096.00 2,273,308.00

$12,330,672.00 52,415,674.00

2,498,531.00

3,085,128.00 10,086,128.00

219,554.00 47,704,489.00

26,908,561.00 104,826,163.00

425,917,587.00 87,671.00

1,542,895.00 157,256,707.00 158,799,602.00 206,504,091.00

20,827,237.00
187,007,627.00 633,840,122.00 738,666,285.00

University of Georgia Annual Financial Report FY 2005 9

Statement of Net Assets, continued

THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2005

LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Component Units Due to Primary Government Current Portion of Long-term Debt Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Due To Primary Government Liabilities under Split Interest Agreements Other Long Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

COMPONENT UNITS

University of University of

Georgia

Georgia

University of

Research

Athletic

Georgia

June 30, 2005 Foundation, Inc. Association, Inc Foundation

13,062,528.69 4,144,479.55
1,717,969.28 1,037,750.00 47,830,749.00 1,043,682.95 10,510,112.70 8,161,069.00
2,801,560.27 21,564,203.98 111,874,105.42
146,586,036.87
13,657,423.67

7,142,806.00
14,326,065.00 3,780,816.00
22,211,510.00 47,461,197.00 11,657,546.00

160,243,460.54 272,117,565.96

11,657,546.00 59,118,743.00

1,966,099.96 1,041,140.00 1,282,736.00 1,814,023.00
18,236,663.00
1,568,211.04 2,029,126.00
238,707.00 28,176,706.00

4,793,532.00
2,300,684.00
5,126,247.00
2,953,288.00 25,079.00
15,198,830.00

1,542,895.00 2,650,527.00
69,682,274.00 73,875,696.00 102,052,402.00

13,243,328.00 210,067,183.00 223,310,511.00 238,509,341.00

NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS

881,930,856.52
46,931,620.93 48,112,738.84
425,718.71 58,409,730.28 $1,035,810,665.28

607,158.00
25,138,988.00 $25,746,146.00

82,599,225.00
2,295,518.00 19,556,946.00 $104,451,689.00

249,596,597.00 238,332,497.00
12,227,850.00 $500,156,944.00

University of Georgia Annual Financial Report FY 2005 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, 2005

June 30, 2005

COMPONENT UNITS

University of

University of

Georgia

Georgia

Research

Athletic

Foundation, Inc. Association, Inc

University of Georgia
Foundation

REVENUES Operating Revenues
Student Tuition and Fees (net of allowance for doubtful accounts)
Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts
Federal State Other Sales and Services Rents and Royalties 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 Payments To or On Behalf of Depreciation
Total Operating Expenses Operating Income (loss)

$221,788,144.84 60,890,730.34
11,537,500.71
119,243,950.30 32,796,291.29 41,973,452.04 34,355,450.39
261,208.56
32,146,004.15 4,751,925.41 26,983,080.63 13,620,867.73 14,683,990.93
3,442,111.20 1,800,525.67 498,493,773.51

$0.00 131,815,923.00
13,380,173.00 145,196,096.00

$0.00

$0.00
22,992,752.00 20,635,171.00

65,449,621.00 65,449,621.00

6,179,579.00 49,807,502.00

127,951,187.22 378,541,792.45 120,106,104.88
12,090,431.19 19,931,628.74 29,187,184.38 175,387,333.03
58,402,191.96 921,597,853.85 (423,104,080.34)

8,945,205.00 130,895,226.00
46,083.00 139,886,514.00
5,309,582.00

1,351,246.00 175,795.00

21,256,578.44 22,100,476.56 4,034,865.00 47,391,920.00 18,057,701.00

83,406.00 7,940,022.00 22,901,776.00 5,448,303.00 37,900,548.00 11,906,954.00

University of Georgia Annual Financial Report FY 2005 11

Statement of Revenues, Expenses, and Changes in Net Assets, continued

THE UNIVERSITY OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2005

June 30, 2005

COMPONENT UNITS

University of

University of

Georgia

Georgia

Research

Athletic

Foundation, Inc. Association, Inc

University of Georgia
Foundation

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and othe Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gai Capital Grants and Gifts Federal State Other Total Other Revenues Increase in Net Assets

384,462,459.26
17,528,913.04 19,546,997.79 4,645,207.76 (10,002,025.93) 17,095,455.11 433,277,007.03 10,172,926.69
3,823,947.92 16,125,619.33 8,362,711.41 28,312,278.66 38,485,205.35

1,418,112.00
570,283.00 1,988,395.00 7,297,977.00

847,559.00 629,679.00 (1,832,381.00) 79,329.00 (275,814.00) 17,781,887.00

34,076,184.00 (7,725,849.00) 10,236,901.00 36,587,236.00 48,494,190.00

0.00 7,297,977.00

0.00 17,781,887.00

0.00 48,494,190.00

NET ASSETS Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

997,325,459.93 $1,035,810,665.28

18,448,169.00 $25,746,146.00

86,669,802.00 $104,451,689.00

451,662,754.00 $500,156,944.00

University of Georgia Annual Financial Report FY 2005 12

Statement of Cash Flows
THE UNIVERSITY OF G EORG IA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$159,036,123.68 9,419,901.31
196,606,019.87 30,356,666.64 (337,805,955.68) (505,823,547.40) (19,931,628.74) (3,705,243.00)
2,556,590.48
104,038,775.61 5,417,872.88
43,600,800.76 14,100,309.26 15,785,977.60
3,668,690.55 3,777,617.41 (278,901,028.77)
384,462,459.26 (1,838,576.57) 53,570,698.30
436,194,580.99
22,338,137.01 (691,602.75)
(86,516,978.93) (2,902,369.60) (9,814,525.93) (77,587,340.20)
60,060,216.75 3,990,853.31
(87,034,058.99) (22,982,988.93) 56,723,223.09 72,705,357.59 $129,428,580.68

University of Georgia Annual Financial Report FY 2005 13

Statement of Cash Flows, continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($423,104,080.34)
58,402,191.96 (3,801,330.83)
(715,987.01) (708,145.73) (556,807.32) 3,738,971.61 87,258,900.29 585,258.60 ($278,901,028.77)
$90,436,336.51 ($387,850.60)
($5,974,141.65)

University of Georgia Annual Financial Report FY 2005 14

THE UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, 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 16. 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
University of Georgia Annual Financial Report FY 2005 15

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 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 Statement 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 2005 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 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 35 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $2,764,239.20 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 2005 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. The University of Georgia had accrued liability for compensated absences in the amount of $34,636,369.05 as of 7-1-2004. For FY2005, $23,789,623.14 was earned in compensated absences and employees were paid $23,204,364.54, for a net increase of $585,258.60. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $35,221,627.65.
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 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 previously in Note 1 Capital Assets section.
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 2005 18

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $28,492,393.63
10,278,208.58 9,342,136.63
$48,112,738.84

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 Assets

June 30, 2005
$10,636,663.74 39,504,462.52 1,487,000.00 6,781,604.02 $58,409,730.28

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 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
University of Georgia Annual Financial Report FY 2005 20

Note 2. Deposits and Investments
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $44,385,982 of the University's deposits was uninsured. Of these uninsured deposits, none were collateralized with securities held by the financial institution's trust department or agent in the University's name, $34,385,982 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name and $10,000,000 were uncollateralized.
University of Georgia Annual Financial Report FY 2005 21

Investments The University of Georgia maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws. Under Georgia Code Sections 50-17-59 and 50-1763, investment of state funds is restricted to direct U.S. government obligations and obligations of selected U.S. government agencies. Private endowment funds and other non-state fund sources are not subject to this restriction.
The University's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Inves tment Type Debt Securities U. S. Treas uries U. S. A gencies Corporate Debt M oney M arket M utual Fund Commercial Paper Repurchas e A greements
Other Inves tments Equity M utual Funds Equity Securities - Domes tic Real Es tate Held for Inves tment Purpos es Other
Inves tment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treas ury and Fis cal Services Georgia Fund 1 Georgia Extended A s s et Pool
Total Inves tments

Fair Value
$8,344,361 91,038,428
2,605,300

Les s Than 1 Year
$328,079 36,138,913

Inves tment Maturity

1 -5

6 - 10

Years

Years

$6,472,093 54,880,255
930,000

$1,448,129 1,675,300

More than 10 Years
$96,060 19,260

2,244,321
104,232,410
670,208 8,550,657
240,469 1,877

2,244,321 $38,711,313

$62,282,348

$3,123,429

$115,320

4,761,420 27,058,869 $145,515,910

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.

University of Georgia Annual Financial Report FY 2005 22

The Weighted Average Maturity of the Legal Fund is 3.9 years. Of the University's total investment of $4,761,419.69 in the Legal fund, $4,713,476.67 is invested in debt securities.
The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 24 days.
The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University's policy for managing interest rate risk is divided between short-term and long-term investments. Short-term investments will have a maximum maturity of three years and long-term investments will have a maximum maturity of ten years.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments.
At June 30, 2005, $19,811,174 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $98,355,572 were uninsured and held by the investment's counterparty's trust department or agent, but not in the University's name.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University's policy for managing credit quality risk focuses in investment of loan and endowment funds which are funded by private sources. For loan and endowment funds, investments should have an average rating of "AAA". All other investments follow Board of Regents investment guidelines.
University of Georgia Annual Financial Report FY 2005 23

Fair

Rated Debt Inves tments

Value

U. S. A g en cies

$91,038,428

Corp orate Debt

2,605,300

M on ey M arket M u tu al Fun d

Co mmercial Pap er

Rep u rch as e A g reemen ts - Un d erly in g :

U. S. A g en cy Secu rities

2,244,321

Corp orate Debt

M u n icip al Bo n d s

Totals by Rating s

$95,888,049

AAA $91,004,589
166,496

AA $0.00
564,050

Quality Ratings

A

A1

$0.00

$0.00

509,667

243,498

2,244,169

$93,415,254

$564,050

$509,667

$243,498

BAAA $0.00
1,121,589

Un r ate d $33,839

152

$1,121,589

$33,991

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University's policy for managing concentration of credit risk is divided between short-term and long-term investments. For short-term investments, certificates of deposit and repurchase agreements should comprise 25-50%, investment in the Office of Treasury and Fiscal Services Georgia Fund 1 should not exceed 50% and investment in U.S. Treasury obligations or U.S. government agency securities can be 100%. For long-term investment of loan and endowment funds, equities comprise 50-75%, fixed income can range between 25-50%, and cash and cash equivalents will range between 10-25%.

As of June 30, 2005, investments in a single issuer where those investments exceed 5% of total investments were as follows:

Federal National Mortgage Association

22%

Federal Home Loan Mortgage Corporation

12%

Federal Home Loan Bank

14%

Freddie Mac

10%

Georgia Fund

18%

Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The University's investments are not exposed to foreign currency risk.

University of Georgia Annual Financial Report FY 2005 24

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,651,348.31 3,361,728.26 20,114,900.20
36,579,226.58 61,707,203.35
720,868.22
$60,986,335.13

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005
$1,148,074.14 824,226.98
1,900,027.24 $3,872,328.36

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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, 2005 the allowance for uncollectible loans was approximately $676,538.26.

University of Georgia Annual Financial Report FY 2005 25

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: In fras tru ctu re Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated
Less: Accumulated Depreciation In fras tru ctu re 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 7/1/2004
$18,335,633.76 31,735,756.94 50,071,390.70

Additions
$6,501,367.47 28,534,229.62 35,035,597.09

Reductions
$320,000.00 16,819,899.03 17,139,899.03

Ending Balance 6/30/2005
$24,517,001.23 43,450,087.53 67,967,088.76

36,741,795.36 863,153,150.23 134,164,210.29 287,355,844.01
4,141,225.63 179,892,850.95 10,075,209.72 1,515,524,286.19

1,686,505.51 121,069,814.76
6,358,126.60 23,437,732.09
165,629.81 11,498,145.20
495,805.00 164,711,758.97

290,562.14
15,222,960.28 2,144,843.60
176,014.00
17,834,380.02

38,428,300.87 983,932,402.85 140,522,336.89 295,570,615.82
2,162,011.84 191,214,982.15 10,571,014.72 1,662,401,665.14

11,888,663.59 273,170,913.65 24,339,131.23 213,864,014.02
1,865,079.14 128,348,823.00
0.00 653,476,624.63
862,047,661.56
$912,119,052.26

1,137,322.76 23,159,332.77 3,519,884.87 22,487,339.76
406,520.80 7,691,791.00
58,402,191.96
106,309,567.01
$141,345,164.10

258,971.22
10,937,143.91 1,456,387.22
176,014.00
12,828,516.35
5,005,863.67
$22,145,762.70

13,025,986.35 296,071,275.20 27,859,016.10 225,414,209.87
815,212.72 135,864,600.00
0.00 699,050,300.24
963,351,364.90
$1,031,318,453.66

University of Georgia Annual Financial Report FY 2005 26

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005
$17,558,237.30 13,422,666.26 16,849,845.44
$47,830,749.00

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Beginning

Ending

Balance

Balance

July 1, 2004

Additions

Reductions

June 30, 2005

Leases

Lease Obligations

$61,697,311.23

$90,592,655.51

$2,902,369.60

$149,387,597.14

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long Term Obligations

0.00 34,636,369.05 34,636,369.05
$96,333,680.28

23,789,623.14 23,789,623.14
$114,382,278.65

23,204,364.54 23,204,364.54
$26,106,734.14

0.00 35,221,627.65 35,221,627.65
$184,609,224.79

Current Portion $2,801,560.27
21,564,203.98 21,564,203.98 $24,365,764.25

Note 9. Significant Commitments
The University of Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $9,411,276.86 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.

Note 10. 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.
CAPITAL LEASES
The University of Georgia occupies six real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2011, 2032, 2033, and three expire in 2034. The equipment capital leases expire between 2006 and 2010. Expenditures for fiscal year 2005 were $12,362,027.39, of which $9,459,657.79 represented interest and $2,902,369.60

University of Georgia Annual Financial Report FY 2005 27

represented principal paid on capital leases. Interest rates range from 0.65 percent to 8.48 percent. The carrying values of assets held under capital lease, including the current liability portion, at June 30, 2005 were $149,387,597.14.
All six 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 lease 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 University of Georgia entered into the fifth and sixth capital leases with The University of Georgia Real Estate Foundation, whereby the University leases the East Campus Village dormitory complex and the East Village Commons dining hall for a 30 year period that began July 1, 2004, and expires June 30, 2004. The outstanding liability at June 30, 2005 on these capital leases is $148,387,597.14.
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.
Noncancellable operating lease expenditures in 2005 were $3,412,238.63 for real property.
University of Georgia Annual Financial Report FY 2005 28

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$12,625,596.86 12,450,321.48 12,266,731.09 12,185,831.26 12,084,431.74 58,448,587.00 57,956,355.00 57,956,355.00 57,956,355.00 40,019,297.50

$3,895,995.52 17,869.80 4,467.45

333,949,861.93 171,486,656.79
13,075,608.00 $149,387,597.14

$3,918,332.77

University of Georgia Annual Financial Report FY 2005 29

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$28,398,641.35 $29,085,698.09 $29,871,955.92

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 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.

University of Georgia Annual Financial Report FY 2005 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, 2005, for employees covered by ERS was $517,665.78. The University's total payroll for all employees was $506,286,996.23.
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 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, 2005, 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 2005 amounted to $61,964.03, of which $42,546.20 was made by the University and $19,417.83 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, 2005, financial report, which may be obtained through ERS.
University of Georgia Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $10,065,638.88 (9.65%) and $5,215,249.38 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
University of Georgia Annual Financial Report FY 2005 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 2005 amounted to $1,605,963.26, which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
The Board of Regents of the University System of Georgia Executive 403(b) Defined Contribution Plan
Plan Description The University System of Georgia Executive Retirement Plan is a defined contribution plan that operates under Section 403(b) of the Internal Revenue Code (IRC). The Board of Regents of the University System of Georgia is the plan administrator for the Executive 403(b) Defined Contribution Retirement Plan. The Plan was established December 12, 2001. The Employee may choose to invest plan contributions among four approved carriers (American Century, Fidelity Investments, TIAA-CREF, and VALIC).
Funding Policy Each Plan participant contributes a percentage of his or her compensation as determined by the Board of Trustees of the TRSGA. The employee contribution rate for FY2005 was 5% of gross earnings. The University System contributes, on behalf of each participant, an amount equal to the contribution amount determined by the Board of Trustees of the TRSGA. For fiscal year 2005, the employer contribution rate was 9.24% for covered employees.
Source of Funding For FY2005, The University of Georgia funded this plan through General Funds.
Note 12. 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.
University of Georgia Annual Financial Report FY 2005 33

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.
Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
University of Georgia Annual Financial Report FY 2005 34

Note 14. 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, 2005, there were 3,536 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, The University of Georgia recognized as incurred $16,472,954.10 of expenditures, which was net of $5,844,784.60 of participant contributions.
University of Georgia Annual Financial Report FY 2005 35

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

Natural Classification

Ins truction

Res earch

Public Service

Academic Support

Student Services

Ins titu tional Support

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation

$76,714,512.30 55,070,197.05 25,002,008.31

$48,437,378.55 100,381,535.16 29,931,169.76

2,169,221.32 2,884,939.59 1,505,805.54 17,804,889.24 13,199,511.45

5,616,030.04 1,046,409.01 1,113,704.10 60,520,224.87 15,376,491.35

$1,674,263.57 69,612,109.67 20,992,702.52
3,012,717.09 42,816.58
1,190,806.59 24,278,637.80
3,593,183.88

$827,147.07 43,463,804.68 10,564,361.72
577,318.94 2,055.00
573,463.39 15,178,572.61 11,803,288.50

$245,706.80 11,745,824.05 2,840,208.57
154,353.54 1,423,726.28
211,657.44 8,975,071.06
656,315.46

$0.00 29,122,053.72 13,335,459.42
355,278.41
478,447.01 6,141,490.86 849,227.38

Total Expenses

$194,351,084.80

$262,422,942.84

$124,397,237.70

$82,990,011.91 $26,252,863.20

$50,281,956.80

N atural Classification
Fa c ulty Staff B e ne f its P ersonal Services Travel Scholarships and Fellow ships U tilities Supplies and O thers Services D epreciation
Total Expenses

Plan t Op eratio n s & M ain ten an ce

Functional Classification FY2 0 0 5

Sch o lars h ip s & Fello ws h ip s

A u xiliary En terp ris es

Un allo cated Exp en s es

$0.00 25,941,084.59
7,737,751.91

$0.00

$52,178.93 43,205,183.53 9,702,442.67

$0.00

41,365.22
18,461,782.69 13,293,066.31 2,658,328.46

14,143,363.76

164,146.63 388,318.52 5,651,517.62 29,195,380.28 10,265,845.48

$68,133,379.18

$14,143,363.76

$98,625,013.66

$0.00

Total Exp en s es
$127,951,187.22 378,541,792.45 120,106,104.88
0.00 12,090,431.19 19,931,628.74 29,187,184.38 175,387,333.03 58,402,191.96
$921,597,853.85

University of Georgia Annual Financial Report FY 2005 36

Note 16. Component Units The University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation (the Research Foundation) is a legally separate, tax-exempt component unit of The University of Georgia. 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 eighteenmember 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 2005, the Research Foundation transferred approximately $131 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. Approximately $2.2 million in 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.
University of Georgia Annual Financial Report FY 2005 37

The University of Georgia Research Foundation, Inc.

DEPOSITS AND INVESTMENTS

Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the Foundation's deposits may not be recovered. The Research Foundation does not have a deposit policy for custodial credit risk.

At June 30, 2005, the book value of the Foundation's deposits, including demand accounts and cash and cash equivalents held in managed investment accounts, was $3,388,932. The bank and investment account balances at June 30, 2005 were $4,541,947 of which $4,441,947 was uninsured. Of these uninsured deposits, none were collateralized with securities held by the financial institution's trust department or agent in the Foundation's name, $3,156,199 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Foundation's name and $1,285,748 were uncollateralized.

Investments The University of Georgia Research Foundation maintains both short-term and long-term investment policies. Both establish primary and secondary objectives, specify allowable investments, set target investment mix, and provide investment guidelines.

The Foundation's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Inves tment Maturity

Fair

Less Than

1 -5

6 - 10

More than

Inves tment Type

Value

1 Year

Years

Years

10 Years

Debt Securities

U. S. Treasuries

$1,069,512.80

$0.00

$445,554.70

$566,263.10

$57,695.00

U. S. Agencies

2,396,368

1,474,553

360,952

560,863

Corporate Debt

17,813,771

14,899,864

2,722,658

191,249

Other Investments Equity Mutual Funds - Domes tic Equity Mutual Funds - International Equity Securities - Domes tic Equity Securities - International Managed Futures /Hedge Funds
Inves tment Pools University of Georgia Foundation
Long-Term Fund

21,279,652
2,118,412 1,428,138 4,696,172 1,044,229
769,866

$14,899,864.08

$4,642,766.03

$1,118,464.31

$618,558.10

2,220,886

Total Investments

$33,557,355

As of June 30, 2005, Research Foundation investments held by the University of Georgia

Foundation in the long-term investment pool consists of investments in domestic and

international equities (70.6%), fixed income instruments (10.0%), private equity investments

University of Georgia Annual Financial Report FY 2005 38

(5.4%), real estate funds (6.2%), hedge funds (7.5%) and deposits (.3%) that are held by outside investment managers.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Foundation's policy for managing interest rate risk is divided between short-term and long-term investments. Short-term investments will have a maximum maturity of eighteen months to five years depending on type of investment. Longterm investments are managed using a planning timeline of five years or more and overall risk measurements rather than specific maturity limits.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Foundation will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Foundation does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2005, $27,030,053 of the Foundation's applicable investments were uninsured and held by the investment's counterparty in the Foundation's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Foundation's short-term investment policy specifies that corporate bonds be rated BBB (Standard & Poor's) or higher; the long-term policy requires a BBB- rating or higher.

Value

Rated Inves tments

Agencies

Debt

Funds

Qualtity Ratings S tandard & Poor's AAA AA+ AAA+ A ABBB+ BBB BBBBB+ BB Mornings tar 5-Star 4-Star 3-Star Unrated
Non-rated inves tments GNMA securities U.S. Treasury s ecurities Total

$461,186 124,990.00 420,606.00 1,739,165.00 606,895.00 923,842.00 5,107,850.00 3,697,868.00 2,004,597.00 1,303,248.00 1,884,710.00
1,599,681.00 1,428,138.00
518,731.00 1,564,675.00 23,386,182.00
370,507.00 1,069,513.00 $24,826,202

$461,186
1,564,675.00 2,025,861.00
370,507.00 $2,396,368

$0 124,990.00 420,606.00 1,739,165.00 606,895.00 923,842.00 5,107,850.00 3,697,868.00 2,004,597.00 1,303,248.00 1,884,710.00
17,813,771.00
$17,813,771

$0
1,599,681.00 1,428,138.00
518,731.00 3,546,550.00
$3,546,550

University of Georgia Annual Financial Report FY 2005 39

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of an entity's investment in a single issuer. The Foundation's policy for managing concentration of credit risk is divided between short-term and long-term investments. For short-term investments, maximum percentages are set for cash and cash equivalents at 15%, asset backed securities at 50% and corporate bonds at 90% while U. S. Treasuries, U. S. Agencies debt, and certificates of deposit may comprise 100% for the short-term investments. For long-term investment equities comprise 40-80%, bonds 20-60% and alternative investments can range 0-20%.

As of June 30, 2005, investments in a single issuer where those investments exceed 5% of total investments were as follows:

Federal Home Loan Mortgage Corporation

5%

General Motors Acceptance

6%

University of Georgia Foundation

7%

Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Foundation's investments are not exposed to foreign currency risk as securities denominated in currencies other than the U.S. dollar are not permissible by the Research Foundation's investment policy.

University of Georgia Annual Financial Report FY 2005 40

The University of Georgia Research Foundation, Inc. CAPITAL ASSETS
Changes in capital assets for the year ended June 30, 2005 are as follows:

Capital Assets, Not Being Depreciated: Land
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2004
$110,000 110,000

Additions
$0 0

Capital Assets, Being Depreciated:

Library Repository Building

1,142,307

Total Assets Being Depreciated

1,142,307

0

Less: Accumulated Depreciation Library Repository Building Total Accumulated Depreciation

599,066 599,066

46,083 46,083

Total Capital Assets, Being Depreciated, Net

543,241

(46,083)

Capital Assets, net

$653,241

($46,083)

Changes in capital assets for the year ended June 30, 2004 are as follows:

Capital Assets, Not Being Depreciated: Land
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2003
$110,000 110,000

Additions
$0 0

Capital Assets, Being Depreciated:

Library Repository Building

1,142,307

Total Assets Being Depreciated

1,142,307

0

Less: Accumulated Depreciation Library Repository Building Total Accumulated Depreciation

552,984 552,984

46,082 46,082

Total Capital Assets, Being Depreciated, Net

589,323

(46,082)

Capital Assets, net

$699,323

($46,082)

Reductions $0 0
0
0 0 $0
Reductions $0 0
0
0 0 $0

Ending Balance 6/30/2005
$110,000 110,000
1,142,307 1,142,307
645,149 645,149 497,158 $607,158
Ending Balance 6/30/2004
$110,000 110,000
1,142,307 1,142,307
599,066 599,066 543,241 $653,241

LONG TERM LIABILITIES The University of Georgia Research Foundation had no long term liabilities at June 30, 2005

University of Georgia Annual Financial Report FY 2005 41

The University of Georgia Athletic Assocation, Inc. The University of Georgia Athletic Association (the Athletic Association) is a legally separate, tax-exempt component unit of The University of Georgia (the "University"). The Association was organized in 1938 as a not-for-profit corporation to promote intercollegiate athletic sports representing the University. The twenty-member board of 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, 2005, 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 $21,901,018 and were recognized as expenses of the Association. Capital assets net of accumulated depreciation of $139.2M 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.
University of Georgia Annual Financial Report FY 2005 42

The University of Georgia Athletic Association, Inc.
DEPOSITS AND INVESTMENTS
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia the option of exempting demand deposits from the collateral requirements.
At year-end, the book-carrying amount of the Association's deposits, including restricted cash and cash equivalents, was $42,713,096 and $46,525,928 in 2005 and 2004, respectively. The bank balance was $44,029,742 and $49,157,519 in 2005 and 2004, respectively. The Association's bank balance is classified as follows at June 30:
University of Georgia Annual Financial Report FY 2005 43

Amount insured by the FDIC and FSLIC or collaterialized with securities held in the Associations' name
U n c o lla te ra liz e d

2005

2004

$38,007,574 6,022,168
$44,029,742

$42,751,961 6,405,558
$49,157,519

Investments Since 2001, the Association has transferred funds to the University of Georgia Foundation (the "Foundation") for investment management. The current value of Association investments held by the Foundation is $2,273,308. The Association reflects the value of the investments as Receivables from the Foundation. The Athletic Association has ultimate control over the use of the assets and has the ability to request that all funds be returned to the Association at any time. The Foundation reports include a categorization of all investments, including those held for the Association.

As of June 30, 2005, Athletic Association investments held by the University of Georgia Foundation in the long-term investment pool consists of investments in domestic and international equities (70.6%), fixed income instruments (10.0%), private equity investments (5.4%), real estate funds (6.2%), hedge funds (7.5%) and deposits (.3%) that are held by outside investment managers.

University of Georgia Annual Financial Report FY 2005 44

The University of Georgia Athletic Association, Inc. CAPITAL ASSETS
Changes in capital assets for the year ended June 30, 2005 are as follows:

Beginning

B al anc e s

7/1/2004

Additions

Reductions

Capital A s s ets , Not Being Depreciated:

Cons truction W ork-in-Progres s

$5,005,013

$4,761,467

$5,005,013

Total Capital A s s ets Not Being Depreciated

5,005,013

4,761,467

5,005,013

Capital A s s ets , Being Depreciated: Land Improvements Buildings , Fixed Equipment, and Infras ctructure Other Equipment Total A s s ets Being Depreciated

16,216,108
157,796,405 5,045,539
179,058,052

685,975
4,395,072 1,854,999 6,936,046

(5,005,013) 247,652
(4,757,361)

Les s : A ccumulated Depreciation Land Improvements Buildings , Fixed Equipment, and Infras ctructure Other Equipment Total A ccumulated Depreciation
Total Capital A s s ets , Being Depreciated, Net

4,056,169
25,834,727 4,535,225
34,426,121 144,631,931

691,864
2,886,206 252,028
3,830,098 3,105,948

0 (4,757,361)

Capital A s s ets , net

$149,636,944

$7,867,415

$247,652

The University of Georgia Athletic Association, Inc.
Changes in capital assets for the year ended June 30, 2004 are as follows:

Capital A s s ets , Not Being Depreciated: Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Land Improvements Buildings , Fixed Equipment, and Infras ctructure Other Equipment Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Land Improvements Buildings , Fixed Equipment, and Infras ctructure Other Equipment Total A ccumulated Depreciation
Total Capital A s s ets , Being Depreciated, Net
Capital A s s ets , net

Beginning B al anc e s 7/1/2003
$16,214,885 16,214,885

Additions
$5,005,013 5,005,013

Reductions
$16,214,885 16,214,885

9,585,242
130,831,937 6,550,483
146,967,662

6,641,537
15,874,594 664,197
23,180,328

10,671
(11,089,874) 2,169,141 (8,910,062)

3,370,635
26,422,255 5,330,247
35,123,137 111,844,525 $128,059,410

685,534
3,457,957 206,367
4,349,858 18,830,470 $23,835,483

4,045,485 1,001,389 5,046,874
(13,956,936)
$2,257,949

Ending B al anc e 6/30/2005
$4,761,467 4,761,467
16,902,083
167,196,490 6,652,886
190,751,459
4,748,033
28,720,933 4,787,253
38,256,219 152,495,240 $157,256,707
Ending B al anc e 6/30/2004
$5,005,013 5,005,013
16,216,108
157,796,405 5,045,539
179,058,052
4,056,169
25,834,727 4,535,225
34,426,121 144,631,931 $149,636,944

University of Georgia Annual Financial Report FY 2005 45

The University of Georgia Athletic Association, Inc.

LONG TERM LIABILITIES

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Athletic Association Athletic Facilities
Deferred Compensation

Beginning Balance July 1, 2004

Additions

Reductions

Ending

Amounts due

Balance

within

June 30, 2005 One Year

$84,502,614.00 0.00

$17,470,000.00 1,781,602.00

$27,315,132.00

$74,657,482.00 1,781,602.00

$2,324,681.00 238,707.00

Total Long Term Debt

$84,502,614.00

$19,251,602.00

$27,315,132.00

$76,439,084.00

$2,563,388.00

University of Georgia Annual Financial Report FY 2005 46

The University of Georgia Athletic Association, Inc.
Total long-term debt consisted of the following at June 30:
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.
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).
Note payable to the University of Georgia over 20 years in annual payments of $477,917 at a rate 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.
Development Authority of Athens-Clarke County Series 2001 revenue bonds. Interest is payable monthly based on a formula rate adjusted daily (2.28% and 1.1% in June 2005 and 2004, respectively). The loan matures in 2031, based on certain repayment provisions.
Development Authority of Athens-Clarke County Series 2003 revenue bonds. Interest is payable monthly based on a formula rate adjusted daily (2.28% and 1.1% in June 2005 and 2004, respectively). The loan matures in 2033, based on certain repayment provisions.
Development Authority of Athens-Clarke County Series 2005A revenue bonds. Interest is payable monthly based on a formula rate adjusted daily (3.28% in June 2005). The loan matures in 2021, based on certain repayment provisions.
Total Debt Less Current Portion of Debt
Total Long-Term Debt

2005

2004

$0

$340,000

2,946,082

10,560,000 3,224,540

241,400

378,074

34,000,000

34,000,000

20,000,000

36,000,000

17,470,000
74,657,482 2,324,681
$72,332,801.00

84,502,614 1,352,976
$83,149,638.00

Ramsey Student Center for Physical Activities Under an agreement with The University of Georgia, the Association assumed the responsibility for a portion of the funding for the construction of the Ramsey Student Center for Physical Activities. In fiscal 1996, the Association recorded as property approximately $7,800,000, representing the Association's share of the Ramsey Center based on estimated usage as defined in the agreement. The Association paid cash of $2,858,928, and subsequently recorded a liability of $4,941,072 at June 30, 1996 representing the remaining principal balance of the obligation.
University of Georgia Annual Financial Report FY 2005 47

This balance is reported as the note payable to the University of Georgia above and has an outstanding principal balance at June 30, 2005 and 2004 of $2,946,082 and $3,224,540, respectively. The Association made payments of principal and interest of $477,917 during the year June 30, 2005 and will make an equal payment in each succeeding year through 2013. The interest rate associated with this liability is 6.19%.
Revenue Bonds Payable On September 27, 2001, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $34 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2001 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $34 million to the Association. The Bonds are secured by a letter of credit issued by SunTrust Bank in favor of the Authority. The letter of credit expires on January 15, 2006. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.28% and 1.1% on June 30, 2005 and 2004, respectively). The loan matures in 2031, subject to certain early repayment provisions.
On August 28, 2003, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $36 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2003 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $36 million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that expires on August 28, 2005 and must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.28% and 1.1% on June 30, 2005 and 2004, respectively). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the Association redeemed $16 million of these bonds.
The Association has entered into a twenty-eight year interest rate swap agreement for the remaining $20 million of the Series 2003 Bonds. Based on the swap agreement, the association owes interest calculated at a fixed rate of 3.38% to the counterparty to the swap. In return, the counterparty owes the Association interest based on a variable rate that matches the rate required by the bonds. Only the net difference in interest payments is actually exchanged with the counterparty. The bond principal is not exchanged; it is only the basis on which the interest payments are calculated. The Association continues to pay interest to the bondholders at the variable rate provided by the bonds. However, during the term of the swap agreement, the Association effectively pays a fixed rate on the debt. The debt service requirements to maturity for these bonds are based on that fixed rate. The Association will be exposed to variable rates if the counterparty to the swap defaults or if the swap is terminated. A termination of the swap agreement may also result in the Association's making or receiving a termination payment. The market value of the interest rate swap agreement as of June 30, 2005 represented an $853,859 liability of the Association had the swap been terminated at that time
On January 27, 2005, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $17.47 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2005 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $17.47
University of Georgia Annual Financial Report FY 2005 48

million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that expires on January 27, 2006 and must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.28% on June 30, 2005). The loan matures in 2021 and requires yearly principal reductions.
Debt Service Obligations Annual debt service requirements at 06/30/2005 for the Athletic Association are as follows:

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045

Ye ar
1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

P r inc ipal
$2,324,683.00 1,850,371.00 1,904,951.00 1,866,794.00 1,922,025.00 9,471,991.00 9,062,778.00 6,045,556.00 3,833,333.00 36,375,000.00

Int e r e s t

To t al

$2,150,649.00 2,084,039.00 2,015,359.00 1,944,540.00 1,871,343.00 8,102,196.00 6,956,843.00 5,261,869.00 4,589,769.00 922,741.00

$4,475,332.00 3,934,410.00 3,920,310.00 3,811,334.00 3,793,368.00 17,574,187.00 16,019,621.00 11,307,425.00 8,423,102.00 37,297,741.00

$74,657,482.00

$35,899,348.00

$110,556,830.00

University of Georgia Annual Financial Report FY 2005 49

The University of Georgia Foundation The University of Georgia 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 35-member Board of Trustees has fiduciary responsibility for managing the Foundation's assets. The Foundation Executive Committee is composed of the chairman, vicechairman, secretary, treasurer, the chairman from each of the other standing trustee committees and one at-large member. 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.
In 1996, the Foundation entered into a cooperative organization agreement with the Board of Regents which provided administrative services and facilities to the Foundation. In April 2005, the Board of Regents exercised its right to terminate the agreement after a period of 90 days. On July 1, 2005, the Foundation entered into an agreement with the University to provide administrative services and facilities to the Foundation, effectively terminating the cooperative organization agreement. The administrative services and facilities agreement expires on June 30, 2006 and provides for annual renewal. The Real Estate Foundation's $75 million revolving credit facility provides the bank with certain rights upon the termination of the cooperative organization agreement. In September of 2005, the Real Estate Foundation entered into a forbearance agreement with the bank whereby the bank agreed not to exercise their termination event rights until July 31, 2006.
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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2005, the Foundation distributed $14,635,504 to the University for scholarships and donor restricted support. Facilities valued at $162 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 2005 50

The University of Georgia Foundation

INVESTMENTS

The University of Georgia Foundation holds investments in the amount of $426 million. The University of Georgia Foundation established a spending plan for all endowment funds effective with fiscal year 1999. Under this plan, funds are allowed to expend the lesser of Investment Return (dividend/interest yield and market appreciation) or the Spending Calculation for that fund. The Spending Calculation is derived by applying a "Spending Calculation Rate" to the average principal balance of the fund over the preceding 36 months. The Investment Committee of the Foundation's Board of Trustees establishes the "Spending Calculation Rate" to be used in the spending calculation each year. Gifts made to fund current expenditures are not endowed and, therefore, are not subject to the Spending Policy.

The University of Georgia Foundation also holds investments in real property valued at $17,477,005

Investments:
Certificates of Deposit Common Stock Corporate Bonds U.S. Government Securities Mutual Funds Split-Interest Investments Long-Term Investment Pool Investments in Real Estate
Total Investments

Cost
$158,457.00 3,796,047.83 1,020,363.62
734,220.04 1,135,432.74 13,173,259.25 333,249,156.00 17,477,005.00
$370,743,941.48

Fair Value
$158,457.00 4,130,055.00 1,026,947.00
726,907.00 1,164,501.00 14,845,294.00 386,388,421.00 17,477,005.00
$425,917,587.00

As of June 30, 2005, the long-term investment pool consists of investments in domestic and international equities (70.6%), fixed income instruments (10.0%), private equity investments (5.4%), real estate funds (6.2%), hedge funds (7.5%) and deposits (.3%) that are held by outside investment managers.

The Long-Term Investment Pool includes assets held for the Athletic Association and the Research Foundation in the amounts of $2,273,308 and $2,220,886, respectively. These amounts are also reported as investments by those entities. The Foundation reports the liability for these investments in Deposits Held for Other Organizations.

University of Georgia Annual Financial Report FY 2005 51

The University of Georgia Foundation

LONG TERM LIABILITIES

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2005 are

shown below:

Beginning

Ending

Principal due

Balance

Balance

within

July 1, 2004 Additions Reductions June 30, 2005 One Year

$25,620,000 bond issue--Par value of bonds outstanding
$39,155,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $20,871 and $12,135 Total $39,155,000 bonds payable
$99,860,000 bond issue: Par value of bonds outstanding Bond premium, net of accumulated amortization of $239,333 and $146,083 Total $99,860,000 bonds payable
$8,215,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $14,371 and $7,341 Total $8,215,000 bonds payable
$25,970,000 bond issue: Par value of bonds outstanding Bond discount, net of accumulated amortization of $9,213 and $1,274 Total $25,970,000 bonds payable
Total bonds payable
$75,000,000 revolving credit agreement $1,900,000 credit agreement $300,000 credit agreement
Total revolving credit agreements
$1,800,000 note payable $1,117,865 note payable
Total notes payable
Total Long Term Debt

$24,610,000

$0

($535,000)

$24,075,000

$0

39,155,000
138,150 39,293,150

(740,000)
(8,736) (748,736)

38,415,000
129,414 38,544,414

760,000 760,000

99,860,000
1,808,468 101,668,468

(125,000)
(93,250) (218,250)

99,735,000
1,715,218 101,450,218

1,825,000 1,825,000

8,125,000
(100,168) 8,024,832

(230,000)
7,030 (222,970)

7,895,000
(93,138) 7,801,862

240,000 240,000

25,970,000 (165,519)
25,804,481
199,400,931
11,997,170 1,636,000
200,000
13,833,170 1,357,250
831,034
2,188,284
$215,422,385

972,087 100,000 1,072,087
300,000 300,000 $1,372,087

7,939 7,939 (1,717,017)
(1,636,000) (300,000)
(1,936,000) (89,000) (31,984) (120,984)
($3,774,001)

25,970,000 (157,580)
25,812,420
197,683,914
12,969,257

2,825,000

12,969,257 1,268,250 1,099,050 2,367,300 $213,020,471

89,000 39,288
128,288
$2,953,288

University of Georgia Annual Financial Report FY 2005 52

The University of Georgia Foundation DEBT DISCLOSURE $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 $75 million credit agreement discussed below. The Foundation has guaranteed the obligations, including the letter of credit, under the Real Estate Foundation's $75 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 (2.29% and 1.08% at June 30, 2005 and 2004, respectively). The loan matures in 2031, subject to certain early repayment provisions. During the years ended June 30, 2005 and 2004, principal payments of $535,000 and $515,000, respectively, were made.

During 2003, the Real Estate Foundation entered into an interest rate swap agreement effectively changing the interest rate exposure on the 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 was $48,489 and was recorded as an accrued liability in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $160,765 for the year ended June 30, 2004 as an adjustment to interest expense related to this swap. During the year ended June 30, 2005, this swap agreement expired and the related gain on the fair value of the derivative of $48,489 has been reflected in interest expense.

During 2005, the Real Estate Foundation entered into an interest rate cap agreement effectively limiting the interest rate on a portion of the 2001 Loan Agreement to a 3.5% fixed rate until November 30, 2007. The Real Estate Foundation paid a premium of $91,000 in connection with this agreement. The fair value of the interest rate cap as of June 30, 2005 was $58,311 and was recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss on the fair value of the derivative of $32,689 for the year ended June 30, 2005 as an adjustment to interest expense related to this agreement.

$ 2 5 ,6 2 0 ,0 0 0 B o n d Is s u e

Y e a r E n d in g J u n e 3 0 : 2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031

Year 1 2 3 4 5 6 -1 0 1 1 -1 5 1 6 -2 0 2 1 -2 5 26

P rin c ip a l $0
1 1 ,6 5 9 ,5 2 3
1 2 ,4 1 5 ,4 7 7

In te re s t*

T o tal

$ 551,318 2 8 4 ,3 1 4 2 8 4 ,3 1 4 2 8 4 ,3 1 4 2 8 4 ,3 1 4
1 ,4 2 1 ,5 7 2 1 ,4 2 1 ,5 7 2 1 ,4 2 1 ,5 7 2 1 ,4 2 1 ,5 7 2
2 8 4 ,3 1 4

$5 51,318 1 1 ,9 4 3 ,8 3 7
2 84,314 2 84,314 2 84,314 1 ,4 2 1 ,5 7 2 1 ,4 2 1 ,5 7 2 1 ,4 2 1 ,5 7 2 1 ,4 2 1 ,5 7 2 1 2 ,6 9 9 ,7 9 1

$ 2 4 ,0 7 5 ,0 0 0

$ 7,659,178

$ 3 1 ,7 3 4 ,1 7 8

* In te r e s t is c alc ulate d us ing rate in e ffe c t at J u n e 3 0 , 2 0 0 5 , w hic h w as 2 .2 9 % .

University of Georgia Annual Financial Report FY 2005 53

$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, 2005 and 2004, 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 schedule of bond maturities. Principal payments are due on December 15 starting in 2004 and continuing through 2032. During the year ended June 30, 2005, a principal payment of $740,000 was made.

$39,155,000 Bond Issue

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2033

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-28

Prin c ip a l
$760,000 780,000 800,000 825,000 850,000 4,710,000 5,840,000 7,435,000 9,480,000 6,935,000

Interes t

Total

$1,728,264 1,709,014 1,688,264 1,664,889 1,639,233 7,724,501 6,601,211 5,009,541 2,946,563 530,469

$2,488,264 2,489,014 2,488,264 2,489,889 2,489,233
12,434,501 12,441,211 12,444,541 12,426,563
7,465,469

$38,415,000

$31,241,949

$69,656,949

$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 facilities. During the years ended June 30, 2005 and 2004, 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 schedule of bond maturities. Principal payments are due on December 1 starting in 2005 and continuing

University of Georgia Annual Financial Report FY 2005 54

through 2033. During the year ended June 30, 2005, a prepayment of principal in the amount of $125,000 was made based on surplus bond proceeds as required under the bond agreement.

Ye a r En d in g Ju n e 30: 2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2030 2031 th ro u g h 2034

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-29

$ 9 9 ,8 6 0 ,0 0 0 B o nd Is sue

P rincipal

Inte re s t

To tal

$ 1 ,8 2 5 ,0 0 0 1 ,8 7 5 ,0 0 0 1 ,9 3 5 ,0 0 0 2 ,0 0 0 ,0 0 0 2 ,0 6 0 ,0 0 0
1 1 ,5 1 5 ,0 0 0 1 4 ,2 3 5 ,0 0 0 1 8 ,6 4 0 ,0 0 0 2 3 ,6 3 5 ,0 0 0 2 2 ,0 1 5 ,0 0 0

$4,764,175 4,708,675 4,651,525 4,590,000 4,516,300
21,240,800 18,231,857 13,950,456
8,604,375 2,214,250

$ 6 ,5 8 9 ,1 7 5 6 ,5 8 3 ,6 7 5 6 ,5 8 6 ,5 2 5 6 ,5 9 0 ,0 0 0 6 ,5 7 6 ,3 0 0
3 2 ,7 5 5 ,8 0 0 3 2 ,4 6 6 ,8 5 7 3 2 ,5 9 0 ,4 5 6 3 2 ,2 3 9 ,3 7 5 2 4 ,2 2 9 ,2 5 0

$ 9 9 ,7 3 5 ,0 0 0

$87,472,413

$ 1 8 7 ,2 0 7 ,4 1 3

$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 schedule of bond maturities. Principal payments are due on December 15 starting in 2003 and continuing through 2027. During the years ended June 30, 2005 and 2004, principal payments of $230,000 and $90,000, respectively, were made.

Ye a r En d in g Ju n e 30: 2006 2007 2008 2009 2010 2011 th ro u g h 2015 2016 th ro u g h 2020 2021 th ro u g h 2025 2026 th ro u g h 2028

Ye a r 1 2 3 4 5 6-10 11-15 16-20 21-23

$ 8 ,2 1 5 ,0 0 0 B o nd Issue

P rin c ip a l

In teres t

Total

$240,000 250,000 250,000 260,000 260,000
1,420,000 1,680,000 2,065,000 1,470,000

$288,241 282,729 277,104 271,431 265,321
1,205,244 933,713 550,766 98,219

$528,241 532,729 527,104 531,431 525,321
2,625,244 2,613,713 2,615,766 1,568,219

$7,895,000

$4,172,768

$12,067,768

University of Georgia Annual Financial Report FY 2005 55

$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 a portion of the facility and by the Coverdell Entity's interest in certain rents and leases derived from a portion of the facility. During the years ended June 30, 2005 and 2004, the Coverdell Entity used the proceeds of this loan to fund construction of a portion 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 schedule of bond maturities. Principal payments are due on December 15 starting in 2006 and continuing through 2034.

$25,970,000 Bond Issue

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30

Prin c ip a l
$0 460,000 500,000 510,000 525,000 2,915,000 3,580,000 4,505,000 5,700,000 7,275,000

Interes t

Total

$1,165,645 1,159,002 1,146,110 1,133,485 1,119,235 5,305,950 4,637,894 3,720,286 2,521,275 945,625

$1,165,645 1,619,002 1,646,110 1,643,485 1,644,235 8,220,950 8,217,894 8,225,286 8,221,275 8,220,625

$25,970,000

$22,854,507

$48,824,507

$75,000,000 Revolving Credit Agreement--During 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, 2007. 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, 2005 and 2004, amounts outstanding or issued under this agreement included borrowings of $12,969,257 and $11,997,170, respectively, and letters of credit and bank credit reserves of $24,519,347 and $25,485,347, respectively, resulting in $37,511,396 and $35,617,483, respectively, 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, 2005 and 2004, the rates applicable to the borrowings were 3.465% and 1.45%, respectively. The

University of Georgia Annual Financial Report FY 2005 56

Foundation has guaranteed the obligations of the Real Estate Foundation under this revolving credit agreement.
The revolving credit agreement provides the bank with certain rights after a 90 day forbearance period from the date of the termination of the cooperative services agreement between the Board of Regents and the Foundation. The cooperative service agreement was terminated July 1, 2005. Those termination event rights include (1) the ability to require that the Real Estate Foundation prepay a portion of the outstanding loans which are not directly and fully supported by a lease agreement with the Board of Regents and (2) the ability to decline to make any further loans or to issue further letters of credit to the Real Estate Foundation.
In September 2005, the Real Estate Foundation entered into a forbearance agreement with the bank which expires July 31, 2006. During the forbearance period, the bank agrees not to call any borrowings or letters of credit and to continue to make loans as long as the conditions of the revolving credit agreement and the forbearance agreement are met. The balance of borrowings and letters of credit as of June 30, 2005 that is callable by the bank after the forbearance period is $18,476,566 and is included in the total principal payments due during the year ended June 30, 2007.
$1,900,000 Credit Agreement--During 2003, the Real Estate Foundation established a $1.9 million credit agreement with a bank which was to expire July 29, 2007. The credit agreement provided for direct borrowings for the purchase and improvement of a property in Cortona, Italy. At June 30, 2004, the amount outstanding under this agreement was $1,636,000, with $264,000 available as borrowing capacity. Borrowings under the credit agreement bore interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). During the year ended June 30, 2004, the rate applicable to the borrowings was 1.81%. The Foundation had guaranteed the obligations of the Real Estate Foundation under this credit agreement.
During the year ended June 30, 2005, this line of credit was repaid using funds from the $75 million revolving credit agreement described previously.
$300,000 Credit Agreement--During 2003, the Foundation established a $0.3 million credit agreement with a bank which was to expire June 30, 2009. The credit agreement provided for direct borrowings for the purchase and improvement of a property in Costa Rica. At June 30, 2004, the amount outstanding under this agreement was $200,000, with $100,000 available as borrowing capacity. Borrowings under the credit agreement bore interest at the bank's 30-day LIBOR rate plus 45 basis points (or .45%). During the year ended June 30, 2004, the rate applicable to the borrowings was 1.61%.
University of Georgia Annual Financial Report FY 2005 57

$1,800,000 Note Payable--During 2000, the Foundation signed a $1.8 million promissory note agreement with a bank, which expires on December 31, 2019. At June 30, 2005 and 2004, $1,268,250 and $1,357,250, respectively, 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: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020

Year 1 2 3 4 5 6-10 11-15

$1 ,8 0 0 ,0 0 0 No te P ayable

P rinc ipal Inte re st To tal

$ 8 9 ,0 0 0 8 9 ,0 0 0 8 9 ,0 0 0 8 9 ,0 0 0 8 9 ,0 0 0
4 4 5 ,0 0 0 3 7 8 ,2 5 0

$ 8 8 ,0 4 7 8 1 ,7 0 1 7 5 ,3 5 5 6 9 ,0 0 9 6 2 ,6 6 4
2 1 8 ,1 3 3 6 0 ,6 8 1

$ 1 7 7 ,0 4 7 1 7 0 ,7 0 1 1 6 4 ,3 5 5 1 5 8 ,0 0 9 1 5 1 ,6 6 4 6 6 3 ,1 3 3 4 3 8 ,9 3 1

$ 1 ,2 6 8 ,2 5 0

$ 6 5 5 ,5 9 0 $ 1 ,9 2 3,8 4 0

$1,117,865 Note Payable--During 2002, the Foundation signed an $880,000 promissory loan agreement with a bank which was amended during 2005 to increase the borrowed amount to $1,117,865. This agreement expires on May 1, 2007. At June 30, 2005 and 2004, $1,099,050 and $831,034, respectively, was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 0.45%, or 3.56% and 1.56% at June 30, 2005 and 2004, respectively. Principal and interest are payable monthly.

At June 30, 2005, the Foundation had an outstanding interest rate swap agreement effectively changing the interest rate exposure on the $1,117,865 note payable from variable to a 5.9% fixed rate through December 2004 and a 5.75% fixed rate thereafter over the term of the note payable. The fair value of the termination cost of the interest rate swap as of June 30, 2005 and 2004 was $67,045 and $39,855, respectively, and was recorded as an accrued liability in accordance with SFAS No. 133. The Foundation recorded a loss of $27,190 and a gain of $74,474 for the years ended June 30, 2005 and 2004, respectively, as an adjustment to interest expense related to this swap.

$1,117,865 Note Payable

Year Ending June 30: 2006 2007

Year 1 2

Principal Interest* Total

$ 3 9 ,2 8 8 1 ,0 5 9 ,7 6 2

$ 3 8 ,4 8 5 3 4 ,0 4 9

$ 7 7 ,7 7 3 1 ,0 9 3 ,8 1 1

$ 1 ,0 9 9 ,0 5 0

$72,534 $1,171,584

* Interest is calculated using rate in effect at June 30, 2005, which was 3.56%

University of Georgia Annual Financial Report FY 2005 58

UNIVERSITY SYSTEM OFFICE
Annual Financial Report
For the Year Ended June 30, 2005

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 2005
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 Deposits and Investments..................................................................................... 19 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 Significant Commitments.................................................................28 Note 10 Lease Obligations................................................................................................ 28 Note 11 Retirement Plans ................................................................................................. 30 Note 12 Risk Management................................................................................................ 33 Note 13 Contingencies...................................................................................................... 34 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 35 Note 15 Natural Classifications With Functional Classifications..................................... 36

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 233,000 students and employ more than 9,000 faculty and 35,000 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 2005. 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 2004 and FY 2005.
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 University System Office. They are also able to determine how much the University System Office 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 System Office. Net assets are divided into
University System Office Annual Financial Report FY 2005 1

three major categories. The first category, invested in capital assets, net of debt, provides the University System Office's equity in property, plant and equipment owned by the University System Office. 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 System Office 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 University System Office for any lawful purpose of the University System Office.

Statement of Net Assets, Condensed
As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets
Liabilities : Current Liabilities Noncurrent Liabilities
Total Liabilities
Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2005
$199,676,698.26 31,601,508.36 3,612,043.20
234,890,249.82
188,778,536.16 18,803,325.35
207,581,861.51
11,582,240.73 3,612,043.20 7,285,533.64
4,828,570.74 $27,308,388.31

June 30, 2004
$232,372,038.75 15,399,922.51 3,612,043.20
251,384,004.46
184,943,226.15 3,083,535.59
188,026,761.74
11,633,094.78 3,612,043.20
42,708,962.25
5,403,142.49 $63,357,242.72

The total assets of the University System Office decreased by ($16,493,754.64). A review of the Statement of Net Assets will reveal that of the decrease amount ($34,714,286.05) was the reduction of the Health Insurance Reserve Fund. This decrease was due to the Board of Regents of the University System of Georgia granting credits to institutions for their health insurance expense to lessen the impact of a $64.8 million budget reduction. This large decrease is partially offset by a $16,201,585.85 increase to Capital Assets, net of accumulated depreciation due to the addition of five capital leases during the year including one for a new building for the Office of Information and Instructional Technology in Athens, Georgia.
The total liabilities for the year increased by $19,555,099.77. The primary cause for the increase was in non-current liabilities for $15,719,789.76 in capital payables. The combination of the decrease in total assets of ($16,493,754.64) and the increase in total liabilities of $19,555,099.77 yields a decrease in total net assets of ($36,048,854.41).

University System Office Annual Financial Report FY 2005 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 University System Office, both operating and non-operating, and the expenses paid by the University System Office, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the University System Office. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the University System Office. 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 System Office. Nonoperating 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 System Office without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$234,997,159.49 407,266,841.54 (172,269,682.05) 136,220,827.64
(36,048,854.41)
(36,048,854.41) 63,357,242.72 63,357,242.72 $27,308,388.31

$251,058,038.22 394,057,582.62 (142,999,544.40) 136,309,626.52
(6,689,917.88)
(6,689,917.88) 70,047,160.60 70,047,160.60 $63,357,242.72

University System Office Annual Financial Report FY 2005 3

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:

A decrease in Operating Revenue was due to the earlier mentioned Health Insurance credit to the institutions to lessen the impact of a $64.8 million dollar budget reduction. Federal Grants and Contracts revenue had an increase of $5,259,474.12 and was the only operating revenue area with an increase. The increase in operating expenses is also related to the Health Insurance monies, in that health insurance related expenses increased by $16,875,769.19 from FY 04 to FY 05.

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004

June 30, 2005

June 30, 2004

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$0.00
11,106,446.23 20,394,314.63
203,496,398.63
234,997,159.49
134,248,829.19 1,101,913.54
412,003.37 1,096,169.79 136,858,915.89

$0.00
5,846,972.11 54,585.70
245,156,480.41
251,058,038.22
136,231,950.72 526,832.25
534,955.63 (839,923.30) 136,453,815.30

0.00 $371,856,075.38

0.00 $387,511,853.52

University System Office Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$1,540,263.23 105,902.30
91,636,230.82 18,000,721.30
19,375.96 294,643,242.29
30,000.00
1,291,105.64
407,266,841.54
638,088.25 $407,904,929.79

June 30, 2004
$3,997,123.72 135,114.48
91,844,612.86 10,389,343.07
248,728.86 280,431,523.03
968,125.75
6,043,010.85
394,057,582.62
144,188.78 $394,201,771.40

The compensation and employee benefits category decreased by approximately ($586,245.62). The decrease is the result of staffing levels that have continued to be reduced as the result of recent budget reductions.

Under non-operating revenues (expenses) state appropriations decreased by approximately ($1,983,121.53). 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 System Office. Recent data has revealed that the state is once again on the increase in revenue and we are hopeful that this trend will continue and state funding will increase to prior year levels.

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 University System Office 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 System Office. 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 2005 5

Cash Flows for the Years Ended June 30, 2005 and 2004, Condensed

June 30, 2005

Cas h Provided (us ed) By:

Operating A ctivities

($165,649,573.40)

Non-capital Financing A ctivities

136,702,043.42

Capital and Related Financing A ctivities

(5,840,175.11)

Inves ting A ctivities

17,297,926.40

Net Change in Cas h

(17,489,778.69)

Cas h, Beginning of Year

99,689,203.61

June 30, 2004
($131,466,530.84) 148,928,377.00 (6,508,173.97) 224,246.14 11,177,918.33 88,511,285.28

Cas h, End of Year

$82,199,424.92

$99,689,203.61

Capital Assets

The University System Office had one significant capital asset addition for fiscal year 2005 - the addition of a new facility for the Office of Information and Instructional Technology in Athens, Georgia, located at Daniels Bridge Road. In prior years this operation had been housed in rental property.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Health and Dental Insurance

The University System Office is the fiscal agent for health and dental insurance for all the institutions in the University System of Georgia. The financial information for all related health and dental insurance transactions is included on the face of the statements in the Annual Financial Report, including the liability for claims Incurred But Not Reported. The summary information regarding revenues, expenditures and the related liability for fiscal year 2005 is listed below.

Beginning Net Assets July 1, 2004

$ 63,895,896

Plus Revenues FY2005 Less Expenditures FY2005 Less Incurred But Not Reported Claims Adjustment to Fair Market Value

203,291,772 (238,346,479) (27,583,054)
340,421

Ending Net Assets June 30, 2005

$ 1,598,556

Long Term Debt

The University System Office had Long-Term Debt of $20,019,267.63 of which $2,001,310.55 was reflected as current liability at June 30, 2005.

For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.

University System Office Annual Financial Report FY 2005 6

Component Units The University System Office does not have any units that qualify as component units for the purposes of GASB 39 reporting. Economic Outlook The University System Office 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. One area where there is concern is the Health Insurance Reserve fund. This fund was decreased by 54% during the year due to credits to institutions to lessen the impact of the before mentioned $64.8 million budget reduction. After funding the liability for the Incurred But Not Reported claims, the fund has a balance of $1,598,556. It is hoped that the premium increase which took effect on July 1, 2005 will begin to stabilize this fund that is critical to the welfare of our employees system-wide. The University System Office will maintain a close watch over resources, especially as it relates to the Health Insurance Reserve Fund, to maintain the University's ability to react to unknown internal and external issues and continue to perform as good steward's of all available resources. William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office
University System Office Annual Financial Report FY 2005 7

Statement of Net Assets
UNIVERSITY SYSTEM OFFICE STATEMENT OF NET ASSETS
June 30, 2005
ASS ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Inventories (note 4) Prepaid Items Other Assets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments Notes Receivable, net Capital A s s ets , net (note 6) Total Noncurrent A s s ets
TOTAL AS SETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compens ated A bs ences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET ASS ETS

June 30, 2005
$82,199,424.92 116,344,020.87
170,430.13 962,822.34
199,676,698.26
3,612,043.20 31,601,508.36 35,213,551.56 234,890,249.82
20,156.17 27,583,054.00
157,675,406.57 2,001,310.55 1,498,608.87
188,778,536.16 18,017,957.08
785,368.27 18,803,325.35 207,581,861.51
11,582,240.73 3,612,043.20 7,285,533.64 4,828,570.74 $27,308,388.31

University System Office Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

UNIVERSITY SYSTEM OFFICE STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005

REVENUES

June 30, 2005

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Federal A ppropriations Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Be n e fit s Other Pers onal Services T ra v e l Scholars hips and Fellows hips Utilities Supplies and Other Services De p re c ia t io n
Total Operating Expens es Operating Income (los s )

$0.00
10,776,572.84 320,000.00 9,873.39
20,394,314.63
203,496,398.63 234,997,159.49
30,108.81 20,232,404.76 4,214,245.76
488,191.90 30,000.00 24,822,809.17 351,775,859.79 5,673,221.35 407,266,841.54 (172,269,682.05)

University System Office Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
UNIVERSITY SYSTEM OFFICE STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2005
June 30, 2005

NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital as s ets ) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts Fe d e ra l State Other Total Other Revenues Increas e in Net A s s ets
NET AS S ETS Net A s s ets -beginning of year, as originally reported Prior Year A djus tments Net A s s ets -beginning of year, res tated
Net A s s ets -End of Year

134,248,829.19
7,228.03 (2,629.60) 1,097,315.11
412,003.37 (638,088.25) 1,096,169.79 136,220,827.64 (36,048,854.41)
0.00 (36,048,854.41) 63,357,242.72
63,357,242.72 $27,308,388.31

University System Office Annual Financial Report FY 2005 10

Statement of Cash Flows
UNIVERSITY SYSTEM OFFICE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005 $0.00
11,769,057.48 19,545,698.14 (380,215,076.72) (20,239,535.91)
(30,000.00)
203,520,283.61 (165,649,573.40) 134,248,829.19
724,261.97 1,728,952.26 136,702,043.42
500,000.00 (1,060,811.38) (4,641,275.48)
(638,088.25) (5,840,175.11) 17,192,307.41
105,618.99 17,297,926.40 (17,489,778.69) 99,689,203.61 $82,199,424.92

University System Office Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income

($172,269,682.05)
5,673,221.35 85,900.55 45,738.00 (33,617.72)
(248,659.95) 1,080,764.64
16,761.78 ($165,649,573.40)
$20,889,864.75 $306,384.38

University System Office Annual Financial Report FY 2005 12

UNIVERSITY SYSTEM OFFICE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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-at-large, 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 233,000 students and employ more than 9,000 faculty and 35,000 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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in 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 FY2005, the
University System Office Annual Financial Report FY 2005 13

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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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 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 Statement of Revenues,
University System Office Annual Financial Report FY 2005 14

Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, and the Board of Regents Diversified 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, 2005.
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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC did not transfer any capital additions to The University System Office.
Deposits The University System Office had no deposits as of June 30, 2005.
University System Office Annual Financial Report FY 2005 15

Deferred Revenues The University System Office had no deferred revenues as of June 30, 2005.
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 $2,267,215.36 as of 7-1-2004. For FY 2005, $1,764,368.89 was earned in compensated absences and employees were paid $1,747,607.11, for a net increase of $16,761.78. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $2,283,977.14.
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 previously in Note 1 Capital Assets section.
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 Office 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 and Accounts for these funds.
University System Office Annual Financial Report FY 2005 16

Expendable Restricted Net Assets include the following:

June 30, 2005

Restricted - E&G and Other Organized Activities University System of Georgia Health Insurance Reserves
Federal Loans Ins titutional Loans Term Endowments Qu a s i-En d o wmen t s Total Restricted Expendable

$5,686,977.64 1,598,556.00
$7,285,533.64

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.

R & R Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005 $0.00
5,306,825.23
(478,254.49) $4,828,570.74

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.

University System Office Annual Financial Report FY 2005 17

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: 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. Scholarship Allowances The University System Office had no Sponsored and Unsponsored Scholarships as of June 30, 2005.
University System Office Annual Financial Report FY 2005 18

Note 2. Deposits and Investments
A. Deposits
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.
At June 30, 2005, $25,636,134.60 of the University System Office's deposits were uninsured. Of these uninsured deposits, $14,545,519.87 were collateralized with securities held by the financial institution's trust department or agent in the University System Office's name and $8,871,951.26 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System Office's name; and $2,218,663.47 were uncollateralized.
University System Office Annual Financial Report FY 2005 19

B. Investments
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.
The University System Office maintains investment policy guidelines for each pooled investment fund that is offered to qualified University System participants. These policies are intended to foster sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with the Board of Regents investment policy. All investments must be consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
Units of the University System of Georgia and their affiliated organizations may participate in the Pooled Investment Fund program. The overall character of the pooled fund portfolio should be one of above average quality processing, at most, an average degree of investment risk.
Short Term Fund The Short Term fund provides a current return and stability of principal while affording a means of overnight liquidity for projected cash needs. The investment maturities of the fund will range between daily and two years.
Legal Fund The Legal fund provides an opportunity for greater income and modest principal growth to the extent possible with the securities allowed under Georgia Code 50-17-59 and 50-17-63. The average maturity of this fund will typically range between five and 10 years, with a maximum of thirty years for any individual investment. The overall character of the portfolio should be one of treasury and agency quality, possessing virtually no degree of financial risk.
Balance Income Fund The Balanced Income fund is designed to be a vehicle to invest funds that are not subject to the state regulations concerning investing in equities. This fund is comprised of fixed income, equity, and cash equivalent instruments.
The equity allocation range shall be between 30% and 40%, with a target of 35% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 60% and 70%, with a target of 65% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality short term instruments.
University System Office Annual Financial Report FY 2005 20

Total Return Fund The Total Return fund is another pool designed to be a vehicle to invest funds that are not subject to state regulations concerning investing in equities. This pool offers the greatest percentage of overall equity exposure, with well over half of the funds typically invested in equities.
The equity allocation range shall be between 60% and 70%, with a target of 65% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 30% and 40%, with a target of 35% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality short term instruments.
Diversified Fund The Diversified fund is designed to gain further diversification and increase exposures to assets that have lower correlation to equity and bond markets by utilizing alternative asset classes. In addition, this fund is constructed to build an optimal portfolio where return is increased and risk is reduced.
The equity allocation range shall be between 50% and 75% of the portfolio. The fixed income (bond) portion of the portfolio shall be between 20% and 40%. The portfolio may also consist of Hedge Funds, Real Estate and Venture Capital/Private Equity/Post Venture Capital.
Hedge Funds The investment approach to this asset class is to use a multi-strategy, multimanager fund of hedge funds. The Board of Regents believes that a fund of fund strategy will provide the best access to a highly diversified pool of hedge fund strategies and managers.
Real Estate - The Board of Regents' approach for investing in this asset class is to use real estate investment trusts (REITs). REITs are more liquid than owning commercial real estate and diversification can be achieved by purchasing a mutual fund.
Venture Capital/Private Equity/Post Venture Capital This asset class is the riskiest and most volatile permitted investment opportunity. This asset should be considered as an additional diversification investment strategy due to the low correlation with stock and bonds.
Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality short term instruments.
University System Office Annual Financial Report FY 2005 21

The University System Office's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type Debt Securities U. S. Treasuries U. S. Agencies Mutual Bond Fund Money Market Mutual Fund Commercial Paper Municipal Obligation Repurchase Agreements
Other Investments Equity Mutual Funds Equity Securities - Domestic Alternative Investments
Investment Pools Board of Regents
Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

Fair Value
$13,309,872.12 58,352,757.66 33,019,308.35
1,200,000.00 2,423,000.00
108,304,938.13
9,908,054.22 46,441,904.31 3,412,682.78

Less Than 1 Year $0.00
23,141,915.54
1,200,000.00 2,423,000.00 26,764,915.54

Investment Maturity

1-5

6 - 10

Years

Years

$12,386,423.65 35,210,842.12 33,019,308.35

$253,407.97

More than 10 Years
$670,040.50

80,616,574.12

253,407.97

670,040.50

$168,067,579.44

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair market value of an investment. The University System Office's policy for managing interest rate risk is contained in the investment policy guidelines for the various pooled investment funds:
1. In the Short Term Fund, the average maturity of the fixed income portfolio shall not exceed three years.
2. In all the other pooled funds, the average maturity of the fixed income portfolio shall not exceed ten years.
3. Fixed income investments shall be limited to US Treasury government agency, and corporate debt instruments having minimum investment grade credit ratings of BAA by Moody's and/or Standard & Poors.
4. The fixed income target allocation is defined in the investment policy guidelines for each pooled investment fund. These targets may be modified upon recommendation of the fund's investment manager and approval by the Board of Regents.
University System Office Annual Financial Report FY 2005 22

Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University System Office will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University System Office's policy for managing custodial credit risk for investments is:
1. The University System Office has appointed a federally regulated banking institution as custodian. The custodian performs its duties to the standards of a professional custodian and is liable to the University System Office for claims, losses, liabilities, and expenses arising from its failure to exercise ordinary care, its willful misconduct, or its failure to otherwise act in accordance with the contract.
2. All securities transactions are to be settled on a delivery vs. payment basis through an approved depository institution such as the Depository Trust Company or The Federal Reserve.
3. Repurchase agreements are to be collateralized by United States Treasury securities at 102% of the market value of the investment at all times.

At June 30, 2005, $168,067,579.44 were uninsured and held by the University System Office's custodian bank or a depositary institution, but not in the University System Office's name.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University System Office's formal policy for managing credit quality risk is contained in the investment policy guidelines for the various pooled investment funds:
1. In all pooled funds except the Diversified Fund, all debt issues must be investment grade with ratings of at least BAA by Moody's and Standard and Poors at the time of purchase.
2. The Diversified Fund is permitted to invest in non-investment grade debt issues up to a limit of 15% of the entire portfolio.
3. The portfolios shall be well diversified as to issuer and maturity.

Related Debt Inves tments U. S. A gencies U. S. Treas uries M unicipal Obligation M utual Bond Fund M oney M arket M utual Fund Commercial Paper Repurchas e A greements - Underlying U. S. A gency Securities Corporate Debt M unicipal Bonds
Totals by Ratings

Value
$58,352,757.66
1,200,000.00 33,019,308.35
0.00 0.00 0.00 2,423,000.00 0.00
$94,995,066.01

AAA $10,607,093.78
1,200,000.00

AA $0.00

A $0.00

2,423,000.00

$14,230,093.78

$0.00

$0.00

Unrated $47,745,663.88
33,019,308.35
$80,764,972.23

University System Office Annual Financial Report FY 2005 23

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University System Office's policy for managing concentration of credit risk is to diversify investments to the extent that any single issuer shall be limited to 5% of the market value in a particular investment fund. United States Government and United States Governmental agency securities are exempt from this requirement. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The University System Office's policy for managing exposure to foreign currency credit risk is:
1. The Diversified Fund is the only pooled investment fund authorized to hold foreign investments. The current approved asset allocation target for international equity is 0 10% and for global fixed income 0 10%. As of June 30, 2005, the Diversified Fund had 7.5% exposure to international equity and 0% exposure to global fixed income.
2. The Diversified Fund is subject to exchange rate risk on these investments, which does ultimately impact performance.
3. The market value of all international investments is reported in United States Dollars. 4. Direct currency hedging is not permissible under the current investment policy
guidelines.
Condensed financial information for the investment pool follows:
University System Office Annual Financial Report FY 2005 24

Assets
Cash Investments Interest Receivable

Statement of Net Assets - June 30, 2005

Net Assets Held in Trust for Pool Participants
Internal Portion External Portion

$ 10,703,990.77 157,445,069.61 161,914.26
$ 168,310,974.64
$ 10,994,502.03 157,316,472.61
$ 168,310,974.64

Revenues

Statement of Changes in Net Assets - Year Ended June 30, 2005

Interest Income Net Increase (Decrease) in Fair Value of Investments

Total Revenues

$

Expenses
Operating Expenses Administrative Expenses

Net Increase (Decrease) in Assets Resulting from Operations

$

4,674,812.30 -945,372.36 3,729,439.94
434,303.05 3,295,136.89

Distribution to Participants Capital Transactions Total Increase (Decrease) in Net Assets Net Assets July 1, 2004
Net Assets June 30, 2005

-13,131,964.50 13,609,344.43 $ 3,772,516.82 164,538,457.82
$ 168,310,974.64

University System Office Annual Financial Report FY 2005 25

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$0.00
170,430.13
1,002,538.93 1,172,969.06
39,716.59 $1,133,252.47

Note 4. Inventories The University System Office had no inventories as of June 30, 2005. Note 5. Notes/Loans Receivable The University System Office had no Notes/Loans Receivable as of June 30, 2005.

University System Office Annual Financial Report FY 2005 26

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$2,411,877.00
2,411,877.00

Additions $0.00 0.00

Reductions $45,000.00 45,000.00

728,406.53
29,388,727.86 6,089,141.69
0.00 10,000.00 36,216,276.08

1,060,811.38 20,889,864.75
21,950,676.13

2,500,032.21 2,500,032.21

16,389.14 21,263,901.58 1,947,939.85
23,228,230.57 12,988,045.51 $15,399,922.51

16,389.15 3,100,682.63 2,556,149.57
5,673,221.35 16,277,454.78 $16,277,454.78

2,469,163.28
2,469,163.28 30,868.93 $75,868.93

Ending Balance 6/30/2005
$2,366,877.00 0.00
2,366,877.00
0.00 728,406.53
0.00 27,949,507.03 26,979,006.44
0.00 10,000.00 55,666,920.00
0.00 32,778.29
0.00 21,895,420.93 4,504,089.42
0.00 0.00 26,432,288.64
29,234,631.36
$31,601,508.36

University System Office Annual Financial Report FY 2005 27

Note 7. Deferred Revenue The University System Office had no deferred revenue as of June 30, 2005. Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leas es Lease Obligations

Beginning Balance July 1, 2004
$3,766,827.73

Additions

Reductions

Adjus tments

Ending Balance June 30, 2005

$20,889,864.75

$4,641,275.48

$3,850.63

$20,019,267.63

Current Portion
$2,001,310.55

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

0.00 2,267,215.36 2,267,215.36

1,764,368.89 1,764,368.89

1,747,607.11 1,747,607.11

0.00 2,283,977.14 2,283,977.14

1,498,608.87 1,498,608.87

Total Long Term Obligations

$6,034,043.09

$22,654,233.64

$6,388,882.59

$3,850.63

$22,303,244.77

$3,499,919.42

Note 9. Significant Commitments

The University System Office had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2005.

Note 10. Lease Obligations
The University System Office is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment.

CAPITAL LEASES
The University System Office has five capital leases payable in monthly installments with terms expiring in various years between 2010 and 2025. Expenditures for fiscal year 2005 were $5,279,363.73 of which $638,088.25 represented interest. Total principal paid on capital leases was $4,641,275.48 for the fiscal year ended June 30, 2005. Interest rates range from 3.37 percent to 5.65 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Land Buildings Equipment Total Assets Held Under Capital Lease

$0.00 11,666,538.89 10,808,378.13 $22,474,917.02

University System Office Annual Financial Report FY 2005 28

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 five new Capital Lease Obligations in the current year. In September 2004, the University System Office entered into a capital lease of $12,027,359.68 at 4.88 percent for an office building with the Daniels Bridge Technology Center, LLC. The lease term for the building is a twenty-year period that began October 2004, and expires September 2025. The University System Office may cancel the lease agreement at the end of any fiscal year when sufficient appropriations, revenues, income, grants or other funding sources are not available. The University System Office has the option to purchase the property for the redemption price and the payment of $10.

In December 2004, lease obligation number 216 was completed for Optical Fiber Use for a principal amount of $2,684,626.00 at an interest rate of 4.47 percent. In February 2005, lease obligation number 224 was completed for numerous items of equipment for a principal amount of $2,995,012.10 at an interest rate of 4.95 percent. In June 2005, lease obligation numbers 232 and 240 were completed for numerous items of equipment for principal amounts of $1,737,387.00 and $1,448,479.97 respectively, at an interest rate of 5.65 percent. All of the above obligations were entered into with SunTrust Bank and have maturity dates during FY 2010.

Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) as of June 30, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$2,948,913.79 2,948,913.74 2,948,913.73 2,948,913.75 2,255,551.18 4,695,709.80 4,695,709.80 3,991,363.33

$0.00

27,433,989.12 7,414,721.49
$20,019,267.63

$0.00

University System Office Annual Financial Report FY 2005 29

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$1,575,446.47 $1,576,593.52 $1,527,821.81

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 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 System Office Annual Financial Report FY 2005 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 System Office's payroll for the year ended June 30, 2005, for employees covered by ERS was $509,136.67. The University System Office's total payroll for all employees was $20,232,404.76.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the University System Office amount to 10.41% (5.66% under old plan) 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 2005 amounted to $60,724.62, of which $53,186.59 was made by the University System Office and $7,538.03 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, 2005, financial report, which may be obtained through ERS.
University System Office Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 2005, the employer contribution was 9.65% 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 $205,341.81 (9.65%) and $106,289.15 (5%), respectively. In August 2004, TIAA-CREF issued the University System Office a credit of $62,865.31 for previous years' contributions and earnings on those contributions which were received in error. The credits were taken in the months of August December 2004. Due to these credits, the University System Office incurred net expenditures of $142,476.50 for contributions this fiscal year.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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.
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
University System Office Annual Financial Report FY 2005 32

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 2005 amounted to $14,001.91 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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 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, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. All claims submitted by program participants are remitted directly to Blue Cross Blue Shield from various organizational units for verification of coverage, processing and payment through a bank account maintained for this purpose by Blue Cross Blue Shield. Blue Cross Blue Shield maintains an eligibility file based on information furnished by the various organizational units of the University System of Georgia. In addition to the two different selfinsured 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.
Express Scripts is the administrator of the Board of Regents' prescription drug plan. Pharmacy drug claims will be processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted by participating pharmacies directly to Express Scripts for verification, processing and payment. Express Scripts
University System Office Annual Financial Report FY 2005 33

maintains an eligibility file based on information furnished by Blue Cross Blue Shield on behalf of the various organizational units of the University System of Georgia.

A reconciliation of total estimated claims liabilities for the fiscal year ended June 30, 2005, is shown below:

Unpaid Claims and Claim Adjustments July 1, 200 4

$ 26,506,139.92

Incurred Claims and Claim Adjustments Expenses Provisions for Insured Events of the current year

226,706,589.97

Payments Claims and Claim Adjustments Attributable to Insured Events of the Current Year and of Prior Years

225,629,675.89

Unpaid Claims and Claim Adjustments June 30, 2005

$ 27,583,054.00

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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are

University System Office Annual Financial Report FY 2005 34

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, 2005.
Note 14. 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, 2005, 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, 2005, the University System Office recognized as incurred $249,056.38 of expenditures, which was net of $102,764.95 of participant contributions. For FY 05 the retiree charges received a portion of the health insurance credit in an amount of $135,930.32 resulting in actual expenses for the year of $113,126.06.
University System Office Annual Financial Report FY 2005 35

Note 15. Natural Classifications with Functional Classifications

The University System Office's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$0.00 408,248.52 72,983.75
1,572.98
4,033.29 960,908.65
92,516.04

$0.00 85,901.04 20,001.26

$0.00 1,601,625.51 314,790.92
41,528.13
18,583,417.02 70,994,589.62
100,279.62

$13,700.00 1,223,503.62
238,840.13
47,848.00
177,781.37 15,962,976.78
336,071.40

$0.00
13,265.91 2,660.71 3,449.34

$16,408.81 16,913,126.07 3,567,629.70
383,976.88
6,054,916.78 263,853,935.40
3,853,248.65

Total Expenses

$1,540,263.23

$105,902.30

$91,636,230.82

$18,000,721.30

$19,375.96

$294,643,242.29

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

$0.00

$0.00

$0.00

$0.00

30,000.00 $30,000.00

$0.00

$0.00

1,291,105.64 $1,291,105.64

Total Exp en s es
$30,108.81 20,232,404.76
4,214,245.76 0.00
488,191.90 30,000.00 24,822,809.17 351,775,859.79 5,673,221.35
$407,266,841.54

University System Office Annual Financial Report FY 2005 36

VALDOSTA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2005

Valdosta State University Valdosta, Georgia

Dr. Ronald M. Zaccari President

James Black Vice President for Finance & Administration

VALDOSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2005
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 Deposits and Investments.................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 20 Note 5 Notes/Loans Receivable....................................................................................... 21 Note 6 Capital Assets....................................................................................................... 22 Note 7 Deferred Revenue................................................................................................. 23 Note 8 Long-Term Liabilities .......................................................................................... 23 Note 9 Significant Commitments.................................................................23 Note 10 Lease Obligations................................................................................................ 23 Note 11 Retirement Plans ................................................................................................. 26 Note 12 Risk Management................................................................................................ 27 Note 13 Contingencies...................................................................................................... 28 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 15 Natural Classifications With Functional Classifications..................................... 30 Note 16 Component Units ........................................................................ 31

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 has become known for its state-of-the-art technology and technology-related programs. The University offers nationally accredited programs in Art, Business, Music, Nursing, Speech and Language Pathology, School Psychology and Teacher Education as well as baccalaureate and masters degrees in a wide variety of other subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 10,000 students each year. The institution continues to grow as shown by the comparison numbers that follow.

Faculty

Students

FY2005 FY2004 FY2003

420* 423 417

10,400 10,457 9,915

*This figure reflects a shift in the coding applied to personnel rather than a decrease in the total number of instructional faculty.

Overview of the Financial Statements and Financial Analysis

Valdosta State University is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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 2005 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

As s ets : Current A s s ets Capital A s s ets , net Other Assets Total As s ets

June 30, 2005
$9,122,464.86 117,996,220.21
11,464,372.87 138,583,057.94

June 30, 2004
$7,345,777.03 95,232,347.17 11,424,549.63 114,002,673.83

Liabilities : Current Liabilities Noncurrent Liabilities

7,253,425.73 20,353,977.92

6,332,084.28 1,108,004.10

Total Liabilities

27,607,403.65

7,440,088.38

Net As s ets : Inves ted in Capital A s s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

97,770,276.29 3,041,856.40 3,093,606.08
7,069,915.52 $110,975,654.29

94,476,558.68 3,068,823.44 3,332,536.07
5,684,667.26 $106,562,585.45

The total assets of the institution increased by $24,580,384.11. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $22,763,873.04 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 $20,167,315.27. The primary cause for the increase was in non-current liabilities, primarily $19,108,150.86 in lease payment obligations, which contributed to the increase in invested in capital assets, net of debt. The combination of the increase in total assets of $24,580,384.11 and the increase in total liabilities of $20,167,315.27 yields an increase in total net assets of $4,413,068.84. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $3,293,717.61.

Valdosta State University Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$57,365,763.52 104,564,837.05 (47,199,073.53) 44,941,127.75
(2,257,945.78) 6,671,014.62 4,413,068.84 106,562,585.45 106,562,585.45 $110,975,654.29

$54,598,225.71 101,133,358.78 (46,535,133.07) 44,783,898.01
(1,751,235.06) 13,280,908.07 11,529,673.01 95,054,682.30
(21,769.86) 95,032,912.44 $106,562,585.45

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$23,271,954.23
11,336,999.32 518,440.87
21,806,513.47 431,855.63
57,365,763.52
43,573,156.48 929,327.56
1,862,071.52 399,162.83
(1,079,011.47) 45,684,706.92
6,617,954.62 53,060.00
6,671,014.62
$109,721,485.06

June 30, 2004
$22,310,624.81
11,166,546.71 249,277.37
19,994,541.46 877,235.36
54,598,225.71
44,077,402.72 412,540.56 92,157.36 548,127.72 27,481.46
45,157,709.82
12,659,288.07 621,620.00
13,280,908.07
$113,036,843.60

Valdosta State University Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$40,945,552.48 209,046.92
1,430,882.18 6,866,319.86 6,923,171.24 13,371,010.82 9,620,933.43 3,735,901.11 21,462,019.01
104,564,837.05
743,579.17
$105,308,416.22

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

There were two primary causes for the increase in operating revenues. Due largely to a tuition rate increase of 5%, tuition revenues increased by approximately $887,918.18. Also, Residence Hall revenues increased by $906,048.98. The University entered into a long-term leasing relationship for additional housing units with the Valdosta State University Real Estate Foundation LLC, an affiliation organization.
The compensation and employee benefits category decreased by approximately ($139,080.45). Although salaries and the cost of health insurance increased during the year, a health insurance reserve credit from the System Office was utilized in this category, creating the resulting decrease in year to year comparisons.
Utilities increased by approximately $352,709.86 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2005.
Under non-operating revenues, state appropriations decreased by approximately ($504,246.24), due to a change in the accounting method for Student Recreation Center payback bond revenues. Without this change, state appropriations would have increased $220,637.76, largely due to enrollment increases experienced recently as well as an improved state economy. We are hopeful that the economy will continue on an upward trend.
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
Valdosta State University Annual Financial Report FY 2005 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($43,321,211.66) 47,584,924.00 (3,536,546.98) 284,080.66 1,011,246.02 2,978,290.42
$3,989,536.44

June 30, 2004
($40,663,705.27) 44,384,280.72 (3,130,012.41) 244,501.10 835,064.14 2,143,226.28
$2,978,290.42

Capital Assets
The University had two significant capital asset additions for facilities in fiscal year 2005. As already stated, the University entered into a capital lease with the Valdosta State University Foundation Real Estate I, LLC, for Centennial Hall, a housing facility located on Sustella Avenue. The lease value is approximately $19,285,471. A GSFIC funded project, Nevins Hall Renovation, was also realized as a capital gift from state sources in the amount of $5,410,451.66. Significant capital improvements were also made to Brown Hall during the year in the amount of $1,724,518.15.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt
Valdosta State University had a Long-Term Debt of $22,763,272.08 of which $2,409,294.16 was reflected as current liability at June 30, 2005.
For additional information concerning Long-Term Debt, see notes 1 and 8 in the Notes to the Financial Statements.

Valdosta State University Annual Financial Report FY 2005 6

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 FY2005. The Valdosta State University Foundation (consolidated) had endowment and other investments of $36 M as of December 31, 2004. The Valdosta State University Real Estate Foundation had long-term debt of $39 M in the form of several bond issues and other notes payable. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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 continues to move toward its strategic goals incorporating planning and realizing efficiencies in operations when possible. 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. Ronald M. Zaccari, President Valdosta State University
Valdosta State University Annual Financial Report FY 2005 7

Statement of Net Assets
VALDOSTA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2005
Valdos ta S tate Univers ity

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Due from Component Unit Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and Mortgages Receivable Other As s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Due to Primary Government Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$3,965,766.51
1,205,456.12 2,326,644.37
99,603.00
1,410,237.08 114,757.78
9,122,464.86
23,769.93 11,368,467.88
72,135.06
117,996,220.21 129,460,593.08 138,583,057.94
2,016,479.26 1,057,095.09
610,421.08 385,632.36 (37,951.11) 812,454.89 920,389.99 1,488,904.17 7,253,425.73 19,108,150.86 197,403.07 1,048,423.99
20,353,977.92 27,607,403.65
97,770,276.29 3,041,856.40 3,093,606.08 7,069,915.52
$110,975,654.29

Component Unit Valdos ta S tate
Univers ity Foundation Cons olidated
$1,984,637.00
50,000.00 320,669.00 1,311,385.00 3,666,691.00
36,431,071.00 184,749.00
23,464,194.00 60,080,014.00 63,746,705.00
3,819,481.00
99,603.00 940,278.00 4,859,362.00
38,226,153.00 38,226,153.00 43,085,515.00
15,136,733.00 1,902,680.00 3,621,777.00
$20,661,190.00

Valdosta State University Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets

VALDOSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2005

Component Unit

Valdosta State Univers ity

Valdos ta State University Foundation-
Cons ol idated

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal A ppropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterpris es Residence Halls Bo o ks t o re Food Services Parkin g / Tra n s p o rt at io n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Be n e fit s Other Personal Services T ra v e l Scholarships and Fellowships Utilities Supplies and Other Services De p re c ia t io n Payments to or on behalf of Valdosta State University
Total Operating Expenses Operating Income (loss )

$27,364,437.00 4,092,482.77
9,610,061.11 1,233,609.31
493,328.90 518,440.87
5,284,467.84 5,443,397.90 5,428,469.23
873,535.70 1,479,135.06 2,861,349.96
436,157.78 431,855.63 57,365,763.52
27,882,807.26 24,500,964.53 14,231,919.99
252,518.98 781,418.14 5,064,421.45 3,686,049.52 22,131,193.33 6,033,543.85
104,564,837.05 (47,199,073.53)

$0.00 499,318.00
745,095.00
569,358.00 1,813,771.00
450,902.53 127,704.00 1,415,275.47 1,993,882.00 (180,111.00)

Valdosta State University Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued

VALDOSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2005

Component Unit

Valdosta State Univers ity

Valdos ta State University Foundation-
Cons ol idated

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Fe d e ra l State Other Gifts Inves tment Income (endowments , auxiliary and other) Interest Expense (capital as sets ) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains , or loss Capital Grants and Gifts Fe d e ra l State Other Additions to permanent endowments Total Other Revenues Increase in Net A ssets
NET ASSETS
Net A ssets -beginning of year, as originally reported Prior Year Adjustments Net A ssets -beginning of year, restated Net A ssets -End of Year

43,573,156.48
627,317.04 295,224.91
6,785.61 1,862,071.52
399,162.83 (743,579.17) (1,079,011.47) 44,941,127.75 (2,257,945.78)
6,617,954.62 53,060.00
6,671,014.62 4,413,068.84
106,562,585.45
106,562,585.45 $110,975,654.29

2,422,465.00
2,422,465.00 2,242,354.00
246,078.00 246,078.00 2,488,432.00 18,172,758.00 18,172,758.00 $20,661,190.00

Valdosta State University Annual Financial Report FY 2005 10

Statement of Cash Flows
VALDOSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$26,828,149.34
10,862,727.87 201,201.36
(41,249,797.09) (52,625,191.37)
(9,156,904.22) 74,246.43 (84,614.74)
5,354,378.82 5,304,253.65 6,921,951.66
874,537.73 1,474,493.01 2,943,235.89 (1,020,203.21)
(23,676.79) (43,321,211.66)
43,573,156.48 268,795.70
3,742,971.82 47,584,924.00
9,093.44 (2,301,378.72)
(500,682.53) (743,579.17) (3,536,546.98)
284,080.66
284,080.66 1,011,246.02 2,978,290.42 $3,989,536.44

Valdosta State University Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as s ets reducing proceeds of capital grants and gifts

($47,199,073.53)
6,033,543.85 (920,930.73) (471,260.27) 243,288.58 (231,243.31)
23,518.74 (827,043.85)
27,988.86 ($43,321,211.66)
$20,489,052.71 ($115,082.17)
($6,617,954.62)

Valdosta State University Annual Financial Report FY 2005 12

VALDOSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, Valdosta State University is reporting the activity for the Valdosta State University Foundation and the Valdosta State University Real Estate Foundations.
See Note 16. 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
Valdosta State University Annual Financial Report FY 2005 13

Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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 may be 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 Statement 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 2005 14

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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC transferred capital additions valued at $6,617,954.62 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 2005 15

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 $2,509,339.28 as of 7-1-2004. For FY2005, $1,931,864.49 was earned in compensated absences and employees were paid $1,903,875.61, for a net increase of $27,988.88. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 2,537,328.16.
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 previously in Note 1 Capital Assets section.
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 2005 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $2,747,650.34
37,336.42 308,619.32
$3,093,606.08

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 Assets

June 30, 2005
$82,887.99 5,997,178.05
373,510.73 616,338.75 $7,069,915.52

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 2005 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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 non-operating 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the college/university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college/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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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
Valdosta State University Annual Financial Report FY 2005 18

States government both as to principal and interest and 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.

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.

At June 30, 2005, $6,557,683.82 of the University's deposits were uninsured and uncollateralized.

B. Investments

At June 30, 2005, the carrying value of the college/university's investment was $11,368,467.88, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and the Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool Board of Regents Total Return Fund Office of Treasury and Fiscal Services Georgia Extended Asset Pool

$5,985,264.18 5,383,203.70
$11,368,467.88

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.
The Weighted Average Maturity of the Balanced Income Fund is 4.4 years. Of the University's total investment of $ 5,985,264.18 in the Total Return Fund, $1,707,795.28 is invested in debt securities.
The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $1.98 at June 30, 2005. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is $1.07.

Valdosta State University Annual Financial Report FY 2005 19

The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).
Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$122,224.75 437,457.13 1,205,456.12
1,903,399.41 3,668,537.41
36,833.92
$3,631,703.49

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005
$873,903.79 161,724.96 316,740.25
57,868.08
$1,410,237.08

Valdosta State University Annual Financial Report FY 2005 20

Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises approximately one-half of the loans receivable at June 30, 2005 (the other half is made up of Institutional Loans). The Perkins 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, 2005, no provision has been made for uncollectible loans.
Valdosta State University Annual Financial Report FY 2005 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$2,296,985.21 1,452,195.16 3,749,180.37
0.00 110,880,269.28
4,598,091.00 13,864,142.35 2,112,129.12 17,401,863.27
148,856,495.02
0.00 31,839,012.89 2,465,478.16 9,378,396.86
491,619.05 13,198,821.26
57,373,328.22
91,483,166.80
$95,232,347.17

Additions
$137,500.00 606,219.34 743,719.34

Reductions
$0.00 1,452,195.16 1,452,195.16

8,745,924.27
1,335,977.23 20,489,052.71
810,333.50
31,381,287.71

811,700.00
714,596.23 2,106,429.09
4,474.63
3,637,199.95

2,949,938.98 218,671.08
1,184,613.98 856,340.81 823,979.00
6,033,543.85
25,347,743.86
$26,091,463.20

617,230.21
605,318.29 534,781.82
4,474.63
1,761,804.95
1,875,395.00
$3,327,590.16

Ending Balance 6/30/2005
$2,434,485.21 606,219.34
3,040,704.55
0.00 118,814,493.55
4,598,091.00 14,485,523.35 20,494,752.74 18,207,722.14
0.00 176,600,582.78
0.00 34,171,721.66 2,684,149.24 9,957,692.55
813,178.04 14,018,325.63
0.00 61,645,067.12
114,955,515.66
$117,996,220.21

Valdosta State University Annual Financial Report FY 2005 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $0.00
385,632.36 $385,632.36

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$351,951.30

Additions $20,489,054.33

Reductions

Ending Balance June 30, 2005

$849,952.07

$19,991,053.56

Current Portion
$882,902.70

Other Liabilities Softball Field - Athletics Compensated Absences Total

258,595.20 2,509,339.28 2,767,934.48

234,890.36 1,931,864.49 2,166,754.85

258,595.20 1,903,875.61 2,162,470.81

234,890.36 2,537,328.16 2,772,218.52

37,487.29 1,488,904.17 1,526,391.46

Total Long TermObligations

$3,119,885.78

$22,655,809.18

$3,012,422.88

$22,763,272.08

$2,409,294.16

Note 9. Significant Commitments

The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,721,023.94 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.

Note 10. 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.
CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2006 and 2030. Expenditures for fiscal year 2005 were $1,573,247.99 of which $1,072,565.46 represented interest and $500,682.53 represented principal. Interest rates range from 4.25 percent to 10.00 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Valdosta State University Annual Financial Report FY 2005 23

Buildings Equipment Total Assets Held Under Capital Lease

$19,623,250.75 58,323.95
$19,681,574.70

Certain capital leases provide for renewal and/or purchase options.
Valdosta State University had two capital leases with related entities in the current fiscal year. In 2005, Valdosta State University entered into a capital lease of $19,285,471.00 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC. The University leases a Centennial Hall, a housing unit located on Sustella Avenue for a twenty-five year period. In July of 2004, the University entered into a capital lease of $1,141,194.06 at 6.25 percent with the Valdosta State University Foundation, also a related party, whereby the University leases a building for a six-year period. The outstanding liability at June 30, 2005 on these capital leases is $18,956,090.22 and $979,334.21 respectively.
Valdosta State University also has various capital leases for equipment with an outstanding balance at June 30, 2005 in the amount of $55,629.13.
OPERATING LEASES
Valdosta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2014. Certain operating leases provide for renewal options. 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 noncapital property leases, copiers and other small business equipment.
Noncancellable operating lease expenditures in 2005 were $487,998.75 for real property.

Valdosta State University Annual Financial Report FY 2005 24

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, 2005, were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2030 2021 through 2025 2026 through 2030 Total minimum lease payments
Less: Interest Less: Executory cos ts (if paid) Principal Outstanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25

Capital Leas es

Real Property Operating Leas es

$2,254,450.88 1,619,318.16 1,656,956.55 1,689,002.45 1,721,092.33 7,959,828.00 8,222,532.00 8,421,444.00 8,643,589.51
42,188,213.88 22,197,160.32

$389,490.00 293,490.00 187,440.00 187,440.00 187,440.00 584,760.00
$1,830,060.00

$19,991,053.56

Valdosta State University Annual Financial Report FY 2005 25

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$2,805,355.72 $2,870,027.54 $2,968,322.25

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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 accordance with State Statute and as advised by their independent actuary. For fiscal year 2005,
Valdosta State University Annual Financial Report FY 2005 26

the employer contribution was 9.65% 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 $1,657,255.15 (9.65%) and $860,787.84 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $79,161.53 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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
Valdosta State University Annual Financial Report FY 2005 27

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. 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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, 2005.
Valdosta State University Annual Financial Report FY 2005 28

Note 14. 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, 2005, there were 344 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Valdosta State University recognized as incurred $1,493,923.20 of expenditures, which was net of $583,926.51 of participant contributions.
Valdosta State University Annual Financial Report FY 2005 29

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$27,540,281.09 2,484,810.88 7,495,227.21 85,289.29 224,503.71 113,672.50 221,973.68 2,478,057.11 301,737.01

$63,736.23 34,917.76 7,580.42 1,923.87 7,746.54
77,387.78 15,754.32

$125,163.97 592,829.40 167,075.33 20,948.69
68,594.01 14,928.00 77,393.51 184,365.47 179,583.80

$102,843.60 3,472,328.20
899,252.12 40,470.86 235,045.98
50,693.43 814,172.51 1,251,513.16

$0.00 3,114,143.39 834,973.00
9,870.18 75,421.46
70,932.33 2,752,633.08
65,197.80

$47,004.87 6,061,796.08 2,162,034.13
45,742.20 76,903.38 384,393.71 136,894.32 4,052,582.84 403,659.29

Total Expenses

$40,945,552.48

$209,046.92

$1,430,882.18

$6,866,319.86

$6,923,171.24

$13,371,010.82

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

Auxiliary En terp ris es

Unallocated Exp en s es

$0.00 2,124,174.20 1,088,146.22
25,427.80 2,968.52
2,739,769.70 1,097,506.42 2,542,940.57

$0.00 3,735,901.11

$3,777.50 6,615,964.62 1,577,631.56
22,846.09 90,234.54 815,526.13 388,392.55 10,674,488.12 1,273,157.90

$0.00

$9,620,933.43

$3,735,901.11

$21,462,019.01

$0.00

Total Exp en s es
$27,882,807.26 24,500,964.53 14,231,919.99 252,518.98 781,418.14 5,064,421.45 3,686,049.52 22,131,193.33 6,033,543.85
$104,564,837.05

Valdosta State University Annual Financial Report FY 2005 30

Note 16. Component Units Valdosta State University Foundation (Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Foundation is also the sole member of VSU Foundation Real Estate I, LLC, a Georgia limited liability company (subsidiary). The Foundation and any other subsidiaries under its control act primarily as fund-raising organizations to supplement the resources that are available to the University in support of its programs. The thirty-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 and its subsidiaries can only be used by, or for the benefit of, the University, the Foundation, consolidated with any subsidiaries, 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. 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. Construction in Progress valued at 17 million and the associated long-term debt are included in the consolidated financial statements of the Foundation. The corresponding capital leases and associated long-term debt are included in the University's report. During the year ended December 31, 2004, the Foundation distributed $1,415,275.47 to the University or on its behalf for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of University Advancement, 102 Georgia Avenue, Valdosta, Georgia 31698.
Valdosta State University Annual Financial Report FY 2005 31

Investments for Component Units:

Valdosta State University Foundation (consolidated) holds endowment investments in the amount of $15 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended per the Foundation's spending plan and as restricted by the donors. Valdosta State University Foundation, in conjunction with the donors, has established a spending plan whereby 4.5% of the previous year's December 31 portfolio value may be expended.

Valdosta State University Foundation (consolidated) also holds investments in real property valued at $6,311,456.00.

Investments:
Equities Fixed Income Alternative Mutual Funds Life Income Agreements
Endowment Investments
Investments held by Trustee Total Investments per Balance Sheet

Cost $ 0 .0 0
0 .0 0 $ 0 .0 0

Fair Value $ 9 ,6 4 2 ,5 1 9 .0 0
4 ,6 3 6 ,9 2 3 .0 0 1 ,0 5 9 ,6 1 9 .0 0
6 0 3 ,4 9 8 .0 0 1 5 ,9 4 2 ,5 5 9 .0 0
2 0 ,4 8 8 ,5 1 2 .0 0 $ 3 6 ,4 3 1 ,0 7 1 .0 0

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%, respectfully.
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 liability. Since the University retains ownership of the facility, the University has recorded a capital asset and liability. The Foundation entry should be eliminated for consolidated reporting.
In June 2004, The Valdosta Housing Authority issued Series 2004 Student Housing Revenue Bonds and loaned the proceeds to VSU Foundation Real Estate I, LLC (a subsidiary). The bonds, serial and term, are secured by pledges of gross receipts from student housing at Valdosta State University. The bonds bear interest at rates ranging from 3.25% to 5.25%. Interest is due semiannually and principal is due annually.

Valdosta State University Annual Financial Report FY 2005 32

Changes in Long Term Liabilities for the fiscal year ended December 31, 2004 are shown below:

Be g in n in g Balance January 1, 2004

A d d it io n s

Re d u c t io n s

En d in g Balance December 31, 2004

Amounts due within
One Year

95 Bond 98 Bond Note Payable Housing Bonds
Total Long Term Debt

$1,839,836.00 $2,605,337.00
278,083.00
$4,723,256.00

$0.00
35,904,562.00 $35,904,562.00

$652,375.00 $771,621.00
37,391.00
$1,461,387.00

$1,187,461.00 1,833,716.00
240,692.00 35,904,562.00
$39,166,431.00

$250,478.00 201,557.00 36,208.00 452,035.00
$940,278.00

Valdosta State University Annual Financial Report FY 2005 33

WAYCROSS COLLEGE
Financial Report
For the Year Ended June 30, 2005

Barbara P. Losty
President

Waycross College Waycross, Georgia
William E. Deason
Vice President for Fiscal Affairs

WAYCROSS COLLEGE ANNUAL FINANCIAL REPORT
FY 2005
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 Deposits and Investments..................................................................................... 18 Note 3 Accounts Receivable............................................................................................ 20 Note 4 Inventories............................................................................................................ 20 Note 5 Notes/Loans Receivable....................................................................................... 20 Note 6 Capital Assets....................................................................................................... 21 Note 7 Deferred Revenue................................................................................................. 22 Note 8 Long-Term Liabilities .......................................................................................... 22 Note 9 Significant Commitments................................................................................... 22 Note 10 Lease Obligations................................................................................................ 22 Note 11 Retirement Plans ................................................................................................. 23 Note 12 Risk Management................................................................................................ 25 Note 13 Contingencies...................................................................................................... 25 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 15 Natural Classifications With Functional Classifications..................................... 27 Note 16 Component Units ........................................................................ 28

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

FY2005 FY2004 FY2003

21

2,552

21

2,570

21

2,332

Overview of the Financial Statements and Financial Analysis

Waycross College is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

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.

Waycross College Annual Financial Report FY 2005 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
As s e ts : Current Assets Capital Assets, net Other Assets Total Asse ts
Liabilitie s: Current Liabilities Noncurrent Liabilities
Total Liabilitie s
Net Asse ts: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrest rict ed Total Ne t Asse ts

June 30, 2005
$975,190.68 8,982,862.04
258,733.06 10,216,785.78
374,299.86 41,455.62
415,755.48
8,982,862.04 131,240.03 104,133.26
582,794.97 $9,801,030.30

June 30, 2004
$925,888.27 9,032,993.87
262,134.61 10,221,016.75
359,934.30 35,462.65
395,396.95
9,032,993.87 130,240.03 100,434.36
561,951.54 $9,825,619.80

The total assets of the institution decreased by ($4,230.97). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($50,131.83) 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 $20,358.53. The primary cause for the increase was in current liabilities, primarily $35,280.75 in deposits held for other organizations. Other changes in current liabilities included a $6,675.00 increase in contracts payable and a ($23,783.30) decrease in deferred revenue. Non-current liabilities increased due to an increase in compensated absences (non-current) of $5,992.97. The combination of the decrease in total assets of ($4,230.97) and the increase in total liabilities of $20,358.53 yields a decrease in total net assets of ($24,589.50). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($50,131.83).

Waycross College Annual Financial Report FY 2005 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, 2005

June 30, 2004

Operating Revenues

$2,201,680.32

$2,035,186.13

Operating Expenses Operating Loss

6,104,060.66 (3,902,380.34)

5,991,464.64 (3,956,278.51)

Nonoperating Revenues and Expenses

3,436,281.63

3,611,395.84

Income (Loss) Before other revenues, expenses, gains or losses

(466,098.71)

(344,882.67)

Other revenues, expenses, gains or losses

252,703.58

185,026.19

Increase in Net Assets

(213,395.13)

(159,856.48)

Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated

9,825,619.80 188,805.63
10,014,425.43

9,985,476.28 0.00
9,985,476.28

Net Assets at End of Year

$9,801,030.30

$9,825,619.80

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 2005 3

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue T uition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Ot h er
T otal Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Gift s Investment Income Ot h er
T otal Nonoperating Revenue
Capital Gifts and Grants St at e Other Capital Gifts and Grants
T otal Capital Gifts and Grants
T otal Revenues

$694,309.63
1,010,864.29 21,484.90
456,093.71 18,927.79
2,201,680.32
3,219,651.86 102,186.27 117,494.85 14,854.45 (17,905.80)
3,436,281.63
252,703.58
252,703.58
$5,890,665.53

June 30, 2004
$720,722.50 1,115,425.30
36,921.43 138,364.74
23,752.16 2,035,186.13
3,452,921.51 119,953.74 6,633.45 32,002.39
3,611,511.09
185,026.19 185,026.19 $5,831,723.41

Waycross College Annual Financial Report FY 2005 4

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expenses Inst ruct io n Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (MCG only)
T otal Operating Expenses

June 30, 2005

June 30, 2004

$1,519,501.76

$2,136,532.16

846,228.80 564,928.77 1,026,961.85 1,202,389.81 519,617.36 424,432.31

848,712.30 681,287.75 1,041,492.16 604,488.50 576,884.02 102,067.75

6,104,060.66

5,991,464.64

Nonoperating Expenses Interest Expense (Capital Assets) and Other
T otal Expenses

$6,104,060.66

115.25 $5,991,579.89

Total operating revenue increases of $166,494.19 are primarily due to differences totaling $317,728.97 in auxiliary enterprises revenue. This is due to the prior year revenue being presented net of cost of goods (state audit report) and the current year being presented as gross revenue. Tuition and fee revenue decreased by ($81,614.95) due to enrollment losses and higher than expected withdrawals.

Total operating expense increased by $81,221.01. Salaries and benefits cost decreased by ($211,821.48), scholarships decreased by ($63,578.97), and utilities by ($20,607.85). These decreases are due primarily to budget reductions. Supplies and other services increased by $401,737.63. This is due to the prior year cost of goods for auxiliary enterprises being presented as a reduction in revenue (state audit report) while the current year's expense is presented as an operating expense. Depreciation expense decreased by ($25,703.28). This was due to the retirement of equipment items.

Under non-operating revenues (expenses) state appropriations decreased by approximately ($233,269.65). 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 Waycross College. We are hopeful that the economy is now on an upward trend.

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

Waycross College Annual Financial Report FY 2005 5

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, 2005 and 2004, Condensed

Cash P ro v ided (used) By : Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Act ivit ies Invest ing Act ivit ies
Net Chan ge in Cash Cash, Beginning of Year
Cash, End of Year

June 30, 2005
($3,457,684.31) 3,431,453.52 15,041.95 18,921.48 7,732.64 722,127.92
$729,860.56

June 30, 2004
($3,320,532.69) 3,586,922.56 (74,126.87) 17,328.46 209,591.46 512,536.46
$722,127.92

Capital Assets

Waycross College completed renovations to the Administrative and Educational buildings during FY 2005. These renovations were funded by the Georgia State Finance and Investment Commission (GSFIC) in the amount of $325,985.43. Of this amount $240,613.58 was capitalized. $20,820.00 was also received from GSFIC for other non-capitalized projects including a sidewalk, gazebo and exterior classroom project and a campus drainage project. Phase II of the sidewalk, gazebo and exterior classroom project was begun but not completed.

Projected funding by GSFIC for FY2005 will be approximately $222,282.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Liabilities (Debt)

Waycross College had Long-Term Liabilities (Debt) of $186,760.48 of which $145,304.86 was reflected as current liability at June 30, 2005.

For additional information concerning Long-Term Liabilities (Debt), see notes 1 and 8 in the Notes to the Financial Statements.

Waycross College Annual Financial Report FY 2005 6

Component Units In compliance with GASB Statement No. 39, Waycross College has included the financial statements and notes for all required component units for FY2005. The Waycross College Foundation had endowment investments of $1.16 M as of June 30, 2005. The Waycross College Foundation had no long-term debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, 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. 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 2005 7

Statement of Net Assets

Waycross C oll e ge STATEMENT O F NET ASSETS
June 30, 2005

AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short-term Investments Accounts Receivable, net Receivables - Federal Financial Assistance Receivables - St ate General Appropriations Allotment Receivables - Other Leases Receivable Pledges Receivable In v en t o ries Prepaid it ems Notes and Mort gages Receivable Ot her Assets T ot al Current Asset s

W aycros s College
$729,860.56
90,106.93 84,433.42
70,519.77 270.00
975,190.68

Noncurre nt Asse ts Noncurrent Cash Invest ments (including Real Est at e) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets, net T ot al Noncurrent Assets
TO TAL ASSETS
LIAB ILITIES C urre nt Liabil i ti e s Accounts Payable Salaries Payable Benefits Payable Cont racts Payable Deposit s Deferred Revenue Ot her Liabilities Deposit s Held for Ot her Organizations Current Port ion of Long-term Debt Compensat ed Absences (current port ion) T ot al Current Liabilit ies Noncurre nt Li abi li ti e s Lease Purchase Obligations (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent) Deposit s Liabilities under Split -Interest Agreement s Ot her Long-T erm Liabilities T ot al Noncurrent Liabilities TO TAL LIABILITIES
NET AS SETS Invest ed in Capit al Assets, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capital Projects Un rest rict ed TO TAL NET ASSETS

258,733.06
8,982,862.04 9,241,595.10 10,216,785.78
41,811.42
6,675.00 136,478.68
1,784.94 42,244.96 145,304.86 374,299.86
41,455.62
41,455.62 415,755.48
8,982,862.04 131,240.03 104,133.26 582,794.97
$9,801,030.30

Waycross C ol le ge Fo u n dati o n $115,295.00 121,466.00
691.00 138.00 237,590.00
1,162,020.00
1,162,020.00 1,399,610.00
1,878.00
50.00
1,928.00
0.00 1,928.00
1,162,020.00 109,717.00 125,945.00
$1,397,682.00

Waycross College Annual Financial Report FY 2005 8

Statement of Revenues, Expenses and Changes in Net Assets
WAYCRO SS CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

Waycross College

REVENUES
Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o kst o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Benefit s Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat ion Payments to or on behalf of Waycross College
T otal Operating Expenses Operating Income (loss)

$1,195,855.53 501,545.90
1,010,864.29
21,484.90 3,210.00
394,372.35 38,149.76
23,571.60 15,717.79 2,201,680.32
1,020,746.65 1,816,709.37
753,159.45 65.00
39,942.47 559,731.59 168,753.76 1,221,355.81 523,596.56 6,104,060.66 (3,902,380.34)

W aycros s College Fo u n da ti o n
$0.00 72,250.00 30,352.00
102,602.00
1,200.00 86.00
7,133.00 60,083.00 68,502.00 34,100.00

Waycross College Annual Financial Report FY 2005 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
WAYCRO SS CO LLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Ye ar Ende d June 30, 2005

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s 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 St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

Waycross College
3,219,651.86
56,112.15 46,074.12 117,494.85 14,854.45 (17,905.80) 3,436,281.63 (466,098.71)
252,703.58
252,703.58 (213,395.13) 9,825,619.80 188,805.63 10,014,425.43 $9,801,030.30

W aycros s College Fo u n da ti o n
(13,284.00)
(13,284.00) 20,816.00
61,515.00 61,515.00 82,331.00 1,315,351.00 1,315,351.00 $1,397,682.00

Waycross College Annual Financial Report FY 2005 10

Statement of Cash Flows
W AYC RO S S C O LLEGE S TATEMENT O F C AS H FLO W S For th e Ye ar En de d Ju n e 30, 2005
C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s (Exchange) Sales and Services of Educat ional Depart ment s P ayment s t o Suppliers P ayments to Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (paym ent s) Net Cash P rovided (used) by Operat ing Act ivit ies
C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies
C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies
C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest m ent s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year

June 30, 2005
$1,187,306.40
939,439.84 22,271.93
(2,187,908.05) (2,835,789.89) (1,061,277.49)
400,337.95 36,476.12
23,609.92 17,848.96 (3,457,684.31)
3,219,651.86 53,141.14
158,660.52 3,431,453.52
43,465.01
(28,423.06)
15,041.95
19,921.48 (1,000.00) 18,921.48 7,732.64 722,127.92 $729,860.56

Waycross College Annual Financial Report FY 2005 11

Statement of Cash Flows, Continued
REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES :
Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies
D ep reciat io n Change in Asset s and Liabilit ies:
Receivables, net In v en t o ries Ot her Asset s Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences
Net Cash P rovided (used) by Operat ing Act ivit ies
** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS
Change in fair value of invest m ent s recognized as a com ponent of int erest incom e Gift of capit al asset s reducing proceeds of capit al grant s and gift s

($3,902,380.34)
523,596.56 (83,021.68) 15,517.39
(270.00) (590.93) (15,116.85) 2,537.18 2,044.36 ($3,457,684.31)
$5,067.03 ($252,703.58)

Waycross College Annual Financial Report FY 2005 12

WAYCROSS COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
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) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2005, Waycross College is reporting the activity for the Waycross College Foundation.
See Note 16. 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 implemented GASB
Waycross College Annual Financial Report FY 2005 13

Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the 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.
Restatement of Net Assets It should be noted that prior period accumulated depreciation for the library collection has been restated in the amount of $188,805.63. Accumulated depreciation had been overstated due to an error in the library collection depreciation schedule.
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
Waycross College Annual Financial Report FY 2005 14

component of investment income in the Statement 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.
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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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, 2005, GSFIC did not transfer any capital additions to Waycross College.
Waycross College Annual Financial Report FY 2005 15

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 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 $184,716.12 as of 7-1-2004. For FY2005, $148,324.02 was earned in compensated absences and employees were paid $146,279.66, for a net increase of $2,044.36. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $186,760.48.
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 previously in Note 1 Capital Assets section.
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.
Waycross College Annual Financial Report FY 2005 16

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:

Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable

June 30, 2005
$104,133.26 0.00 0.00 0.00 0.00
$104,133.26

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 Reserv e fo r En cum bran ces Reserv e fo r Inv en t ory Ot h er Unrest rict ed T o t al Unrest rict ed Net Asset s

June 30, 2005
$ 1 9 5 ,5 6 5 .7 9 1 5 0 ,3 5 5 .3 7 1 0 ,7 2 5 .2 7 2 2 6 ,1 4 8 .5 4
$ 5 8 2 ,7 9 4 .9 7

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.

Waycross College Annual Financial Report FY 2005 17

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.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
Note 2. Deposits and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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.
Waycross College Annual Financial Report FY 2005 18

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 and 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.

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.

At June 30, 2005, $640,393.91 of the College's deposits was uninsured. Of these uninsured deposits, $640,393.91 was collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.

B. Investments

At June 30, 2005, the carrying value of the College's investment was $304,869.40, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pool Board of Regents Balanced Income Fund Legal Fund Short-Term Fund Total Return Fund

$0.00
46,136.34 258,733.06

$304,869.40

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary.

Waycross College Annual Financial Report FY 2005 19

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance St at e General Appropriat ions Allot m ent Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$2,207.32 15,816.59 90,106.93
67,114.51 175,245.35
705.00
$174,540.35

Note 4. Inventories

Inventories consisted of the following at June 30, 2005.

Bookst ore Food Services P hysical P lant Ot h er
T otal

June 30, 2005
$52,661.16 6,163.37
11,163.12 532.12
$70,519.77

Note 5. Notes/Loans Receivable The College did not have Notes/Loans receivable.

Waycross College Annual Financial Report FY 2005 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2005:

Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Restated Beginning Balances
7/1/2004
$358,789.49 41,517.34 400,306.83

Additions
$0.00 75,045.60 75,045.60

Reductions
$0.00 41,517.34 41,517.34

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

1,343,722.00 11,035,957.18
980,473.00 1,208,661.97
1,121,537.64
15,690,351.79

240,613.58 6,269.05 22,154.01
269,036.64

135,218.05 7,884.38
143,102.43

Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

726,101.88 3,600,314.38
734,118.39 881,395.09
926,929.38
6,868,859.12

53,843.45 337,310.93 23,986.96 61,287.22
47,168.00
523,596.56

117,312.25 7,884.38
125,196.63

Total Capital Assets, Being Depreciated, Net

8,821,492.67

(254,559.92)

17,905.80

Capital Assets, net

$9,221,799.50

($179,514.32)

$59,423.14

Ending Balance 6/30/2005
$358,789.49 75,045.60 433,835.09
1,343,722.00 11,276,570.76
980,473.00 1,079,712.97
0.00 1,135,807.27
0.00 15,816,286.00
779,945.33 3,937,625.31
758,105.35 825,370.06
0.00 966,213.00
0.00 7,267,259.05
8,549,026.95
$8,982,862.04

Waycross College Annual Financial Report FY 2005 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2005.

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2005 $135,741.68 737.00 $136,478.68

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations
Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total

Beginning Balance
July 1, 2004
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2005

$0.00

$0.00

184,716.12 184,716.12

148,324.02 148,324.02

146,279.66 146,279.66

186,760.48 186,760.48

Total Long Term Obligations

$184,716.12

$148,324.02

$146,279.66

$186,760.48

Current Portion
$0.00
145,304.86 145,304.86 $145,304.86

Note 9. Significant Commitments
The Waycross College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $103,600.15 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements.
Note 10. 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.

Waycross College Annual Financial Report FY 2005 22

Note 11. 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 TRS offices or 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 2005, 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

2005 2004 2003

100% 100% 100%

$165,277.62 $212,282.36 $184,714.97

Employees' Retirement System of Georgia

Plan Description Waycross College did not contribute to the Employees' Retirement System of Georgia (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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable

Waycross College Annual Financial Report FY 2005 23

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 2005, the employer contribution was 9.65% 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 $80,089.46 (9.65%) and $41,503.52 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 2005 amounted to $2,732.94 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Waycross College Annual Financial Report FY 2005 24

The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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 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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the
Waycross College Annual Financial Report FY 2005 25

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, 2005. Note 14. 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, 2005, there were 16 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Waycross College recognized as incurred $75,839.40 of expenditures, which was net of $31,464.07 of participant contributions.
Waycross College Annual Financial Report FY 2005 26

Note 15. Natural Classifications with Functional Classifications

The College's operating expenses by functional classification for FY2005 are shown below:

Functional Classification FY2005

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

$1,019,246.65 94,521.59 288,835.44
5,850.51
2,861.25 105,043.76
3,142.56

$0.00

$0.00

$1,500.00 405,166.81 114,860.97
10,601.32
11,221.17 237,007.56 65,870.97

$0.00 310,972.60 80,542.26
8,715.70
4,371.37 153,643.06
6,683.78

$0.00 657,788.57 165,340.44
65.00 13,933.56 40,114.23 5,123.56 127,928.46 16,668.03

Total Expenses

$1,519,501.76

$0.00

$0.00 $846,228.80 $564,928.77 $1,026,961.85

Natural Classification
Faculty Staff Benefit s Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Depreciat ion
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Scholarships & Fellowships

Auxiliary Enterprises

Unallocat ed Expenses

$0.00 289,125.91
91,571.92 (3,747.36)
759.06
143,853.62 257,592.94 423,233.72

$0.00 519,617.36

$0.00 59,133.89 12,008.42
3,747.36 82.32
1,322.79 340,140.03
7,997.50

$0.00

$1,202,389.81

$519,617.36 $424,432.31

$0.00

T ot al Expenses
$1,020,746.65 1,816,709.37 753,159.45 65.00 39,942.47 559,731.59 168,753.76 1,221,355.81 523,596.56
$6,104,060.66

Waycross College Annual Financial Report FY 2005 27

Note 16. Component Units Waycross College Foundation is a legally separate, tax-exempt component unit of Waycross 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 one-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 University 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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2005, the Foundation distributed $60,083 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 2001 South Georgia Parkway Waycross, GA 31503. Investments for Component Units: Waycross College Foundation holds endowment investments in the amount of $1.16 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 dividend and interest earned on the corpus may be used for academic scholarships. The realized gains are set aside as a reserve.
Waycross College Annual Financial Report FY 2005 28

Waycross College Foundation Investments are comprised of the following amounts at June 30, 2005:

Cos t

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Certificates of Deposit Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$0.00

$0.00

29,635.00

29,635.00

1,191,375.00

1,132,385.00

Total Investments

$1,221,010.00

$1,162,020.00

Waycross College Annual Financial Report FY 2005 29

UNIVERSITY of WEST GEORGIA
Financial Report
For the Year Ended June 30, 2005

University of West Georgia Carrollton, Georgia

Dr. Beheruz N. Sethna
President

William N. Gauthier
Vice President for Business & Finance

UNIVERSITY of WEST GEORGIA ANNUAL FINANCIAL REPORT
FY 2005
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ..................................................................................................... 10 Statement of Revenues, Expenses, and Changes in Net Assets......................................... 11 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............................................................................................ 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 Significant Commitments.................................................................25 Note 10 Lease Obligations................................................................................................ 25 Note 11 Retirement Plans ................................................................................................. 28 Note 12 Risk Management................................................................................................ 31 Note 13 Contingencies...................................................................................................... 32 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 32 Note 15 Natural Classifications With Functional Classifications..................................... 33 Note 16 Component Units ........................................................................ 34

UNIVERSITY of WEST GEORGIA
Management's Discussion and Analysis

Introduction
University of West Georgia is one of the 34 institutions of the University System of Georgia, is a charter member of the University System of Georgia and 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. The wide range of educational opportunities, offered by the University attracts a highly qualified faculty and a student body of more than 10,000 students each year. In general we continue to grow, as shown by the year to year comparison numbers that follow.
West Georgia offers a range of disciplinary, interdisciplinary and professional programs at the baccalaureate level. There are 113 programs of study, including 60 at the Bachelors level, 52 at the Masters and Specialists level, and one Doctoral program. During the 2004 fiscal year, the Southern Association of Colleges and Schools (SACS) reaffirmed UWG's accreditation for 10 years based on the February 2003 accreditation visit. In addition, the University has achieved national recognition in several areas including academic debate, faculty-directed student research and athletic competition.
Although enrollment reached a plateau in fall 2005, our enrollment projections still forecast that our solid 3% average historical increase will continue, toward our eventual student body of 1516000 students.

Faculty

Students

FY2005 FY2004 FY2003

405

10,216

398

10,255

355

9,675

Overview of the Financial Statements and Financial Analysis

University of West Georgia is proud to present its financial statements for fiscal year 2005. 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 2004 and FY 2005.

University of West Georgia Annual Financial Report FY 2005 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 University of West 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

Assets : Current Ass ets Capital As sets, net Other Assets Total As sets

June 30, 2005
$16,284,666.22 66,411,670.82 1,764,942.25 84,461,279.29

June 30, 2004
$16,349,507.20 57,806,738.27 1,863,246.96 76,019,492.43

Liabilities : Current Liabilities Noncurrent Liabilities

9,060,671.60 3,414,441.96

8,698,111.90 2,616,201.25

Total Liabilities

12,475,113.56

11,314,313.15

Net Assets: Invested in Capital Ass ets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unres tricted Total Net Assets

65,197,919.79
2,094,935.23
4,693,310.71 $71,986,165.73

56,421,479.02
2,060,580.45
6,223,119.81 $64,705,179.28

University of West Georgia Annual Financial Report FY 2005 2

The total assets of the institution increased by $8,441,786.86 A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase in capital assets, invested in plant of $8,604,932.55 net of accumulated depreciation. The capital asset additions follow the institutional philosophy to utilize resources as efficiently as possible, yet insure that we continue to maintain and improve our support of the institutions instruction, research and public service missions. The total liabilities for the year increased by $1,160,800.41. The primary cause for the increase was in non-current liabilities, primarily $943,358.70 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 $8,441,786.86 and the increase in total liabilities of $1,160,800.41 yields an increase in total net assets of $7,280,986.45. The increase in total net assets is primarily in the amounts invested in capital assets, net of debt. 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 West Georgia Annual Financial Report FY 2005 3

Statement of Revenues, Expenses and Changes in Net Assets, Condensed
June 30, 2005

Operating Revenues
Operating Expens es Operating Los s
Nonoperating Revenues and Expens es
Income (Los s ) Before other revenues , expens es , gains or los s es
Other revenues , expens es , gains or los s es
Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported Prior Year A djus tments Net A s s ets at beginning of year, res tated
Net A s s ets at End of Year

$48,097,307.70 89,005,582.69 (40,908,274.99) 40,680,869.60
(227,405.39) 7,508,391.84 7,280,986.45 64,705,179.28 64,705,179.28 $71,986,165.73

June 30, 2004
$43,096,644.88 85,031,127.81 (41,934,482.93) 37,653,186.58
(4,281,296.35) 3,421,839.36 (859,456.99) 65,513,416.04
51,220.23 65,564,636.27 $64,705,179.28

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 West Georgia Annual Financial Report FY 2005 4

Revenue by Source For the Years Ended June 30, 2005 and June 30, 2004
June 30, 2005

Operating Revenue Tuition and Fees Federal A ppropriations Grants and Contracts Sales and Services A uxiliary Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Grants and Contracts Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

$19,727,822.49
9,061,222.57 404,653.64
18,460,016.84 443,592.16
48,097,307.70
39,338,796.31
905,290.01 433,435.02 40,449.01 40,717,970.35
6,916,163.29 592,228.55
7,508,391.84
$96,323,669.89

June 30, 2004
$18,967,484.51 8,914,580.67 271,488.40
14,307,960.89 635,130.41
43,096,644.88
38,308,824.05
193,578.47 (847,188.11) 37,655,214.41
3,246,839.36 175,000.00
3,421,839.36 $84,173,698.65

University of West Georgia Annual Financial Report FY 2005 5

Expenses (By Functional Classification) For the Years Ended June 30, 2005 and June 30, 2004

Operating Expens es Ins truction Res earch Public Service A cademic Support Student Services Ins titutional Support Plant Operations and M aintenance Scholars hips and Fellows hips A uxiliary Enterpris es Unallocated Expens es Patient Care (M CG only)
Total Operating Expens es
Nonoperating Expens es Interes t Expens e (Capital A s s ets )
Total Expens es

June 30, 2005
$35,199,043.56 972,673.83 166,246.75
10,797,062.17 5,045,757.20 8,146,114.15 7,536,434.06 1,164,026.94 17,360,197.28 2,618,026.75
89,005,582.69
37,100.75
$89,042,683.44

June 30, 2004
$34,713,240.31 860,659.05 163,571.16
11,253,016.14 4,816,802.95 8,152,838.24
10,420,879.21 1,419,185.97
13,230,934.78
85,031,127.81
2,027.83
$85,033,155.64

The University's second major revenue source of student generated tuition and fees increased by $1,263,772 due primarily to the 5% tuition increase authorized by the Board of Regents, and effective Fall semester. As mentioned earlier the headcount for the year was flat.
Grants and contracts increased in total by $146,641 primarily due to an increase in the amount of federal grants booked, of $324,104.31. This was offset by a reduction of state and other grants in the amount, in the amount of $177,462.41.
Sales and service revenue is internally generated revenue from sources such as continuing education fees and printing and publication. Increased volume created additional dollars of $133,165.
Auxiliary housing revenues increased by $1,100,431 as a result of an increase in room rents of 4% and a result of the university's strategic planning that added 343 additional beds on campus.
In fall of 2004 the university opened the University Suites, which encompasses 612 beds of new housing. The suites are privatized, meaning that they were constructed on university land, under a ground lease, and then leased back to the university by the foundation, for twenty five years. The University of West Georgia Foundation is a component unit of the University. The long term lease is reflected in the notes as an operating lease.
At the same time, we also tore down the 269-bed Strozier Hall, a traditional campus dormitory. The net effect is an increase of 343 beds on campus. In fall of 2005, we will open the second phase of our housing plan, adding 602 new beds, and removing Roberts Hall which has 400 beds. Again we will add to the bed inventory, by about 200 beds.
University of West Georgia Annual Financial Report FY 2005 6

The compensation and employee benefits category increased by approximately $1,552,453.06. The increase reflects increased costs for health insurance, and the 2% raise that went into effect in January for the second half of the fiscal year.

Utilities decreased by approximately ($170,151.58) during the past year. The decrease was the result of aggressive management of our utility operations, to insure that we operate as efficiently as possible. Our efforts were offset by the continuing increases in the cost of natural gas and electricity. If cost increases continue, it will become increasingly difficult to keep the costs from going out of control.

Under non-operating revenues (expenses) state appropriations increased by $1,029,972.26. Although we did get more operating money from the state this year, we are still suffering from the prior year reductions of state appropriations system-wide, due to a sluggish economy. We suffered cuts of 20% of our budget and that has created a challenge for all institutions of the University System of Georgia and, thus, for University of West Georgia. We are hopeful that the economy is now on an upward trend and that we can recover some of those cuts in the future.

Statement of Cash Flows

The final statement presented by the 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, 2005 and 2004, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Capital and Related Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2005
($35,130,549.85) 39,796,529.24 (5,033,908.32) 449,635.02 81,706.09 13,271,306.01
$13,353,012.10

June 30, 2004
($37,366,477.39) 38,999,934.51 (1,984,005.72) 221,784.76 (128,763.84) 13,400,069.85
$13,271,306.01

University of West Georgia Annual Financial Report FY 2005 7

Capital Assets
The University had some major capital asset additions for facilities in fiscal year 2005, totaling $8.5m dollars. The primary project completed was the $3.1m Campus Electrical Infrastructure project. This project enhances our electrical to meet the demands of tomorrow. Other major projects in the approximately $1m range included the completion of Adamson Hall, replacement of the Education Center HVAC system, design and planning costs for the Health Wellness Building, completion additions for the TLC, replacement of the mechanical systems in the Art Annex for $250k, replacing the Biology roof for $424k and numerous smaller projects in the $50 to $100k range. All of these projects follow the University's philosophy and strategic objectives of continuing to upgrade our buildings grounds and systems to support our clients and thus have the most beautiful campus in the University System of Georgia.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt
University of West Georgia had a Long-Term Debt of $4,877,597.93 of which $1,673,155.93 was reflected as current liability at June 30, 2005.
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, University of West Georgia has included the financial statements and notes for all required component units for FY2005. The University of West Georgia Foundation had endowment investments of $12.7 M as of December 31, 2004, and long-term debt of $38.6 M. The UWG Real Estate Foundation had long-term debt of $ 30.9 M in the form of one bond issue. Those funds are being invested and held by the Bank of New York as trustee, while construction of the new Campus Center is underway. The project is set to open in summer 2006. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.
Economic Outlook
Although enrollment reached a plateau in fall 2005, the University continues to have a strong enrollment picture. Our projections still forecast that our solid 3% average historical increase will continue, toward our eventual student body of 15-16,000 students, and we expect that the enrollment trend will start back up in 2006.
Overall our projected growth is coming at a time when the State of Georgia is just starting to come out of the economic doldrums. For the first time in three years, our state support increased after the "tough-to-take" 16.3% cuts we absorbed the prior 3 years, amounting to a total of almost $6M, operating and MRR funds.
University of West Georgia Annual Financial Report FY 2005 8

Overall the market position of the University is strong, and although we have issues, we have an administrative team that pulls together even to take on the challenges. We continue to manage this institution very efficiently and have one of the lowest cost-per-student ratios in the university system. As we move into fiscal year 2006, we expect strong continued growth in undergraduate enrollment, a continued need to manage our resources efficiently, and the maintenance of our conservative approach to budget forecasting and management. New buildings coming on to support our needs include the new Arbor View Apartments (fall 2005), the University Center (recreation center and student union) under construction (fall 2006) and the Health Wellness Building which should start construction in summer 2006. 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. Dr. Beheruz N. Sethna President University of West Georgia
University of West Georgia Annual Financial Report FY 2005 9

Statement of Net Assets

UNIVERSITY OF WEST GEORGIA
STATEMENT OF NET ASSETS June 30, 2005

Univers ity of Wes t Ge or g i a

Component Units

Univers ity of Wes t UWG Real Es tate

Ge or g i a

Foundation, Inc.

Foundation, Inc.

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments A ccounts Receivable, net Receivables - Federal Financial A s s is tance Receivables - State General A ppropriations A llotment Receivables - Other Due from Primary Government Leas es Receivable Pledges Receivable In v e n t o rie s Prepaid items Notes and M ortgages Receivable Other A s s ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Pledges Receivable Capital A s s ets , net Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue Other Liabilities Depos its Held for Other Organizations Due to Component Unit Current Portion of Long-term Debt Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Depos its Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Res tricted for No n e xp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$13,353,012.10 616,200.00 324,395.61 867,977.08
799,779.82 323,301.61
16,284,666.22

$1,879,912.00 18,684,928.00

$26,312,614.00

2,144.00 586,806.00
68,586.00 27,582.00 21,249,958.00

299,277.00 86,739.00
51,132.00 814,761.00 27,564,523.00

1,764,942.25
66,411,670.82 68,176,613.07 84,461,279.29

12,664,768.00
83,000.00 20,159,050.00 32,906,818.00 54,156,776.00

5,660,911.00 5,660,911.00 33,225,434.00

448,965.80 231,067.95
559,197.59 458,315.50 4,509,390.25 334,820.06 969,019.48
86,739.00 270,392.93 1,192,763.04 9,060,671.60
943,358.70 1,505,000.00
966,083.26
3,414,441.96 12,475,113.56
65,197,919.79
2,094,935.23
4,693,310.71 $71,986,165.73

1,191,032.00 1,191,032.00
37,694,382.00 37,694,382.00 38,885,414.00
178,766.00 13,227,827.00
1,377,454.00 487,315.00
$15,271,362.00

1,494,777.00 353,277.00
1,021,022.00 7,476.00
2,876,552.00
30,930,376.00 30,930,376.00 33,806,928.00
(581,494.00) ($581,494.00)

University of West Georgia Annual Financial Report FY 2005 10

Statement of Revenues, Expenses and Changes in Net Assets

UNIVERSITY OF WEST GEORGIA
STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2005

University of West Georgia

Component Units

University of West

UWG Real Estate

Georgia Foundation, Inc.

Foundation, Inc.

REVENUES

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o ks t o re Food Services Parkin g / Tran s p o rt atio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of University of West Georgia
Total Operating Expenses Operating Income (loss)

$25,266,357.99 5,538,535.50
7,456,809.70 581,984.00
1,022,428.87 404,653.64 12,188.00
6,678,791.43 3,350,147.84 3,680,090.84
640,789.13 1,364,793.60 2,349,533.10
395,870.90 431,404.16 48,097,307.70
23,182,577.80 23,734,930.18 12,260,829.19
845,584.26 2,318,113.09 2,971,140.48 18,973,861.61 4,718,546.08
89,005,582.69 (40,908,274.99)

$0.00 1,442,856.00
471,862.00
766,223.00 2,680,941.00
371,685.00 90,186.00
858,047.00 1,077,504.00 2,397,422.00
283,519.00

$0.00
0.00
17,087.00 17,087.00 (17,087.00)

University of West Georgia Annual Financial Report FY 2005 11

Statement of Revenues, Expenses and Changes in Net Assets, Continued

UNIVERSITY OF WEST GEORGIA
STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2005

University of West Georgia

Component Units

University of West

UWG Real Estate

Georgia Foundation, Inc.

Foundation, Inc.

NONOPERATING REVENUES (EXPENS ES) 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 Additions to permanent endowments 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

39,338,796.31

905,290.01 433,435.02 (37,100.75) 40,449.01 40,680,869.60 (227,405.39)
6,916,163.29 592,228.55
7,508,391.84 7,280,986.45
64,705,179.28
64,705,179.28 $71,986,165.73

997,686.00
997,686.00 1,281,205.00
376,956.00 376,956.00 1,658,161.00 13,613,201.00 13,613,201.00 $15,271,362.00

471,458.00 (1,016,394.00)
(19,471.00) (564,407.00) (581,494.00)
0.00 (581,494.00)
($581,494.00)

University of West Georgia Annual Financial Report FY 2005 12

Statement of Cash Flows
UNIVERSITY OF WEST G EORG IA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2005
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal A ppropriations Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Loans Is s ued to Students and Employees Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics Other Organizations Other Receipts (payments ) Net Cas h Provided (us ed) by Operating A ctivities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State A ppropriations A gency Funds Trans actions Gifts and Grants Received for Other Than Capital Purpos es Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from s ale of Capital A s s ets Purchas es of Capital A s s ets Principal Paid on Capital Debt and Leas es Interes t Paid on Capital Debt and Leas es Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities of Inves tments Interes t on Inves tments Purchas e of Inves tments Net Cas h Provided (us ed) by Inves ting A ctivities Net Increas e/Decreas e in Cas h Cas h and Cas h Equivalents - Beginning of year Cas h and Cas h Equivalents - End of Year

June 30, 2005
$19,735,201.02
9,190,207.71 230,388.69
(34,956,337.69) (46,738,528.02)
(2,318,113.09) (411,162.08) 509,466.79
6,790,689.49 3,353,171.58 3,861,206.94
647,714.60 1,369,082.46 2,349,240.28
598,255.08 658,966.39 (35,130,549.85)
39,338,796.31 5,310.40
452,422.53 39,796,529.24
(4,793,957.71) (202,849.86) (37,100.75)
(5,033,908.32)
16,200.00 433,435.02
449,635.02 81,706.09 13,271,306.01 $13,353,012.10

University of West Georgia Annual Financial Report FY 2005 13

Statement of Cash Flows, Continued
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) A djus tments to Reconcile Net Income (los s ) to Net Cas h Provided (us ed) by Operating A ctivities
De p re c ia t io n Change in A s s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities
** NON-CA SH INVESTING, NON-CA PITA L FINA NCING, A ND CA PITA L A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed as s ets acquired by incurring capital leas e obligations Gift of capital as s ets reducing proceeds of capital grants and gifts

($40,908,274.99)
4,718,546.08 31,684.26 (40,777.42)
117,447.74 113,938.01 293,040.59 432,934.14 110,911.74 ($35,130,549.85)
$1,402,886.73 ($7,508,391.84)

University of West Georgia Annual Financial Report FY 2005 14

UNIVERSITY of WEST GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2005
Note 1. Summary of Significant Accounting Policies
Nature of Operations University of West 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 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 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. University of West Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, 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 University of West Georgia) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in 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 (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the University's report. For FY2005, University of West Georgia is reporting the activity for the University of West Georgia Housing Foundation and the University of West Georgia Real Estate Foundation.
See Note 16. Component Units, for foundation notes.
University of West Georgia Annual Financial Report FY 2005 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 implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational 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 statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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
University of West Georgia Annual Financial Report FY 2005 16

reported as a component of investment income in the Statement 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 recorded on the consumption method and are valued at cost using the weighted average method. Resale inventories are valued at cost using the firstin, 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. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
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 of West Georgia when complete. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $5,300,065.41 to University of West Georgia.
University of West Georgia Annual Financial Report FY 2005 17

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. University of West Georgia had accrued liability for compensated absences in the amount of $2,047,934.56 as of 7-1-2004. For FY2005, $1,601,146.87 was earned in compensated absences and employees were paid $1,490,235.13 for a net increase of $110,911.74. The ending balance as of 6-30-2005 in accrued liability for compensated absences was $ 2,158,846.30.
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 previously in Note 1 Capital Assets section.
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.
University of West Georgia Annual Financial Report FY 2005 18

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:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Quas i-Endowments Total Res tricted Expendable

June 30, 2005 $0.00
1,838,744.86 256,190.37
$2,094,935.23

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 Res erv e Res erv e fo r En cu mb ran ces Res erv e fo r In v en to ry O th e r U n re s tric te d T o ta l U n re s tric te d N e t A s s e ts

June 30, 2005
$2,860,411.26 4,388,609.95 128,993.55 (2,684,704.05)
$4,693,310.71

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 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.
University of West Georgia Annual Financial Report FY 2005 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. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 scholarship allowances.
University of West Georgia Annual Financial Report FY 2005 20

Note 2. Cash and Cash Equivalents, Other Deposits, and Investments
A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the college/university's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the college/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, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness 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 and 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.
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.
At June 30, 2005, $3,144,155.54 of the university's deposits were uninsured. Of these uninsured deposits, $516,200.00 were collateralized with securities held by the financial institution's trust department or agent in the university's name, and $2,627,955.54 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name.
University of West Georgia Annual Financial Report FY 2005 21

B. Investments

At June 30, 2005, the carrying value of the college/university's investment was $12,531,669.56, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool Board of Regents Short-Term Fund
Office of Treasury and Fiscal Services Georgia Fund 1

$1,880,742.05
10,650,927.51 $12,531,669.56

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of 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. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html.

The Weighted Average Maturity of the Short Term Fund is 1.1 years. Of the University's total investment of $1,880,742.05 in the Short Term Fund, $1,818,935.66 is invested in debt securities.

The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 24 days.

The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63).

University of West Georgia Annual Financial Report FY 2005 22

Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. Due to the nature of our investments, this risk does not apply. The university does not have a formal policy for managing interest rate risk.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Due to the nature of our investments, this risk does not apply. The university does not have a formal policy for managing credit quality risk.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2005.

June 30, 2005

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance State General A ppropriations A llotment Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$399,475.50 225,403.07 324,395.61
417,015.84 1,366,290.02
173,917.33
$1,192,372.69

Note 4. Inventories Inventories consisted of the following at June 30, 2005.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2005 $667,249.95 132,529.87 $799,779.82

Note 5. Notes/Loans Receivable

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. 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 deemed that no allowance is needed for uncollectible loans as of June 30, 2005.

University of West Georgia Annual Financial Report FY 2005 23

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2005:

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 7/1/2004
$554,184.25 758,387.02 1,312,571.27
83,378,134.88 1,832,926.69 11,710,449.48
106,915.94 12,914,671.64
13,516.00 109,956,614.63
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
56,494,167.00
$57,806,738.27

Additions
$0.00 7,187,626.41 7,187,626.41

Reductions
$0.00 4,713,051.42 4,713,051.42

3,144,580.30 4,467,031.18
1,273,890.09 1,402,886.73
735,059.32
11,023,447.62

158,000.00 134,710.76 90,736.09 383,446.85

84,903.67 2,762,031.72
86,891.84 1,205,396.36
161,671.87 417,312.73
337.89 4,718,546.08
6,304,901.54
$13,492,527.95

44,108.33 74,111.54 90,683.00 208,902.87 174,543.98 $4,887,595.40

Ending Balance 6/30/2005
$554,184.25 3,232,962.01 3,787,146.26
3,144,580.30 87,687,166.06 1,832,926.69 12,849,628.81 1,509,802.67 13,558,994.87
13,516.00 120,596,615.40
84,903.67 36,894,339.05
703,359.71 9,938,818.98
234,725.79 10,108,247.44
7,696.20 57,972,090.84
62,624,524.56
$66,411,670.82

University of West Georgia Annual Financial Report FY 2005 24

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2005.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2005 $2,980,143.90
1,529,246.35 $4,509,390.25

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2004
$19,199.25

Additions $1,397,402.24

Reductions

Ending Balance June 30, 2005

$202,849.86

$1,213,751.63

Other Liabilities Deferred Revene (noncurrent) Compensated Absences Total
Total Long TermObligations

1,715,000.00 2,047,934.56 3,762,934.56
$3,782,133.81

1,601,146.87 1,601,146.87
$2,998,549.11

210,000.00 1,490,235.13 1,700,235.13
$1,903,084.99

1,505,000.00 2,158,846.30 3,663,846.30
$4,877,597.93

Current Portion
$270,392.93
1,192,763.04 1,192,763.04 $1,463,155.97

Note: The Current Portion of Deferred Revenue ($210,000.00) is included in Note 7 Deferred Revenue in the Other Deferred Revenue line.
Note 9. Significant Commitments
The University of West Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $ 3,149,338.50 as of June 30, 2005 which includes a committed GSFIC funded contract in the amount of $939,200.00. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
The 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 and equipment.

University of West Georgia Annual Financial Report FY 2005 25

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2006 and 2010. Expenses for fiscal year 2005 were $239,950.61 of which $37,100.75 represented interest. Total principal paid on capital leases was $202,849.86 for the fiscal year ended June 30, 2005. Interest rates were 8.05% and 4.71%.

The following is a summary of the carrying values of assets held under capital lease at June 30, 2005:

Equipment

$1,275,071.57

OPERATING LEASES
University of West Georgia's operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2010. Certain operating leases provide for renewal options for periods from one to five 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 copiers and other small equipment. The University has three real estates leases consisting of a lease for our bookstore, a rental fee for use of a stadium and the lease for the University Suites, a privatized housing facility. In FY 2006, the University will have an additional real estate lease for the lease of the Arbor View apartments, another privatized housing facility. The future lease payments for this agreement are reflected in the schedule below.
The total operating lease expenditures in 2005 were $308,471.66. The total real estate lease expenditures in 2005 were $1,005,894.28.

University of West Georgia Annual Financial Report FY 2005 26

Future commitments for capital leases and for operating and real estate leases having remaining terms in excess of one year as of June 30, 2005 were as follows:

Year Ending June 30: 2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 36-40

Capital Leas es

Real Property Operating Leas es

$321,782.69 314,225.28 314,225.28 314,225.28 76,543.26

$2,028,375.91 2,671,376.87 2,718,747.46 2,730,227.77 2,760,338.13
13,843,870.56 14,600,993.28 15,445,293.72 14,829,996.44

1,341,001.79 127,250.16 0.00
$1,213,751.63

$71,629,220.14

University of West Georgia Annual Financial Report FY 2005 27

Note 11. Retirement Plans

Teachers Retirement System of Georgia

Plan Description 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 TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of University of West Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. 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 2005, 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

2005 2004 2003

100% 100% 100%

$2,177,219.12 $2,202,322.42 $2,191,615.93

Employees' Retirement System of Georgia

Plan Description 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 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.

University of West Georgia Annual Financial Report FY 2005 28

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, 2005, for employees covered by ERS was $56,792.00. The University's total payroll for all employees was $47,160,585.09.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the 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, 2005, the ERS employer contribution rate for the University amount to 6.18% 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 2005 amounted to $7,430.33 of which $6,516.45 was made by the University and $920.88 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, 2005, financial report, which may be obtained through ERS.
University of West Georgia Annual Financial Report FY 2005 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 from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) 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 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 2005, the employer contribution was 9.65% 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.
University of West Georgia and the covered employees made the required contributions of $1,769,294.27 and $915,248.92 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Georgia Defined Contribution Plan
Plan Description 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
University of West Georgia Annual Financial Report FY 2005 30

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 2005 amounted to $80,864.52 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. 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. 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. 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.
University of West Georgia Annual Financial Report FY 2005 31

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 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 University of West Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against 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, 2005.
Note 14. 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, 2005, there were 383 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, University of West Georgia recognized as incurred $1,414,026.09 of expenditures, which was net of $459,833.20 of participant contributions.
University of West Georgia Annual Financial Report FY 2005 32

Note 15. Natural Classifications with Functional Classifications

The University's operating expenses by functional classification for FY2005 are shown below:
Functional Classification FY2005

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

$22,714,348.29 3,938,043.71 6,289,877.36
474,703.92 21,521.76 88,818.91
1,644,497.39 27,232.22

$184,024.62 302,914.58 66,788.49
38,900.00 3,764.90
432.78 320,353.55
55,494.91

$0.00 122,797.06 28,650.44
3,193.02
796.16 10,810.07

$236,653.70 5,285,889.96 1,438,979.30
116,835.81
31,676.37 2,836,831.45
850,195.58

$25,396.00 2,945,437.74
711,629.09
72,750.46 3,377.00 18,676.43 1,263,911.59 4,578.89

$12,020.19 4,178,750.94 1,769,171.23
54,991.92 343,243.60
33,779.81 1,689,882.09
64,274.37

Total Expenses

$35,199,043.56

$972,673.83

$166,246.75

$10,797,062.17

$5,045,757.20

$8,146,114.15

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses

Plant Operations & Maintenance

Functional Classification FY2005

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

$0.00 3,859,582.29 1,217,776.58 (2,081,717.14)
12,504.63
2,539,334.24 1,874,414.46
114,539.00

$0.00 1,164,026.94

$10,135.00 3,101,513.90 737,956.70 2,081,717.14
71,704.50 782,178.89 257,625.78 9,333,161.01 984,204.36

$0.00 2,618,026.75

$7,536,434.06

$1,164,026.94

$17,360,197.28

$2,618,026.75

Total Exp en s es
$23,182,577.80 23,734,930.18 12,260,829.19 0.00 845,584.26 2,318,113.09 2,971,140.48 18,973,861.61 4,718,546.08
$89,005,582.69

University of West Georgia Annual Financial Report FY 2005 33

Note 16. Component Units
University of West Georgia Foundation
University of West Georgia Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of University of West Georgia (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 consists of approximately forty 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 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. 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.
In accordance with GASB 14, there was a receivable due from the University to the Foundation in the amount of $2,144. Due to the different fiscal years this transaction was not listed as a payable by the University.
During the year ended December 31, 2004, the Foundation distributed $1,077,504.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Development and Alumni Services at 1901 Maple Street Carrollton Georgia 30118.
Investments for Component Units:
University of West Georgia Foundation, Inc. holds endowment investments in the amount of $12,664,768 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. University of West Georgia Foundation, in conjunction with the donors, has established a spending plan whereby up to 5% of the adjusted corpus balance at year end may be used for academic scholarships. The remaining 95% of the earnings are set aside as a reserve.
University of West Georgia Foundation, Inc. also holds investments in real property valued at $17,238,148.
University of West Georgia Annual Financial Report FY 2005 34

Investments are comprised of the following amounts at December 31, 2004:

Cost

Fair Value

Cash held by investment organization Short Term Investments Stocks and options Fixed income securities Managed Futures Mutual Funds Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$375,944.00 18,684,928.00
7,079,417.00 3,319,006.00
200,000.00 5,109.00

$375,944.00 18,684,928.00
8,721,878.00 3,308,193.00
253,644.00 5,109.00

Total Investments

$29,664,404.00

$31,349,696.00

Long Term Liabilities for Component Units:
Student Housing Bonds have been issued by the University of West Georgia foundation, Inc. to finance student housing on university property. The bonds are secured by pledges of gross receipts from student housing at the University of West Georgia.
Series 2003 bonds were issued on June 30, 2003 for $13,205,000 to fund the construction of Phase 1. These bonds are variable rate bonds whose rate is the Weekly Swap Index published by the Bond Market Association, adjusted weekly, with a cap of 12.0%. The current rate is 2.09%. The fixed bond rate for the project would have been approximately 6.5%; therefore, 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.
Series 2004A bonds were issued on October 1, 2004 in the amount of $19,275,000 to fund the construction of Phase II. The bonds bear interest at rates ranging from 3.0% to 5.0%.
Series 2004B bonds were issued on October 1, 2004 in the amount of $180,000 to assist in the construction of Phase II. The bonds bear interest at a rate of 3.4%.

University of West Georgia Annual Financial Report FY 2005 35

Changes in long-term liabilities for the calendar year ended December 31, 2004 are shown below:

Mortage Payable (Brookwood) Series 2003 Bonds Bond Premium Series 2004A Bonds Series 2004B Bonds

Beginning Balance
January 1, 2004 $0.00
13,205,000.00

Additions Reductions

$5,700,000.00

$0.00

363,667.00 19,175,000.00
180,000.00

Ending Balance
December 31, 2004 $5,700,000.00 13,205,000.00 363,667.00 19,175,000.00 180,000.00

Amounts due within
One Year
$0.00 405,791.00
0.00 779,631.00
5,610.00

Total Long Term Debt

$13,205,000.00

$25,418,667.00

$0.00

$38,623,667.00

$1,191,032.00

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:

Year Ending
2005 2006 2007 2008 2009 through 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029

Series 2003 Bonds Payable

P r inc i pal

Interest

Total

$0 375,000 385,000 400,000 2,185,000 2,565,000 3,005,000 3,520,000 770,000
$13,205,000

$405,791 401,018 389,366 377,337
1,692,759 1,329,763
903,774 404,923
13,860
$5,918,591

$405,791 776,018 774,366 777,337
3,877,759 3,894,763 3,908,774 3,924,923
783,860
$19,123,591

Year Ending
2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029
UWG Real Estate Foundation:

Series 2004 A & B Bonds Payable

P r inc i pal

Interest

Total

$0
455,000 485,000 535,000 3,180,000 3,820,000 4,790,000 6,090,000

$785,241 856,626 856,626 842,256 827,706
3,822,730 3,178,806 2,208,375
900,883

$785,241 856,626
1,311,626 1,327,256 1,362,706 7,002,730 6,998,806 6,998,375 6,990,883

$19,355,000

$14,279,249

$33,634,249

University of West Georgia Annual Financial Report FY 2005 36

UWG Real Estate Foundation (Foundation) is a legally separate, tax-exempt component unit of the University of West Georgia (University). The Foundation constructs research and auxiliary buildings and facilities for use by the University and then leases the completed buildings to the University. The nine-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 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 the sole member of UWG Campus Center, LLC, a Georgia limited liability company, who holds title to all assets and associated conduit debt described herein in connection with the Campus Center construction project.

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. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.

Complete financial statements for the Foundation can be obtained from the Treasurer, Office of Business and Finance 1601 Maple Street, Carrollton, Georgia 30118.

Investments for Component Units:

UWG Real Estate Foundation holds investments in the amount of $26.3 million. Investments consist of money market funds and repurchase agreements as follows:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities FSA-Repurchase Agreement Maturity 11/1/06 FSA-Repurchase Agreement Maturity 8/1/05 AIG-Repurchase Agreement Real Estate Georgia Investment Pools
BOR Legal Fund BOR Balanced Income Fund BOR Total Return Fund

$127,669.00
24,117,452.00 925,387.00
1,142,106.00

$127,669.00
24,117,452.00 925,387.00
1,142,106.00

Total Investments

$26,312,614.00

$26,312,614.00

Long Term Liabilities for Component Units:
University of West Georgia Annual Financial Report FY 2005 37

Resident Instruction Bonds have been issued by the UWG Real Estate Foundation, Inc. to finance the Student Center facilities at the University of West Georgia. The bonds mature serially and are serviced by a pledge of a student fee and appropriations formerly used for square footage support. The interest rate can fluctuate between 3 and 5% over the term of the bonds.

Changes in long-term liabilities for the fiscal year ended June 30, 2005 are shown below:

Revenue Bonds Payable Real Estate Foundation Premium on Issue Student Center

Beginning Balance July 1, 2004

Additions

Reductions

Ending Balance June 30, 2005

Amounts due within
One Year

$0.00 0.00

$222,421.00 30,720,000.00

$4,569.00 0.00

$217,852.00 30,720,000.00

$7,476.00 0.00

Total Long Term Debt

$0.00

$30,942,421.00

$4,569.00

$30,937,852.00

$7,476.00

Annual debt service requirements to maturity for Student Center (Real Estate Foundation) revenue bonds payable are as follows:

Bonds Payable

Year Ending June 30:
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035

Principal
$0.00 0.00 360,000.00 390,000.00 425,000.00 2,735,000.00 3,965,000.00 5,770,000.00 8,045,000.00 9,030,000.00

Interest

Total

$1,665,440.00 1,427,520.00 1,422,120.00 1,410,383.00 1,395,545.00 6,703,887.00 6,067,480.00 4,970,326.00 3,169,007.00 1,082,283.00

$1,665,440.00 1,427,520.00 1,782,120.00 1,800,383.00 1,820,545.00 9,438,887.00 10,032,480.00 10,740,326.00 11,214,007.00 10,112,283.00

$30,720,000.00

$29,313,991.00

$60,033,991.00

University of West Georgia Annual Financial Report FY 2005 38

Annual debt service requirements to maturity for Student Center (Real Estate Foundation) revenue bonds premium on certificates payable are as follows:

Premium on Certificates Payable

Year Ending June 30:
2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2035

Premium

Total

$7,476.00 7,476.00 7,476.00 7,476.00 37,380.00 37,380.00 37,380.00 37,380.00 38,428.00

$7,476.00 7,476.00 7,476.00 7,476.00 37,380.00 37,380.00 37,380.00 37,380.00 38,428.00

$217,852.00

$217,852.00

University of West Georgia Annual Financial Report FY 2005 39