Annual financial report, fiscal year 2006

ANNUAL FINANCIAL REPORTS
Offices of Fiscal Affairs and Internal Audit For the Year Ended: June 30, 2006
Welcome to the CD version of the Fiscal Year 2006 Annual Financial Reports of the University System of Georgia.

Annual Financial Report (GAAP Basis)

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA
"Creating A More Educated Georgia" www.usg.edu

Annual Financial Report (Statutory Basis) PDF format requires the free AdobeAcrobat Reader

A Publication of the Offices of Fiscal Affairs and Internal Audit 2006 Board of Regents of the University System of Georgia

ANNUAL FINANCIAL REPORT (GAAP Basis) UNIVERSITY SYSTEM OF GEORGIA
For the Year Ended: June 30, 2006
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All reports are in PDF format and require the free AdobeAcrobat Reader

Consolidated Report (GAAP Basis)

Institution Reports (GAAP Basis)
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 Abraham Baldwin Agricultural College q Dalton State College q Gainesville State College q Georgia Gwinnett College q Gordon College q Macon State College q Middle Georgia College q Atlanta Metropolitan College q Bainbridge College q Coastal Georgia Community College q Darton College q East Georgia College q Georgia Highlands College q Georgia Perimeter College q South Georgia College q Waycross College q Skidaway Institute of Oceanography q University System Office

ANNUAL FINANCIAL REPORT (Statutory Basis) UNIVERSITY SYSTEM OF GEORGIA
For the Year Ended: June 30, 2006
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All reports are in PDF format and require the free AdobeAcrobat Reader

Consolidated Report (Statutory Basis)

Institution Reports (Statutory Basis)
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 Abraham Baldwin Agricultural College q Dalton State College q Gainesville State College q Georgia Gwinnett College q Gordon College q Macon State College q Middle Georgia College q Atlanta Metropolitan College q Bainbridge College q Coastal Georgia Community College q Darton College q East Georgia College q Georgia Highlands College q Georgia Perimeter College q South Georgia College q Waycross College q Skidaway Institute of Oceanography q University System Office

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA
ANNUAL FINANCIAL REPORTS
For the Year Ended
June 30, 2006
Offices of Fiscal Affairs and Internal Audit
"Creating A More Educated Georgia" www.usg.edu

Board of Regents of The University System of Georgia
Annual Financial Report June 30, 2006
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 (GAAP Basis)
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 .............................................................................................. 77 Note 12 Risk Management............................................................................................. 80 Note 13 Contingencies................................................................................................... 81 Note 14 Post Employment Benefits Other Than Pension Benefits................................ 81 Note 15 Natural Classifications with Functional Classifications .................................. 82 Note 16 Component Units ............................................................................................. 83
Financial Statements (Statutory Basis)
Balance Sheet (Non-GAAP Basis) ...................................................................................195 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) ...........................196

BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA
June 30, 2006

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
Felton Jenkins .............................Madison State-At-Large Term Expires January 1, 2013
Donald M. Leebern, Jr.....................Columbus State-At-Large Term Expires January 1, 2012
Doreen Stiles Poitevint ..................Bainbridge State-At-Large Term Expires January 1, 2011
W. Mansfield Jennings, Jr.............Hawkinsville First District Term Expires January 1, 2013
Julie Ewing Hunt ..............................Tifton Second District Term Expires January 1, 2013
Benjamin J. Tarbutton..................Sandersville Third District Term Expires January 1, 2013
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
Robert F. Hatcher..........................Macon Eighth District Term Expires January 1, 2013
Patrick S. Pittard .........................Lamont Ninth District Term Expires January 1, 2008
James R. Jolly...............................Dalton Tenth District Term Expires January 1, 2008
Willis J. Potts ...............................Rome Eleventh District Term Expires January 1, 2013
J. Timothy Shelnut ......................Augusta Twelfth District Term Expires January 1, 2007
Allan Vigil ...........................McDonough Thirteenth District Term Expires January 1, 2010

OFFICERS OF THE BOARD OF REGENTS

J. Timothy Shelnut........................Chairman Patrick S. Pittard .................. Vice Chairman Erroll B. Davis, Jr. ......................Chancellor

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

Annual Financial Report FY2006 1

OFFICE OF BUSINESS AND FISCAL AFFAIRS OFFICE OF INTERNAL AUDIT 270 WASHINGTON STREET, S.W. ATLANTA, GEORGIA 30334

December 15, 2006

404-656-2232 404-656-2237

Chancellor Erroll B. Davis, Jr. Board of Regents University System of Georgia
Dear Chancellor Davis:
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, 2006.
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 Chief Audit Officer and Associate Vice Chancellor

"Creating A More Educated Georgia" www.usg.edu
Annual Financial Report FY2006 2

UNIVERSITY SYSTEM OF GEORGIA
Annual Financial Report FY2006 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
Abraham Baldwin Agricultural College .............................................................................................. Tifton Dalton State College ........................................................................................................................... Dalton Gainesville State College.............................................................................................................Gainesville Georgia Gwinnett College ...................................................................................................... Lawrenceville Gordon College............................................................................................................................Barnesville Macon State College...........................................................................................................................Macon Middle Georgia College................................................................................................................... Cochran
TWO-YEAR COLLEGES
Atlanta Metropolitan College ............................................................................................................ Atlanta Bainbridge College ...................................................................................................................... Bainbridge Coastal Georgia Community College ...........................................................................................Brunswick Darton College................................................................................................................................... Albany East Georgia College .................................................................................................................. Swainsboro Georgia Highlands College.................................................................................................................. Rome Georgia Perimeter College................................................................................................................ Decatur South Georgia College......................................................................................................................Douglas Waycross College .......................................................................................................................... Waycross
INDEPENDENT RESEARCH UNIT
Skidaway Institute of Oceanography ............................................................................................. Savannah
Annual Financial Report FY2006 4

STATE RESOURCES
The General Appropriations Act of 2006, as amended, provided a total of $1,802,771,336 to the University System of Georgia. In addition, House Bill 85 provided $16,232,554 from Tobacco funds. The amounts were as follows:

STATE APPROPRIATIONS AVAILABLE General Appropriations Act of 2006 House Bill 85
General State Funds Tobacco funds House Bill 1026 General State Funds
TOTAL STATE APPROPRIATIONS AVAILABLE
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
TOTAL ALLOCATIONS BY BOARD OF REGENTS

$1,796,565,144 16,232,554
6,206,192

$1,819,003,890

$12,383,357 33,853,330 767,598 2,896,734 16,958,649 35,901,229 21,962,489

$1,521,783,521 131,033,154 16,232,554
124,723,386 25,231,275

1,819,003,890

$1,819,003,890

Annual Financial Report FY2006 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 35 institutions in the University System were led by Chancellor Erroll B. Davis Jr. and the Board of Regents at June 30, 2006. The University System continues to thrive as shown by the following statistics:
Students- StudentsFaculty Headcount FTE

FY2006 FY2005 FY2004

10,061* 9,335 8,981

253,552 250,659 247,020

218,617 214,863 210,180

* Unofficial: Final number not available at report date

Overview of the Financial Statements and Financial Analysis

The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2006. These consolidated statements contain information from the 35 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 fiscal 2005 and 2006.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University System as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and

Annual Financial Report FY2006 6

non-current), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed
Assets: Current Assets Capital Assets, net Other Assets Total Assets

June 30, 2006
$1,009,710,744.01 4,588,411,513.20 186,508,292.40 5,784,630,549.61

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

Liabilities: Current Liabilities Noncurrent Liabilities Total Liabilities

517,527,417.58 890,816,145.57 1,408,343,563.15

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

Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets

3,756,425,368.25 116,812,688.73 203,025,824.32 19,248,500.76 280,774,604.40
$4,376,286,986.46

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

The total assets of the institution increased by approximately $353.6 million. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $291.6 million of Capital Assets, net of accumulated depreciation and $33.7 million in Cash and Investments.
The total liabilities for the year increased by approximately $176.6 million. The primary component of this increase was an increase of $158.7 million in lease purchase obligations. The combination of the increase in total assets of $353.6 million and the increase in total liabilities of $176.6 million yielded a net increase in total net assets of $177.0 million. The increase in total

Annual Financial Report FY2006 7

net assets is primarily in the category of Invested in Capital Assets, net of related debt in the amount of $139.1 million.

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, 2006

June 30, 2005

Op erating Revenues Op erating Exp enses Op erating Loss

$2,666,117,984.00 4,591,770,541.22 (1,925,652,557.22)

$2,467,384,789.61 4,306,001,630.19 (1,838,616,840.58)

Nonop erating Revenues and Exp enses Income (Loss) Before other revenues, expenses, gains or losses

1,913,241,920.28 (12,410,636.94)

1,788,577,591.48 (50,039,249.10)

Other revenues, expenses, gains, losses and transfers Increase in Net Assets

189,378,834.17 176,968,197.23

301,253,507.11 251,214,258.01

Net Assets at beginning of y ear, as originally rep orted Prior Year Adjustments Net Assets at beginning of y ear, restated

4,199,305,635.15 13,154.08
4,199,318,789.23

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

Net Assets at End of Year

$4,376,286,986.46

$4,199,305,635.15

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 FY2006 8

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005

Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Other
Total Operating Revenue

June 30, 2006
$778,546,436.13 15,764,280.64
1,241,458,814.90 105,560,471.24 445,156,678.77 79,631,302.32
2,666,117,984.00

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other
Total Nonoperating Revenue

1,817,258,595.16 76,184,807.75 37,490,127.67 38,830,965.09 (12,612,265.36)
1,957,152,230.31

Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants

149,618,883.54 39,712,338.52
189,331,222.06

Special Item Transfers

47,612.11

Total Revenues

$4,812,649,048.48

Expenses (By Functional Classification)

For the Years Ended June 30, 2006 and June 30, 2005

June 30, 2006

Operating Expenses

Instruction

$1,136,097,589.26

Research

699,292,561.63

Public Service

385,137,831.91

Academic Support

338,041,955.37

Student Services

174,407,247.85

Institutional Support

693,500,531.66

Plant Operations and M aintenance

382,900,429.39

Scholarships and Fellowships

143,900,127.24

Auxiliary Enterprises

388,780,429.19

Unallocated Expenses

74,498,186.62

Patient Care (M CG only)

175,213,651.10

Total Operating Expenses

4,591,770,541.22

Nonoperating Expenses Interest Expense (Capital Assets)

43,910,310.03

Total Expenses

$4,635,680,851.25

June 30, 2005
$695,664,180.31 11,537,500.71
1,200,286,629.66 99,710,783.84
389,889,281.21 70,296,413.88
2,467,384,789.61
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
0.00
$4,592,589,582.64
June 20, 2005
$988,427,311.48 703,361,893.13 381,049,885.70 325,414,901.69 173,525,170.80 638,303,116.65 350,471,825.78 143,593,840.78 363,884,476.61 65,781,126.24 172,188,081.33
4,306,001,630.19
35,373,694.44
$4,341,375,324.63

Annual Financial Report FY2006 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, 2006 and 2005, 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, 2006
($1,679,012,680.53) 1,926,902,736.95 (244,102,911.87) 48,687,350.63 52,474,495.18 540,669,329.30

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

Cash, End of Year

$593,143,824.48

$540,669,329.30

Capital Assets
The University System of Georgia had many significant capital asset additions and renovations during fiscal 2006 including the following:
Georgia Institute of Technology: The most significant capital addition for fiscal 2006 was the purchase of land and buildings in Midtown Atlanta for $14.2 million.
Georgia State University: Additions in fiscal year 2006 included a $13.6 million land donation that will be used for future student housing.
Medical College of Georgia: Numerous projects were completed during the fiscal year totaling $28.9 million. Medical College of Georgia also completed the Cancer Research Center and the Satellite Energy Plant in fiscal year 2006. A total of $15.3 million for these projects was funded by Georgia State Financing and Investment Commission (GSFIC).
University of Georgia: In fiscal year 2006, the University opened the Paul D. Coverdell Center for Biomedical and Health Sciences, an interdisciplinary research facility housing a range of disciplines from disease and immunology to mathematics, engineering, and other areas of biomedical research. The University also opened the Tifton Campus Conference Center
Annual Financial Report FY2006 10

featuring a 2000 seat auditorium, exhibit space, banquet and reception facilities, and a business center. Other capital improvements made during fiscal year 2006 include improvements to the scoreboards at Sanford Stadium and Foley Field, renovations at the University of Georgia Center for Continuing Education, and improvements to the Boyd Data Center. Capital asset additions during fiscal year 2006 totaled $93.7 million.
Georgia Southern University: Capital assets, net, increased $31.3 million. The increase is primarily due to the addition of four capital leases with the GSU Housing Foundation, Inc. of a new residence hall and three capital renovations of Athletic facilities.
Valdosta State University: The Lowndes Hall renovation was completed and opened during the fiscal year ($7.2 million).
Augusta State University: The University Village student housing complex and the new Jaguar Student Activities Center were placed into service during the fiscal year ($32 million).
Georgia Southwestern State University: Construction of the Student Success Center was completed and placed into service early in fiscal year 2006 ($20.2 million).
Kennesaw State University: Kennesaw State University had $26.2 in capital asset additions in fiscal year 2006 of which $17.4 million was funded by GSFIC, primarily for construction in progress on the Social Science Building. Kennesaw State University also entered into two new capital leases with their Foundation. The leases added $5.8 million to capital assets for the Towne Pointe unimproved land and improved land and building.
Southern Polytechnic State University: Four residence halls totaling $33.8 million were added due to the reorganization of the housing operations.
Dalton State College: The construction of the new continuing education center continued during the fiscal year and the building is slated to open in August 2006. Costs related to the new facility totaled nearly $5.3 million, which included construction, equipment and furnishings.
Georgia Highlands College: The new Cartersville Campus was completed and opened in August 2005 ($18.2 million).
Georgia Perimeter College: $6 million in capital additions were for the renovation of the B Building on the Dunwoody Campus, and ongoing construction of the Student Center on the Clarkston Campus.
Long-Term Debt and Liabilities
The University System of Georgia had Long-Term Debts and Liabilities of $985,288,216.52, excluding related party liabilities and deferred revenue, of which $109,454,570.95 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt, see notes 1, 8 and 10 in the Notes to the Financial Statements.
Annual Financial Report FY2006 11

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 fiscal 2006. 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. Fourteen of the foundations were also included as component units of the State of Georgia in the State Comprehensive Annual Financial Report (CAFR) for fiscal 2006.
The 54 component units had combined total assets of $5.5 billion and total liabilities of $2.8 billion at June 30, 2006. The assets included $2.4 billion in investments and $1.4 billion in capital assets. The liabilities included $2.3 billion in long-term liabilities. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.
Economic Outlook
With significant increases in state appropriations during the last two years, the University System of Georgia financial picture appears to be improving significantly. FY 2007 state appropriations for current University System of Georgia operations, including institutions and other organized activities, were $1.9 billion, an increase of 6.6%, or $120.1 million, over fiscal year 2006 appropriations. Additionally, the University System of Georgia received $310 million in general obligation bond funding for capital facilities, about 27.5% of all bond funding recommended for state government, a high water mark in capital funding in comparison to recent years. 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.
The implementation of the new guaranteed tuition policy which fixes tuition rates for all students for four years may affect revenues going forward, although the impact of this may be mitigated by establishing such rates at levels higher than had been approved in the past. Tuition rate increases under this new program ranged from 4% at the two year colleges to 7% at the University System's research universities. Total funds generated for the University System of Georgia, including all fund sources, now exceed $5.3 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, although several institutions are seeing a strong enrollment demand. 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 FY2006 12

Statement of Net Assets
UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006
AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance M argin Allocation Funds Receivables - Other Due from Comp onent Units Inventories (note 4) Prep aid Items Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent p ortion) Due from Comp onent Units Investments (including real estate) Notes Receivable, net Cap ital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue (note 7) Other Liabilities Dep osits Held for Other Organizations Lease Purchase Obligations (current p ortion) Comp ensated Absences (current p ortion) US DOE Settlement (current p ortion) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities (note 8) Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Comp ensated Absences (noncurrent) US DOE Settlement (noncurrent) Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

Un i ve rsi ty S yste m of Ge orgi a (Pri mary
Gove rn m e n t)
$578,103,042.65 109,572,740.30
51,792,044.16 9,222,551.00
110,878,663.65 82,869,006.09 19,749,673.11 47,492,160.59 30,862.46
1,009,710,744.01
15,040,781.83 3,441,996.62 2,336,437.00
123,207,539.93 42,481,537.02
4,588,411,513.20
4,774,919,805.60 5,784,630,549.61
74,147,817.13 12,938,164.33 28,191,556.29
7,158,726.08 31,456,435.74 183,994,363.45
8,442,489.86 60,894,308.50 24,993,937.99 83,845,304.90
499,999.92 848,985.25 115,328.14 517,527,417.58
810,438,825.72 7,107,500.00
62,243,343.77 711,885.14
7,875,000.00 2,439,590.94 890,816,145.57 1,408,343,563.15
3,756,425,368.25
116,812,688.73 203,025,824.32
19,248,500.76 280,774,604.40
$4,376,286,986.46

Annual Financial Report FY2006 13

Statement of Net Assets, Continued

UNIVERSITY S YS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Ge orgi a Te ch Fou n dati on , In c.

Component Units
Ge orgi a Te ch Ath l e ti c
Associ ati on

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$21,778,000.00
336,000.00 14,769.00
3,665,388.98 2,538,210.68
1,319,000.00 29,651,368.66
1,111,949,000.00 171,743,611.02 17,264,789.32 40,873,000.00 19,110,000.00
1,360,940,400.34 1,390,591,769.00
2,831,268.48
2,065,069.95 980,932.05
3,627,026.77
282,569.67 4,385,000.00
419,000.02 44,220,000.00 58,810,866.94
36,549,350.43 211,871,000.00
8,617,320.65 77,787,230.98 334,824,902.06 393,635,769.00
1,758,992.47 317,986,910.75 311,663,881.45
14,779,719.66 350,766,495.67 $996,956,000.00

$3,915,819.00 2,081,233.00 3,168,525.00
826,824.00 9,992,401.00
68,152,231.00
8,080,013.00 102,228,086.00
2,612,811.00 181,073,141.00 191,065,542.00
2,426,836.00
9,125,964.00 2,494,100.00
938,994.00 1,830,000.00
25,480.00 16,841,374.00
106,131,507.00
962,734.00 107,094,241.00 123,935,615.00
(3,195,249.00) 13,669,608.00 46,948,959.00
9,706,609.00 $67,129,927.00

Ge orgi a Te ch Re se arch
C orporati on
$40,022,629.00 29,020,309.00
400,904.00 33,064,745.00 102,508,587.00
959,595.00
1,849,313.00 2,808,908.00 105,317,495.00 1,642,013.00
30,750,187.00 37,512,894.00
69,905,094.00
0.00 69,905,094.00
1,849,313.00
33,563,088.00 $35,412,401.00

Annual Financial Report FY2006 14

Statement of Net Assets, Continued

UNIVERSITY S YS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Ge orgia Advan ce d Te ch n ol ogy Ve n tu re s, In c.

Component Units
Ge orgi a Te ch Faci l i ti e s, In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects U nrest rict ed
TOTAL NET AS S ETS

$1,355,770.00 950,198.00

$375,000.00
851,000.00 419,000.02 2,295,000.00

57,985.00 2,363,953.00

6,006,000.00
1,231,000.00 11,177,000.02

1,000,000.00

9,634,999.98 188,523,000.00

77,748,125.00
78,748,125.00 81,112,078.00

69,484,000.00 5,122,000.00
272,763,999.98 283,941,000.00

879,704.00

7,294,000.00

332,711.00 75,520.00
123,724.00
4,383,096.00 5,794,755.00 50,613,331.00

119,000.00 242,000.00
2,550,000.00
10,205,000.00
9,492,000.00 50,404,000.00 210,125,000.00

6,324,344.00 56,937,675.00 62,732,430.00
17,408,740.00
862,745.00 108,163.00 $18,379,648.00

270,021,000.00 280,226,000.00
41,004,268.26
11,854,000.00 (49,143,268.26) $3,715,000.00

Ge orgi a Te ch Al u m n i
Associ ati on
$263,827.00 112,018.00
2,642.00 8,443.00 386,930.00
628,023.00
511,945.00 1,139,968.00 1,526,898.00
264,348.00
310,000.00 6,587.00
162,382.00 14,769.00
758,086.00
0.00 758,086.00 511,945.00
256,867.00 $768,812.00

Annual Financial Report FY2006 15

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Ge orgia State Uni ve rsi ty
Fou n dati on , In c.

Component Units
Ge orgia State Un i ve rsi ty Re se arch
Fou n dati on, In c.

MC G He al th , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$20,430,398.00 152,856.00
9,782,262.00
124,449.00 30,489,965.00 115,482,909.00 108,656,231.00

$5,296,043.00 6,011,570.00

$60,202,156.00 20,678,381.00
81,796,399.00 53,012.00

60,223.00 4,402,019.00
15,769,855.00

5,983,540.00
831,804.00 169,545,292.00

5,619,165.00

56,821,054.00

4,062,203.00 102,617,490.00
5,155,556.00 335,974,389.00 366,464,354.00

5,116,506.00
10,735,671.00 26,505,526.00

65,118,333.00 526,171.00
122,465,558.00 292,010,850.00

10,517,644.09

19,957.00

9,933,342.00 4,604,529.00

349,191.91 686,221.00
19,101.00 1,550,000.00
13,122,158.00
9,722,456.00 864,510.00
192,636,673.00 249,819.00
5,197,804.00
208,671,262.00 221,793,420.00
17,498,892.00 65,098,919.00 52,938,451.00
9,134,672.00 $144,670,934.00

3,914,328.00 6,187,660.00
10,121,945.00

2,139,000.00
11,991,044.00 2,353,836.00
15,543,000.00 9,731,260.00
134,474.00
56,430,485.00
6,278,650.00

0.00 10,121,945.00
5,116,506.00 2,000,000.00
475,225.00 8,791,850.00 $16,383,581.00

6,416,000.00 12,694,650.00 69,125,135.00 56,485,847.00
166,399,868.00 $222,885,715.00

Annual Financial Report FY2006 16

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Me di cal C ol l e ge of Ge orgi a
Fou ndati on , Inc.

Component Units
Me di cal C ol l e ge of Ge orgia PPG
Foun dati on

Me di cal C ol l e ge of Ge orgi a Re se arch
Insti tu te , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unres t rict ed
TOTAL NET AS S ETS

$16,334,609.00
187,036.00 56,572.00
16,578,217.00

$18,100,759.00 24,838,093.00 344,139.00 134,474.00 2,175,624.00
143,158.00
45,736,247.00

$5,677,198.00 4,294,187.00
9,971,385.00

109,917,975.00 116,256.00

17,562,055.00 62,005,284.00

4,124,798.00 292,873.00
114,451,902.00 131,030,119.00

4,322,749.00 1,812,327.00 85,702,415.00 131,438,662.00

3,342,224.00

941,973.00 2,063,957.00
454,406.00

12,614.00
22,463.00 35,077.00 10,006,462.00
48,583.00
6,000.00 7,755.00 4,892,910.00

0.00

53,012.00 650,000.00 7,505,572.00

2,291,825.00
2,291,825.00 2,291,825.00
4,124,798.00 101,162,885.00
15,419,645.00 8,030,966.00
$128,738,294.00

34,786,702.00
505,990.00 32,699,307.00 67,991,999.00 75,497,571.00
4,322,749.00
51,618,342.00 $55,941,091.00

4,955,248.00
0.00 4,955,248.00
22,463.00 5,028,751.00 $5,051,214.00

Annual Financial Report FY2006 17

Statement of Net Assets, Continued

UNIVERS ITY SYS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Me di cal C ol l e ge of Ge orgi a De n tal Fou n dati on

Component Units
Uni ve rsi ty of Ge orgia
Foun dati on

Un i ve rsi ty of Ge orgi a Athl e ti c Associ ati on , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$62,914.00 3,614,810.00
14,487.00
606,030.00 78,888.00
4,377,129.00

$7,111,948.00 41,161,597.00
2,866,669.00
2,487,755.00
344,481.00 1,558,945.00 55,531,395.00
13,959,276.00
490,567,909.00 77,689.00

$46,922,660.00 2,968,262.00 2,555,872.00
194,709.00 52,641,503.00 28,533,612.00

0.00 4,377,129.00

18,155,595.00 186,536,958.00
4,818,887.00 714,116,314.00 769,647,709.00

170,478,357.00 1,420,090.00
200,432,059.00 253,073,562.00

4,244,055.00

4,439,189.00 700.00

4,244,055.00

710,616.00 768,702.00
26,883.00 3,365,000.00 2,555,872.00 1,148,762.00 13,015,724.00

0.00 4,244,055.00

187,150,024.00 11,291,219.00
13,201,584.00 211,642,827.00 224,658,551.00

133,074.00 $133,074.00

263,400,760.00 261,833,729.00
19,754,669.00 $544,989,158.00

6,665,855.00 2,639.00
16,929,225.00 500,000.00
1,676,546.00
1,955,009.00 80,289.00
27,809,563.00 2,336,437.00
97,559,991.00
2,750,438.00 87,112.00
102,733,978.00 130,543,541.00
68,145,556.00
28,533,612.00 25,850,853.00 $122,530,021.00

Annual Financial Report FY2006 18

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2006

Univers ity of Georgia Res earch Foundation,
Inc.

Component Uni ts
Georgia S outhern Univers ity Foundation,
Inc.

(Georgia S outhern Univers ity) S outhern
Boos ters , Inc.

ASSETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Component Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prepaid 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 Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS
LIAB ILITIES Curre nt Liabilitie s Accounts Payable Salaries Payable Benefits P ayable Contracts Payable Deposits Deferred Revenue Other Liabilities Deposits Held for Other Organizations Due to P rimary Government Lease Purchase Obligations (current portion) Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) Revenue/M ortgage Bonds payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurre nt Liabilitie s Due to P rimary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Deposits Liabilities under Split Interest Agreements Other Long-Term Liabilities Due to Component Units Notes and Loans Payable (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

$3,679,515.00 20,352,451.00
469,278.00 81,390.00
14,239,464.00 38,822,098.00
7,875,000.00 36,312,418.00
561,076.00 497,425.00 45,245,919.00 84,068,017.00
9,623,271.48
14,239,464.00 3,780,816.00
20,064,704.52

$125,069.00 38,169,066.00
50,628.00
842,929.00

$1,259,737.00 565,764.00 400,481.00

39,187,692.00

2,225,982.00

707,406.00
3,401,429.00 421,416.00 103,294.00
4,633,545.00 43,821,237.00
217,907.40
2,325,006.00 17,037.60

690,657.00 1,074,219.00 1,764,876.00 3,990,858.00
18,413.78
59,600.00 31,043.22

47,708,256.00 7,876,730.00
7,876,730.00 55,584,986.00
561,076.00
27,921,955.00 $28,483,031.00

2,559,951.00

417,468.00 526,525.00

844,936.00 844,936.00 3,404,887.00
421,416.00 25,920,651.00 11,924,588.00
2,149,695.00 $40,416,350.00

212,836.00 212,836.00 739,361.00
673,497.00
1,307,463.00 884,035.00 386,502.00
$3,251,497.00

Annual Financial Report FY2006 19

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Ge orgi a Southe rn Un i ve rsi ty Hou si ng
Foundati on, Inc.

Component Units
Ge orgia Southe rn Uni ve rsi ty Re se arch
an d S e rvi ce Foundati on, Inc.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Component Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Estimated Third-Party Payor Settlements Compensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrestricted
TOTAL NET AS S ETS

$418,701.00 3,994,735.00 1,601,531.00
2,171.00 6,017,138.00 24,412,749.00
844,936.00
64,434,914.00 63,753,628.00 27,043,744.00 180,489,971.00 186,507,109.00
3,554,721.00
3,994,735.00
1,785,000.00 9,334,456.00
63,698,591.00 112,495,000.00
176,193,591.00 185,528,047.00
1,459,257.00 (480,195.00) $979,062.00

$1,119,221.00 1,337,888.00 3,725.58 103,380.00 2,564,214.58
0.00 2,564,214.58
1,326.00 825,968.60 1,206,119.98
2,033,414.58
0.00 2,033,414.58
530,800.00 $530,800.00

Val dosta S tate Uni ve rsi ty Foundati on
$4,288,687.00
50,000.00 247,965.00
14,132.00
4,600,784.00
7,238,266.00
17,815,329.00
134,749.00 34,165,199.00
1,209,501.00 60,563,044.00 65,163,828.00
1,551,149.00
107,520.00 98,297.00
395,061.00 913,719.00 3,065,746.00
38,095,457.00 430,303.00
349,862.00 38,875,622.00 41,941,368.00
2,069,098.00 16,712,991.00
1,604,390.00 517,675.00
2,318,306.00 $23,222,460.00

Annual Financial Report FY2006 20

Statement of Net Assets, Continued

UNIVERS ITY S YS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Al ban y S tate Un i ve rsi ty
Foun dati on, Inc.

Component Units
Arm s tro n g Atl anti c State
Un i ve rsi ty Fou n dati on , In c.

AAS U Edu cati on al Prope rti e s
Fou ndati on , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrestricted
TOTAL NET AS S ETS

$901,031.00 17,638.00
80,000.00 239,264.00 1,237,933.00 18,081,773.00 2,160,280.00
32,745,349.00 1,206,601.00
54,194,003.00 55,431,936.00
7,190,436.00
1,124,103.00

$630,445.00 764,538.00 75,769.00
1,470,752.00
4,265,101.00

$331,650.00 29,823.00
15,361.00 1,504,710.00 1,881,544.00 11,006,218.00

14,434.00 4,279,535.00 5,750,287.00
13,000.00

28,672,571.00 39,678,789.00 41,560,333.00
622,979.00
26,226.00

83,192.00 8,397,731.00

13,000.00

977,619.00 1,626,824.00

34,320,000.00
658,805.00 2,309,786.00 37,288,591.00 45,686,322.00
5,107,867.00
2,734,700.00 1,276,805.00
626,242.00 $9,745,614.00

42,821,801.00

0.00 13,000.00
3,877,927.00 1,803,635.00
55,725.00 $5,737,287.00

42,821,801.00 44,448,625.00 (2,615,921.00)
(272,371.00) ($2,888,292.00)

Annual Financial Report FY2006 21

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Au gu sta S tate Uni ve rsi ty
Fou n dati on , In c.

Component Units
Augusta State Un i ve rsi ty Athl e tic Foun dati on

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$2,287,894.00
18,475.00 1,774,739.00
57,333.00
142,000.00 4,280,441.00
5,660,643.00
15,108,849.00 1,402,695.00
61,462,924.00
673,444.00 858,860.00 85,167,415.00 89,447,856.00
682,641.89
1,637,308.00 2,350,803.00
143.11
85,000.00 142,000.00 4,897,896.00
29,055,722.00 30,767,518.00
1,402,695.00 61,225,935.00 66,123,831.00
12,902,730.00 1,110,142.00 4,681,228.00 4,629,925.00
$23,324,025.00

$240,613.00 10,587.00
6,511.00 257,711.00
2,058,622.00 2,058,622.00 2,316,333.00
183,682.00 6,854.00 7,446.00
20,500.00 26,060.00
150,456.00 394,998.00
47,754.00
1,424,267.00 1,472,021.00 1,867,019.00
410,085.00
39,229.00 $449,314.00

W al te r & Emi l i e S pi ve y
Fou n dati on $66,465.06
24,892.08 91,357.14 7,352,183.30 10,769.46 7,362,952.76 7,454,309.90
0.00
0.00 0.00 10,769.46 7,443,540.44 $7,454,309.90

Annual Financial Report FY2006 22

Statement of Net Assets, Continued
UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2006

Component Uni ts

Clayton S tate Univers ity Foundation,
Inc.

Columbus S tate Univers ity Foundation,
Inc.

(Columbus S tate Univers ity) Foundation
Properties , Inc.

ASSETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Component Units Leases Receivable Pledges Receivable Contributions Receivable Due From P rimary Government Inventories Prepaid Items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurre nt As s e ts Noncurrent Cash Short-Term Investments (noncurrent portion) Due from Component Units Due from P rimary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Capital Assets, net 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 Other Liabilities Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Estimated Third-P arty Payor Settlements Compensated Absences (current portion) Revenue/M ortgage Bonds payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurre nt Liabilitie s Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Deposits Liabilities under Split Interest Agreements Other Long-Term Liabilities Due to Component Units Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIAB ILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital P rojects Unrestricted
TOTAL NET ASSETS

$576,546.00
76,154.00
2,745.00 10,040.00 665,485.00

$5,700,585.00
72,430.00 2,390,285.00 12,091,516.00
731.72 13,287.50 150,930.78 20,419,766.00

$2,647,126.00 187,188.00
365,462.00 3,199,776.00

4,179,204.00

28,114,178.00

6,149,745.00

4,179,204.00 4,844,689.00
18,970.00

23,208,664.00 51,322,842.00 71,742,608.00
217,806.00

69,817,981.00 592,270.00
76,559,996.00 79,759,772.00
2,400,035.00

866.00 19,836.00

14,132.00 20,996,341.00
13,825.00 21,242,104.00

9,331,689.00
870,450.00 2,390,285.00 4,584,895.00 19,577,354.00

0.00 19,836.00
1,396,455.00 3,343,478.00
84,920.00 $4,824,853.00

1,208,920.00
1,208,920.00 22,451,024.00
25,365,577.00 11,941,073.00
9,128,130.00 2,856,804.00 $49,291,584.00

41,472,250.00 52,424.00
41,524,674.00 61,102,028.00 22,890,386.00
(4,232,642.00) $18,657,744.00

Annual Financial Report FY2006 23

Statement of Net Assets, Continued

UNIVERS ITY S YS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

C ol u m bu s S tate Un i ve rsi ty
Ath l e ti c Fu n d, In c.

Component Units
C ol u m bu s S tate Un i ve rsi ty Al u mn i
Associ ati on , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrestricted
TOTAL NET AS S ETS

$458,051.00 41,752.00 6,965.00 26,763.00 3,745.00 2,083.00
539,359.00
1,386,343.00
60,808.00 354.00
1,447,505.00 1,986,864.00
59,242.00
33,564.00 18,756.00

$106,453.00 7,830.00 117.00 6,860.00 1,260.00
229.00 122,749.00
116,590.00
3,804.00 120,394.00 243,143.00
7,424.00
4,940.00 13,795.00

111,562.00

26,159.00

0.00 111,562.00
354.00 1,269,915.00
645,791.00 (40,758.00) $1,875,302.00

0.00 26,159.00
3,804.00 82,416.00 97,093.00 33,671.00 $216,984.00

Ge orgi a C ol le ge & State
Un i ve rsi ty Fou n dati on , In c.
$828,375.00
616,020.00 43,746.89 1,500.00 55,508.00
1,545,149.89 13,930,224.00
9,637,437.00
82,320,422.00 2,303,154.00
108,191,237.00 109,736,386.89
1,681,354.50
63,373.00 531,754.39
275,000.00 450,000.00 3,001,481.89
95,782,000.00
95,782,000.00 98,783,481.89
2,043,823.00 8,626,413.00 1,892,819.00 (1,610,150.00) $10,952,905.00

Annual Financial Report FY2006 24

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF G EORG IA STATEMENT OF NET ASSETS June 30, 2006

Georgia College & S tate Univers ity
Alumni As s ociation, Inc.

Component Uni ts
Ge or g i a S outhwes tern Foundation, Inc.

Georgia S outhwes tern Res earch and
Development Corp., Inc.

ASSETS Curre nt As s e ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Component Units Leases Receivable P ledges Receivable Contributions Receivable Due From P rimary Government Inve ntorie s 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 Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable P ledges Receivable Capital Assets, net 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 Other Liabilities Deposits Held for Other Organizations Due to P rimary Government Lease P urchase Obligations (current portion) Estimated Third-P arty P ayor Settlements Compensated Absences (current portion) Revenue/M ortgage Bonds payable (current) Due to Component Units Notes and Loans P ayable (current portion) Total Current Liabilities Noncurre nt Liabilitie s Due to P rimary Government Lease P urchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) D e pos its Liabilities under Split Interest Agreements Other Long-Term Liabilities Due to Component Units 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

$188,168.00
8,111.00 1,748.00 4,500.00 202,527.00
5,207,824.00

$1,670,561.00 143,694.00 341,527.00 16,570.00
2,172,352.00 2,257,401.16 37,020,254.19

91,716.00
5,299,540.00 5,502,067.00

12,435,180.89 714,872.49
52,427,708.73 54,600,060.73
36,104.79
1,498,914.02

5,800.00

109,382.17

$0.00 52,000.00
52,000.00
300,900.00 300,900.00 352,900.00
47,337.00

5,800.00

1,644,400.98

27,233,913.75

0.00 5,800.00
91,716.00 4,185,898.00 1,086,401.00
132,252.00 $5,496,267.00

27,233,913.75 28,878,314.73
3,236,240.98
6,608,714.00 5,510,633.19
9,837.81 10,356,320.02 $25,721,746.00

47,337.00
0.00 47,337.00 300,900.00
4,663.00 $305,563.00

Annual Financial Report FY2006 25

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Ke n n e saw S tate Un i ve rsi ty
Fou n dati on , In c.

Component Units
North Ge orgi a C olle ge & State
Un i ve rsi ty Fou n dati on , In c.

Southe rn Pol yte chnic State
Un i ve rsi ty Fou n dati on , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$2,630,886.00
265,929.96 4,001,315.00
879,557.00 73,079.04
168,693.00 797,754.00 282,553.00 9,099,767.00
22,718,681.00
20,793,027.00 288,256.00
81,741,589.00
106,549,343.00 5,701,637.00
237,792,533.00 246,892,300.00

$543,967.00 272,187.00 1,117.00
78,466.00
895,737.00 1,810,586.00 17,199,185.00
146,756.00 7,969,418.00
555,900.00 27,681,845.00 28,577,582.00

5,519,606.97

368,280.15

104,965.00 3,529,742.00
553,707.03

125,237.00 41,767.00 52,115.00
454,932.85

3,868,157.00 13,576,178.00

100,000.00
1,147,382.00 2,289,714.00

37,103,925.00 181,909,104.00
243,896.00

10,600,000.00 24,940.00

219,256,925.00 232,833,103.00
(3,427,616.00)
12,337,676.00 5,026,603.00 73,803.00 48,731.00
$14,059,197.00

10,624,940.00 12,914,654.00
(419,798.00) 11,633,309.00
4,230,867.00 218,550.00
$15,662,928.00

$669,098.00 417,003.00
2,429,316.00 87,551.00
3,239.00 3,606,207.00 3,726,801.00 3,026,306.00 52,375,384.00
155,610.00 574,590.00 59,858,691.00 63,464,898.00
500,964.00
1,700,000.00 376,128.00
810,000.00 3,387,092.00
21,742,428.00 34,382,327.00
56,124,755.00 59,511,847.00
1,759,206.00 842,692.00
1,351,153.00 $3,953,051.00

Annual Financial Report FY2006 26

Statement of Net Assets, Continued

UNIVERSITY S YS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Un i ve rsi ty of W e st Ge orgi a Fou n dati on , In c.

Component Units
Un i ve rsi ty of W e st Ge orgi a Re al
Estate Fou n dati on , In c.

Abrah am Bal dwi n Agri cu l tu ral
C ol l e ge Fou n dati on , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$3,147,617.00 4,036,180.00 104,105.00 69,887.00
7,357,789.00

$7,267,306.00 162,889.58
43,127.42 7,961.00
7,481,284.00

13,605,710.00

$1,742,513.00 251,980.00 222,946.00
6,694.00 15,225.00 2,239,358.00 5,848,518.00 6,696,770.00

57,750.00 33,754,802.00
978,142.00 48,396,404.00 55,754,193.00
554,196.00

27,066,600.00 786,799.00
27,853,399.00 35,334,683.00
2,704,002.64

685,338.00 28,055,517.00
1,008,309.00 42,294,452.00 44,533,810.00
496,048.77

360,000.00 914,196.00

26,513.36 7,476.00
2,737,992.00

230,423.00
95,946.23
725,000.00 4,423.00
1,551,841.00

33,203,924.00

30,922,900.00

31,134,292.00

5,700,000.00 38,903,924.00 39,818,120.00
(4,530,980.00)
9,195,532.00 6,302,488.00
4,969,033.00 $15,936,073.00

30,922,900.00 33,660,892.00
(52,948.00)
2,513,538.00 3,024,029.00 (3,810,828.00) $1,673,791.00

4,244.00 31,138,536.00 32,690,377.00
3,053,052.00
6,836,009.00 3,671,347.00
(1,716,975.00) $11,843,433.00

Annual Financial Report FY2006 27

Statement of Net Assets, Continued

UNIVERS ITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Dalton State C ol l e ge
Foun dati on , In c.

Component Units
Gai n e svi l l e S tate C ol l e ge
Fou ndati on

Gordon C ol l e ge Fou ndati on

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$1,460,205.00

$0.00

$143,010.00 4,853,964.00

500,908.00 180,329.00 2,141,442.00
10,189,382.00

306,583.00
306,583.00 463,063.00 9,081,845.00

4,996,974.00 3,924,750.00

1,789,288.00 3,701,535.00
38,366.00 15,718,571.00 17,860,013.00
74,571.59
16,555.00
33,245.41
45,462.00 169,834.00

8,400.00 9,553,308.00 9,859,891.00
298,714.00

12,566,571.00 674,027.00
17,165,348.00 22,162,322.00

310,483.00

298,714.00

390,000.00
304,844.00 1,005,327.00

15,745,000.00

2,424,945.00 2,424,945.00 2,594,779.00
1,231,128.00
8,576,180.00 4,182,011.00
1,275,915.00 $15,265,234.00

0.00 298,714.00
8,400.00 2,764,214.00 5,787,353.00 1,001,210.00 $9,561,177.00

53,060.00 15,798,060.00 16,803,387.00
53,847.00
86,843.00
2,948,249.00 2,269,996.00 $5,358,935.00

Annual Financial Report FY2006 28

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Macon S tate C ol l e ge
Fou n dati on , In c.

Component Units
Mi ddl e Ge orgi a C ol l e ge
Fou n dati on, In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Payable Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$88,627.00 323,591.00

$144,300.00 300,000.00
66,500.00

412,218.00 6,452,102.00

510,800.00 20,412,196.00
638,718.00

726,964.00 7,179,066.00 7,591,284.00
59,528.00

10,281,800.00 662,867.00
31,995,581.00 32,506,381.00
4,509,599.00

1,000.00

59,528.00

4,510,599.00

26,850,000.00

0.00 59,528.00
6,227,788.00 801,572.00 502,396.00
$7,531,756.00

26,850,000.00 31,360,599.00
4,506,863.00
787,333.00 327,950.00
1,568.00 (4,477,932.00) $1,145,782.00

Bai n bri dge College
Fou n dati on $33,959.71 78,813.56
112,773.27
0.00 112,773.27
0.00
0.00 0.00 78,813.56 33,959.71 $112,773.27

Annual Financial Report FY2006 29

Statement of Net Assets, Continued

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

C oastal Ge orgia C om m u n i ty C ol l e ge
Fou n dati on , In c.

Component Units
Darton C ol le ge Fou n dati on

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Comp onent Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrestricted
TOTAL NET AS S ETS

$256,651.00
45,199.00 12,500.00 314,350.00
7,662,389.00
17,788.00 7,680,177.00 7,994,527.00

$307,876.00 510,000.00
91,843.00
909,719.00 832,805.00
292,803.00 428,706.00 1,554,314.00 2,464,033.00

500.00 500.00

0.00

0.00 500.00
4,282,480.00 1,745,040.00 1,966,507.00 $7,994,027.00

0.00 0.00
428,706.00
1,094,832.00 287,360.00 617,395.00 35,740.00
$2,464,033.00

East Ge orgi a C ol l e ge
Fou n dati on
$117,337.00 2,198.81
31,004.00 33.19
150,573.00
704,885.00
153,600.00 112,981.00 971,466.00 1,122,039.00
318.81
33.19
352.00
0.00 352.00 153,600.00
0.00 721,805.00 130,262.00 116,020.00 $1,121,687.00

Annual Financial Report FY2006 30

Statement of Net Assets, Continued

UNIVERS ITY S YS TEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

Ge orgi a Hi gh l an ds
C ol l e ge Fou n dati on , In c.

Component Units
South Ge orgi a C ol l e ge
Fou n dati on , In c.

W aycross C olle ge Fou n dati on , In c.

AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Comp onent Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Invent ories Prep aid Items Notes and M ortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Component Units Due from Primary Government Investments (including real estate) Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable Cap ital Assets, net Other Assets Total Noncurrent Assets TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Pay able Salaries Pay able Benefits Pay able Contracts Pay able Dep osits Deferred Revenue Other Liabilities Dep osits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current p ortion) Estimated Third-Party Pay or Settlements Comp ensated Absences (current p ortion) Revenue/Mort gage Bonds payable (current ) Due to Comp onent Units Notes and Loans Pay able (current p ortion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/M ortgage Bonds p ay able (noncurrent) Dep osits Liabilities under Sp lit Interest Agreements Other Long-Term Liabilities Due to Comp onent Units Notes and Loans Pay able (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Cap ital Assets, net of related debt Restricted for Nonexp endable Exp endable Cap ital Projects Unrest rict ed
TOTAL NET AS S ETS

$478,354.00
6,733.00
485,087.00
633,761.00 77,553.00
711,314.00 1,196,401.00

$94,684.19
94,684.19 30,500.00 2,531,470.78
2,561,970.78 2,656,654.97

$178,339.64 29,634.76
498.39 208,472.79
1,245,249.38
1,245,249.38 1,453,722.17
2,521.60

0.00

0.00

4,533.38 7,054.98

0.00 0.00

0.00 0.00

0.00 7,054.98

469,616.00 549,039.00
177,746.00 $1,196,401.00

2,130,932.22 140,961.56
384,761.19 $2,656,654.97

1,212,016.79 98,863.83
135,786.57 $1,446,667.19

Annual Financial Report FY2006 31

Statement of Revenues, Expenses and Changes in Net Assets
UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006
University S ystem of Ge orgi a
(Primary Government)

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Federal Ap p rop riations Grants and Contracts Federal State Ot her Sales and Services Rents and Roy alties Auxiliary Enterp rises Residence Halls Books t ore Food Services Parking/Transp ortation Health Services Intercollegiate Athletics Other Organizations Other Op erating Revenues Total Op erating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Emp loy ee Benefits Other Personal Services Travel Scholarship s and Fellowship s Ut ilit ies Sup p lies and Other Services Dep reciation
Total Op erating Exp enses Op erating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Ap p rop riations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Exp ense (cap ital assets) Other Nonop erating Revenues Net Nonop erating Revenues Income before other revenues, exp enses, gains, or losses Cap ital Grants and Gifts Federal St at e Ot her Sp ecial Item Transfers Total Other Revenues, Exp enses, Gains, Losses and Transfers Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally rep orted Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$957,829,683.83 179,283,247.70 15,764,280.64
677,968,512.12 235,338,058.77 328,152,244.01 105,560,471.24
2,274,214.63
144,148,378.52 72,414,555.25 80,663,681.71 41,154,566.92 31,923,318.48 58,985,821.15 15,866,356.74 77,357,087.69
2,666,117,984.00
902,513,507.05 1,349,380,710.11
349,808,389.91 3,855,964.46
49,168,793.38 174,162,676.93 161,120,813.57 1,360,844,552.61 240,915,133.20 4,591,770,541.22 (1,925,652,557.22)
1,817,258,595.16
25,367,775.34 3,015,503.03
47,801,529.38 37,490,127.67 38,830,965.09 (43,910,310.03) (12,612,265.36) 1,913,241,920.28 (12,410,636.94)
5,905,250.50 149,618,883.54
33,807,088.02 47,612.11
189,378,834.17 176,968,197.23
4,199,305,635.15 13,154.08
4,199,318,789.23 $4,376,286,986.46

Annual Financial Report FY2006 32

Statement of Revenues, Expenses and Changes in Net Assets, Continued
UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Georgia Tech Foundation, Inc.

Georgia Tech Athletic
Association

Georgia Tech Research
Corporation

Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Op erating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses 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

$0.00 38,682,495.00 34,362,195.32
311,595.74 16,391,395.31

$0.00 7,860,322.00
24,941,310.00 2,044,924.00

$0.00
275,585,148.00 13,443,178.00 47,051,123.00 6,635,282.00

89,747,681.37

34,846,556.00

44,532.00 342,759,263.00

1,800,900.00 355,165.00 97,365.00 61,725.00
3,340.00 1,483,144.00 2,334,283.00
5,149,888.00 67,909,033.00 79,194,843.00 10,552,838.37

12,118,888.01 2,606,305.00
2,303,427.00 912,605.73
9,624,929.62 4,521,125.00
9,451,611.64 41,538,892.00 (6,692,336.00)

36,479.00
7,547,111.00 584,733.00
337,269,521.00 345,437,844.00
(2,678,581.00)

85,522,813.63 (13,843,157.00)
71,679,656.63 82,232,495.00

8,323,024.00 (6,227,517.00)
2,095,507.00 (4,596,829.00)

1,315,834.00
1,315,834.00 (1,362,747.00)

21,118,505.00 21,118,505.00 103,351,000.00
893,605,000.00 0.00
893,605,000.00 $996,956,000.00

1,202,291.00 1,202,291.00 (3,394,538.00)
70,524,465.00 0.00
70,524,465.00 $67,129,927.00

0.00 (1,362,747.00)
36,775,148.00 0.00
36,775,148.00 $35,412,401.00

Annual Financial Report FY2006 33

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Georgia Advanced Technology
Ventures, Inc.

Georgia Tech Facilities, Inc.

Georgia Tech Alumni
Association

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally reported Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$0.00 323,952.00
150,000.00 805,926.00 7,003,759.00

$0.00
476,000.00 4,500,000.00

$0.00 3,999,052.00
804,548.00 1,014,718.00

8,283,637.00

72,000.00 5,048,000.00

64,912.00 140,968.00 6,024,198.00

76,924.00 18,076.00
3,992.00
443,410.00 4,635,398.00 1,855,054.00
273,500.00 7,306,354.00
977,283.00

460,000.00 60,000.00 96,000.00
395,000.00 1,011,000.00 4,037,000.00

2,784,530.00 677,825.00
277,577.00 107,508.00
1,198,932.00 114,888.00
839,139.00 6,000,399.00
23,799.00

40,723.00 (3,427,328.00)
(3,386,605.00) (2,409,322.00)

3,845,000.00 (9,273,000.00)
(5,428,000.00) (1,391,000.00)

(12,142.00)
(12,142.00) 11,657.00

0.00 (2,409,322.00)
20,788,970.00 0.00
20,788,970.00 $18,379,648.00

0.00 (1,391,000.00)
5,106,000.00 0.00
5,106,000.00 $3,715,000.00

0.00 11,657.00
757,155.00 0.00
757,155.00 $768,812.00

Annual Financial Report FY2006 34

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Georgia S tate University
Foundation, Inc.

Georgia S tate University Research
Foundation, Inc.

MCG Health, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Op erating Revenues
EXPENS ES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Exp enses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally rep orted Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00 687,221.00 2,840,551.00
10,796,623.00

$0.00

$0.00

37,977,238.00 5,440,952.00 8,397,532.00

5,082,982.10 705,961.90

2,905,910.00 17,230,305.00
403,712.00 103,596.00 183,903.00
4,477,478.00 2,284,833.00
14,843,631.00 22,297,153.00 (5,066,848.00)
13,312,882.00 2,795,717.00 8,409,749.00 (1,735,215.00) (710,940.00)
22,072,193.00 17,005,345.00

323,524,888.00

51,815,722.00

329,313,832.00

606,074.00 109,213.00
50,878,645.00 51,593,932.00
221,790.00
360,889.00 439,064.00
15,992.00 815,945.00 1,037,735.00

142,078,277.00
37,554,174.00 35,634,632.00
525,208.00
4,271,095.00 113,048,948.00
14,888,630.00
348,000,964.00 (18,687,132.00)
31,510,080.00
4,946,835.00
4,266,432.00
(565,085.00) (10,070,214.00)
(23,336.00) 30,064,712.00 11,377,580.00

1,753,104.00 1,753,104.00 18,758,449.00
125,912,485.00 0.00
125,912,485.00 $144,670,934.00

0.00 1,037,735.00
15,345,846.00 0.00
15,345,846.00 $16,383,581.00

0.00 11,377,580.00
211,508,135.00 0.00
211,508,135.00 $222,885,715.00

Annual Financial Report FY2006 35

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Medical College of Georgia Foundation,
Inc.

Medical College of Georgia PPG Foundation

Medical College of Georgia Research
Institute, Inc.

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Op erating Revenues Total Op erating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Op erating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Exp enses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonop erating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally rep orted Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00
4,444,657.00 1,308,672.00

$0.00

1,051,709.00
(13,730.00) 1,689,465.00
119,478.00 8,600,251.00

128,937.00 86,771,062.00 86,899,999.00

$0.00
44,174,069.00 34,812.00
8,173,516.00 79,478.00 409,806.00
52,871,681.00

487,132.00 207,098.00
372,123.00 72,111.00
9,067,607.00 10,206,071.00 (1,605,820.00)

8,492,207.00 14,237,370.00
1,326,706.00 474,950.00 64,920.00
8,915,246.00 682,138.00
51,429,977.00 85,623,514.00
1,276,485.00

2,330,431.00 5,735.00
49,694,858.00 52,031,024.00
840,657.00

8,289,512.00
8,289,512.00 6,683,692.00

3,194,592.00 945,774.00
(1,424,910.00)
159,232.00 2,874,688.00 4,151,173.00

156,418.00
156,418.00 997,075.00

666,536.00 666,536.00 7,350,228.00
121,388,066.00 0.00
121,388,066.00 $128,738,294.00

0.00 4,151,173.00
51,789,918.00 0.00
51,789,918.00 $55,941,091.00

0.00 997,075.00
4,054,139.00 0.00
4,054,139.00 $5,051,214.00

Annual Financial Report FY2006 36

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Medical College of Georgia Dental Foundation

University of Georgia
Foundation

University of Georgia Athletic Association,
Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per sp ending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally rep orted Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00

$0.00
4,707,522.00 9,612,194.00

$0.00

1,562,685.00 20,075,486.00
4,586,633.00

74,035,200.00

4,586,633.00

35,957,887.00

479,217.00 371,751.00
8,602.00

732,925.00 118,383.00

2,597,329.00
1,157,959.00 4,614,858.00
(28,225.00)

373,758.00 6,177,886.00 5,833,163.00
22,479,425.00 35,715,540.00
242,347.00

74,035,200.00
23,590,286.00 4,555,529.00
25,500,018.00 53,645,833.00 20,389,367.00

161,299.00
161,299.00 133,074.00

42,048,058.00 (8,439,683.00)
33,608,375.00 33,850,722.00

589,533.00 2,623,196.00
(3,693,416.00)
(1,830,348.00) (2,311,035.00) 18,078,332.00

0.00 133,074.00
0.00 0.00 0.00 $133,074.00

10,981,492.00 10,981,492.00 44,832,214.00
500,156,944.00 0.00
500,156,944.00 $544,989,158.00

0.00 18,078,332.00
104,451,689.00 0.00
104,451,689.00 $122,530,021.00

Annual Financial Report FY2006 37

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006
Component Units

Univers ity of Georgia Research Foundation, Inc.

Georgia S outhern University Foundation, Inc.

(Georgia Southern Univers ity) S outhern
Boosters , 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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal 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 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 losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses 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
124,274,115.00 15,133,783.00

$0.00
3,777,119.00 2,203,210.00

$0.00 1,704,150.00

131,600.00

516,961.00 139,924,859.00

399,065.00 6,379,394.00

122,571.00 1,958,321.00

11,693,697.00 46,082.00
128,439,909.00 140,179,688.00
(254,829.00)

122,693.00
966,721.00 1,667.00
2,194,105.00 3,285,186.00 3,094,208.00

19,375.00
389,661.00 18,508.00
928,755.00 1,356,299.00
602,022.00

2,991,714.00
2,991,714.00 2,736,885.00

533,315.00
533,315.00 3,627,523.00

49,111.00 (15,341.00)
33,770.00 635,792.00

0.00 2,736,885.00
25,746,146.00 0.00
25,746,146.00 $28,483,031.00

2,241,059.00 2,241,059.00 5,868,582.00
34,547,768.00 0.00
34,547,768.00 $40,416,350.00

0.00 635,792.00
2,615,705.00 0.00
2,615,705.00 $3,251,497.00

Annual Financial Report FY2006 38

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Georgia S outhern University Housing
Foundation, Inc.

Georgia S outhern University Research and S ervice Foundation, Inc.

Valdosta S tate University Foundation

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per sp ending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Op erating Revenues Total Operating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Op erating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonop erating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally rep orted Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00 102,827.00
3,689,263.00

$0.00
4,025,387.00 89,339.00 632,471.00 29,832.00

$0.00 967,668.00 1,597,283.00
532,443.00 2,894,341.00

30,000.00 3,822,090.00

480.00 4,777,509.00

207,457.00 6,199,192.00

106,183.00
106,183.00 3,715,907.00

28,897.00
4,524,543.00 4,553,440.00
224,069.00

947,585.00 712,090.00
1,661,958.00 3,321,633.00 2,877,559.00

195,548.00 (3,265,614.00) (1,160,694.00) (4,230,760.00)
(514,853.00)
0.00 (514,853.00) 1,493,915.00
0.00 1,493,915.00 $979,062.00

29,383.00
29,383.00 253,452.00

9,580.00
(862,052.00)
(244,283.00) (1,096,755.00) 1,780,804.00

0.00 253,452.00
277,348.00 0.00
277,348.00 $530,800.00

780,466.00 780,466.00 2,561,270.00
20,661,190.00 0.00
20,661,190.00 $23,222,460.00

Annual Financial Report FY2006 39

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Albany S tate University
Foundation, Inc.

Armstrong Atlantic S tate University Foundation, Inc.

AAS U Educational Properties
Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses 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

$0.00 609,502.00
26,287.00

$0.00
1,507,410.00 107,067.00

$0.00 3,500,741.00

635,789.00
336,720.00 335,146.18 197,828.00
83,155.00 32,992.82 985,842.00 (350,053.00)

1,614,477.00
449,224.00
626,247.00 581,049.00 1,656,520.00 (42,043.00)

27,646.00 3,528,387.00
263,630.00
354,938.00 845,475.00 2,097,293.00
815,731.00 4,377,067.00 (848,680.00)

(6,858.00) 1,837,251.00 (181,779.00)
1,648,614.00 1,298,561.00

207,036.00 28,240.00
235,276.00 193,233.00

217,538.00 (1,730,746.00)
(1,513,208.00) (2,361,888.00)

0.00 1,298,561.00
8,447,053.00 0.00
8,447,053.00 $9,745,614.00

535,480.00 535,480.00 728,713.00
5,008,574.00 0.00
5,008,574.00 $5,737,287.00

0.00 (2,361,888.00)
(526,404.00) 0.00
(526,404.00) ($2,888,292.00)

Annual Financial Report FY2006 40

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Augusta S tate University
Foundation, Inc.

Augusta S tate University Athletic
Foundation

Walter & Emilie S pivey
Foundation

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Op erating Revenues Total Op erating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Op erating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of year, as originally rep orted Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00 2,379,568.00
454,280.00
1,475,383.00 130,573.00

$0.00 794,131.00

$0.00

112,363.00 4,552,167.00
821,073.00 700,628.00 1,521,701.00 3,030,466.00

794,131.00

0.00

364,818.00 31,401.00 5,892.00
56,714.00 254,720.00 150,056.00
28,875.00
12,000.00 904,476.00 (110,345.00)

24,381.37
354,337.98 378,719.35 (378,719.35)

1,159,614.00
(531,283.00)
3,247,065.00 3,875,396.00 6,905,862.00

7,109.00 (110,031.00)
43,956.00 (58,966.00) (169,311.00)

192,323.83
192,323.83 (186,395.52)

713,478.00 713,478.00 7,619,340.00
15,704,685.00 0.00
15,704,685.00 $23,324,025.00

0.00 (169,311.00)
618,625.00 0.00
618,625.00 $449,314.00

0.00 (186,395.52)
7,640,705.42 0.00
7,640,705.42 $7,454,309.90

Annual Financial Report FY2006 41

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006
Component Uni ts

Clayton State University Foundation,
Inc.

Columbus State Univers ity Foundation, Inc.

(Columbus State Univers ity) Foundation
Properties, 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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal 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 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 losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses 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
1,486,653.00 68,877.00

$0.00
7,870,563.00 417,525.00

$0.00 523,703.00

2,004,763.00 2,139,546.00

41,705.00 1,597,235.00
62,020.00
402,223.00
228,873.00 693,116.00 904,119.00

238,620.00 8,526,708.00

4,668,012.00

706,407.00 78,190.00
1,229,100.00
(3,642,002.00) 32,715,023.00 31,086,718.00 (22,560,010.00)

297,010.00 51,767.00
330,315.00 1,159,472.00 1,483,872.00
3,645,814.00 2,876,963.00 9,845,213.00 (5,177,201.00)

56,668.00
56,668.00 960,787.00

1,817,337.00
1,817,337.00 (20,742,673.00)

679,052.00 (1,344,851.00)
(665,799.00) (5,843,000.00)

40,922.00 40,922.00 1,001,709.00
3,823,144.00 0.00
3,823,144.00 $4,824,853.00

12,646,602.00 12,646,602.00 (8,096,071.00)
57,387,655.00 0.00
57,387,655.00 $49,291,584.00

0.00 (5,843,000.00)
24,500,744.00 0.00
24,500,744.00 $18,657,744.00

Annual Financial Report FY2006 42

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Columbus S tate University Athletic
Fund, Inc.

Columbus S tate University Alumni Association, Inc.

Georgia College & S tate University Foundation, Inc.

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Op erating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Exp enses Op erating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally rep orted Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$0.00
183,050.00 387,166.00

$0.00
63,557.00 7,068.00

$0.00
1,659,138.00 284,941.00

312,929.00 10,002,052.00

225,139.00 795,355.00
992.00 721.00
165,851.00 354.00
(15,065.00) 354,139.00 506,992.00 288,363.00

33,695.00 104,320.00

26,846.00 12,285,906.00

60,404.00 15,005.00
44,719.00 660.00
11,253.00 9,500.00 141,541.00 (37,221.00)

57,435.00
1,021.00 6,214,728.00 2,215,713.00
297,100.00 8,785,997.00 3,499,909.00

1,782.00
1,782.00 290,145.00

977.00
977.00 (36,244.00)

245,110.00 (4,697,706.00)
(4,452,596.00) (952,687.00)

32,944.00 32,944.00 323,089.00
1,552,213.00 0.00
1,552,213.00 $1,875,302.00

0.00 (36,244.00)
253,228.00 0.00
253,228.00 $216,984.00

1,156,523.00 1,156,523.00
203,836.00
10,749,069.00 0.00
10,749,069.00 $10,952,905.00

Annual Financial Report FY2006 43

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30 2006

Georgia College & S tate University
Alumni Association, Inc.

Component Units
Georgia S outhwestern Foundation, Inc.

Georgia S W Research and Development Corp.,
Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Op erating Revenues Total Operating Revenues
EXPENS ES Op erating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Op erating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Exp enses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses 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

$0.00
14,724.00 206,754.00

$0.00
1,077,077.00 1,347,508.00

$0.00 219,000.00

93,105.00 314,583.00

33,468.00 2,458,053.00

6,038.00 147,713.00
7,152.00
191,110.00 352,013.00 (37,430.00)

139,911.34 50,486.08
3,905.18
142.64 184,456.84
3,189.14
1,769,356.78 2,151,448.00
306,605.00

219,000.00
160,441.00 55,901.00
16,149.00 240,720.00
473,211.00 (254,211.00)

98,310.00

98,310.00 60,880.00

0.00 306,605.00

0.00 (254,211.00)

46,359.00 46,359.00 107,239.00
5,389,028.00 0.00
5,389,028.00 $5,496,267.00

387,694.00 387,694.00 694,299.00
25,027,447.00 0.00
25,027,447.00 $25,721,746.00

0.00 (254,211.00)
559,774.00 0.00
559,774.00 $305,563.00

Annual Financial Report FY2006 44

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Kennesaw S tate University
Foundation, Inc.

Component Units North Georgia College & S tate
University Foundation, Inc.

S outhern Polytechnic S tate University 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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally reported Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$0.00 1,824,121.00
19,225,668.00

$0.00 948,825.00 647,416.00
1,595,676.00

$0.00 1,212,980.00
22,862.00
2,087,148.00

21,049,789.00
873,462.00
1,435,889.00 3,770,589.00 4,334,932.00
4,140,377.00 14,555,249.00 6,494,540.00

246,565.00 3,438,482.00
402,451.00
67,797.00 219,586.00 1,338,125.00 278,670.00 201,464.00 751,345.00 3,259,438.00 179,044.00

3,322,990.00
286,786.00 61,592.00
870,687.01
321,089.00 1,540,154.01 1,782,835.99

1,727,912.00 (8,425,914.00)
(6,698,002.00) (203,462.00)

647,417.00
(533,388.00)
581,885.00 695,914.00 874,958.00

433,040.00 163,061.00
(1,628,147.00)
(1,032,046.00) 750,789.99

2,224,053.00 2,224,053.00 2,020,591.00
12,038,606.00 0.00
12,038,606.00 $14,059,197.00

327,687.00 327,687.00 1,202,645.00
14,460,283.00 0.00
14,460,283.00 $15,662,928.00

891,837.00 891,837.00 1,642,626.99
1,038,803.01 1,271,621.00 2,310,424.01 $3,953,051.00

Annual Financial Report FY2006 45

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

University of West Georgia Foundation, Inc.

University of West Georgia Real Estate
Foundation, Inc.

Abraham Baldwin Agricultural College
Foundation, Inc.

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

$0.00 2,115,476.00
655,600.00
321,248.00 1,765,977.00

$0.00 1,742,000.00

$0.00
1,650,565.00 4,523,923.00

4,858,301.00
434,445.00 102,147.00
10,495.00
578,035.00 609,809.00 170,756.00 1,440,543.00 3,346,230.00 1,512,071.00

1,742,000.00
43,696.00 43,696.00 1,698,304.00

6,174,488.00
105,212.00
2,086,702.00 1,362,013.00
253,406.00 3,807,333.00 2,367,155.00

562,867.00 (1,283,791.00)
(720,924.00) 791,147.00

507,841.00 (500,365.00)
7,476.00 1,705,780.00

(1,260,500.00)
(1,260,500.00) 1,106,655.00

(736,715.00) 610,279.00 (126,436.00) 664,711.00
15,271,362.00 0.00
15,271,362.00 $15,936,073.00

0.00 1,705,780.00
(581,494.00) 549,505.00 (31,989.00) $1,673,791.00

544,977.00 544,977.00 1,651,632.00
10,191,801.00 0.00
10,191,801.00 $11,843,433.00

Annual Financial Report FY2006 46

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Dalton S tate College
Foundation, Inc.

Gainesville S tate College Foundation

Gordon College Foundation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Op erating Revenues Total Operating Revenues
EXPENS ES Operating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Op erating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonop erating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally rep orted Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$0.00 2,632,490.00
762,019.00
364,430.00

$0.00
559,434.00 284,294.00

$0.00 88,204.00

3,758,939.00
82,210.00 3,361.00
1,024.00
16,209.00 224,705.00
38,567.00 6,379.00
375,243.00 747,698.00 3,011,241.00

843,728.00

279,521.00 367,725.00

180,988.00
403,157.00 584,145.00 259,583.00

264.00 176,684.00 179,175.00
92,172.00 448,295.00 (80,570.00)

(69,306.00)
(69,306.00) 2,941,935.00

228,005.00
228,005.00 487,588.00

381,092.00 (248,578.00)
132,514.00 51,944.00

1,280,636.00 1,280,636.00 4,222,571.00
11,042,663.00 0.00
11,042,663.00 $15,265,234.00

207,131.00 207,131.00 694,719.00
8,866,458.00 0.00
8,866,458.00 $9,561,177.00

0.00 51,944.00
5,306,991.00 0.00
5,306,991.00 $5,358,935.00

Annual Financial Report FY2006 47

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Macon S tate College
Foundation, Inc.

Middle Georgia College
Foundation, Inc.

Bainbridge College Foundation

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Op erating Revenues
EXPENS ES Op erating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Exp enses Op erating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonop erating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally reported Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$0.00
278,897.00 239,337.00

$0.00
82,678.00 12,682.00

$0.00 2,264.00

518,234.00
162,036.00 22,144.00 3,408.00
74,450.00
1,524,296.00 1,786,334.00 (1,268,100.00)

95,360.00
38,657.00 26,145.00 29,435.00 94,237.00
1,123.00

2,264.00
5,416.30 1,722.10 7,138.40 (4,874.40)

195,666.00
54,000.00 249,666.00 (1,018,434.00)

0.00 1,123.00

807.49
807.49 (4,066.91)

29,085.00 29,085.00 (989,349.00)
8,521,105.00 0.00
8,521,105.00 $7,531,756.00

1,650.00 1,650.00 2,773.00
1,143,009.00 0.00
1,143,009.00 $1,145,782.00

64,248.02 64,248.02 60,181.11
52,592.16 0.00
52,592.16 $112,773.27

Annual Financial Report FY2006 48

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Coastal Georgia Community College
Foundation, Inc.

Darton College Foundation

REVENUES
Op erating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (p er sp ending p lan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Op erating Revenues
EXPENS ES Op erating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Operating Exp ense Payments to Other Component Units Payments to or on behalf of College/University
Total Op erating Exp enses Op erating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonop erating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses Increase in Net Assets
NET AS S ETS Net Assets-beginning of y ear, as originally reported Prior Year Adjustments Net Assets-beginning of y ear, restated Net Assets-End of Year

$0.00
503,080.00 35,329.00

$0.00
848,748.00 24,790.00

538,409.00

873,538.00

23,018.00
577,563.00 600,581.00 (62,172.00)

172,030.00 3,444.00
212,110.00 387,584.00 485,954.00

80,942.00
80,942.00 18,770.00

12,285.00
12,285.00 498,239.00

1,191,662.00 1,191,662.00 1,210,432.00
6,783,595.00 0.00
6,783,595.00 $7,994,027.00

0.00 498,239.00
1,965,794.00 0.00
1,965,794.00 $2,464,033.00

East Georgia College
Foundation
$0.00 178,285.00
20,076.00
9,123.00
6,641.00 214,125.00
20,193.00
115,106.00 135,299.00
78,826.00
7,384.00
7,384.00 86,210.00
0.00 86,210.00 1,035,477.00
0.00 1,035,477.00 $1,121,687.00

Annual Financial Report FY2006 49

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

UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
June 30, 2006

Component Units

Georgia Highlands College Foundation,
Inc.

S outh Georgia College Foundation,
Inc.

Waycross College 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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Intercollegiate Athletics Clinical and Patient Fees Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Op erating Revenues Total Operating Revenues
EXPENS ES Operating Exp enses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Dep reciat ion Other Op erating Expense Payments to Other Component Units Payments to or on behalf of College/University
Total Operating Expenses Operating Income (loss)
NONOPERATING REVENUES (EXPENS ES ) State Appropriations Grants and Contracts Federal Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined M argin Allocation Other Nonoperating Revenues Net Nonop erating Revenues Income before other revenues, expenses, gains, or losses Capital Grants and Gifts Federal State Other Loss on Bond Retirement Additions to permanent endowments Total Other Revenues, Expenses, Gains or Losses 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

$0.00 502,993.00
51,022.00
28,000.00 5,600.00

$0.00
68,426.82 78,446.15

$0.00
37,327.88 34,357.79

587,615.00
35,520.00
102,095.00 1,790.00
114,909.00 254,314.00 333,301.00

146,872.97

71,685.67

1,200.00 412.00

23,924.43
195,917.13 219,841.56 (72,968.59)

9,483.22
60,852.05 71,947.27
(261.60)

5,126.00
(298,996.00) (293,870.00)
39,431.00

0.00 (72,968.59)

2,452.82
2,452.82 2,191.22

26,616.00 26,616.00 66,047.00
1,130,354.00 0.00
1,130,354.00 $1,196,401.00

44,838.34 44,838.34 (28,130.25)
2,684,785.22 0.00
2,684,785.22 $2,656,654.97

46,793.97 46,793.97 48,985.19
1,397,682.00 0.00
1,397,682.00 $1,446,667.19

Annual Financial Report FY2006 50

Statement of Cash Flows
UNIVERSITY SYSTEM OF GEORGIA
STATEMENT OF CASH FLOWS June 30, 2006
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Ap p rop riations Grants and Contracts (Exchange) Sales and Services of Educational Dep artments Pay ments to Sup p liers Pay ments to Emp loy ees Pay ments for Scholarship s and Fellowship s Loans Issued to Students and Emp loy ees Collection of Loans to Students and Emp loy ees Auxiliary Enterp rise Charges: Residence Halls Books t ore Food Services Parking/Transp ortation Health Services Intercollegiate Athletics Other Organizations Other Receip ts (p ay ments) Net Cash Provided (used) by Op erating Activities
CAS H FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Ap p rop riations Agency Funds Transactions Gifts and Grants Received for Other Than Cap ital Purp oses Princip al Paid on Installment Debt Other Nonop erating Receip ts Net Cash Flows Provided by Non-cap ital Financing Activities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Cap ital Grants and Gifts Received Proceeds from Cap ital Debt Proceeds from sale of Cap ital Assets Purchases of Cap ital Assets Princip al Paid on Cap ital Debt and Leases Interest Paid on Cap ital Debt and Leases Net Cash used by Cap ital and Related Financing Activities
CAS H FLOWS FROM INVES TING ACTIVITIES Proceeds from Sales and M aturities 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 y ear Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Op erating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Op erating Activities
Dep reciation Change in Assets and Liabilities:
Receivables, net Invent ories Other Assets Prep aid Items Notes Receivable, Net Accounts Pay able Deferred Revenue Benefits Pay able Lease Purchase Obligations Other Liabilities Comp ensated Absences
Net Cash Provided (used) by Op erating Activities
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS
Fixed assets acquired by incurring cap ital lease obligations Change in accounts receivable related to p rivate gifts Change in receivable from State Agency affecting p roceeds of cap ital debt Change in fair value of investments recognized as a comp onent of interest income Gift of cap ital assets reducing p roceeds of cap ital grants and gifts Gifts other than cap ital assets reducing p roceeds of grants & gifts for other than cap ital assets

June 30, 2006
$788,894,294.18 16,314,973.26
1,252,109,373.96 110,431,887.39
(2,161,470,548.21) (2,246,342,524.39)
(177,910,883.21) (13,120,997.53) 14,056,362.55
147,209,346.56 70,580,928.86 81,021,926.72 41,532,892.83 32,957,320.61 59,085,282.54 12,914,005.54
292,723,677.81 (1,679,012,680.53)
1,817,258,595.16 3,056,550.47
105,947,819.50 (458,333.26)
1,098,105.08 1,926,902,736.95
42,201,286.34 6,268,770.00 3,005,840.37
(226,925,712.89) (25,258,517.86) (43,394,577.83)
(244,102,911.87)
14,757,479.24 34,828,053.89
(898,182.50) 48,687,350.63 52,474,495.18 540,669,329.30 $593,143,824.48
($1,925,652,557.22)
240,915,133.20
(12,300,979.80) (1,044,850.53) 760,500.48
(16,632,306.52) 530,464.55
(6,609,588.56) 11,915,502.70 26,763,564.62
84,156.34 (3,188,642.11) 5,446,922.32
($1,679,012,680.53)
$115,325,003.73 ($20,929.70) ($92,989.00)
$4,612,176.06 ($154,280,359.98)
($2,681,081.14)

Annual Financial Report FY2006 51

UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) State supported member institutions of higher education in Georgia, the Skidaway Institute of Oceanography and the University System Office. 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 35 institutions, the Skidaway Institute of Oceanography and the University System Office 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
Annual Financial Report FY2006 52

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 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) require that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place.
Basis of Accounting For financial reporting purposes, the University 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Annual Financial Report FY2006 53

Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University System's grants 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 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 on projects managed by them and transfers the entire project to the University System of Georgia when complete. For the year ended June 30, 2006, GSFIC transferred capital additions valued at $54,578,913.27 to the University System of Georgia. This includes projects completed during FY2006 and additional expenditures for projects completed in prior years. This resulted in a cumulative total of $2,289,744,024.70 as of June 30, 2006.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University System residence hall.
Annual Financial Report FY2006 54

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 compensation and benefit expense in the Statement of Revenues, Expenses, and Changes in Net Assets. The University System of Georgia had accrued liability for compensated absences in the amount of $140,641,725.65 as of 7-1-2005. For FY2006, $107,932,330.65 was earned in compensated absences and employees were paid $102,485,407.63 for a net increase of $5,446,923.02. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $146,088,648.67.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University 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 FY2006 55

Expendable Restricted Net Assets include the following:

June 30, 2006

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

$118,112,215.50 44,962,461.24 19,814,589.73 4,627,155.49 15,509,402.36
$203,025,824.32

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 include the following items which are quasi-restricted by management:

June 30, 2006

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

$67,933,895.59 161,523,561.57
3,334,644.17 47,982,503.07 $280,774,604.40

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.
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:

Annual Financial Report FY2006 56

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 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 non-operating 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.

Reclassifications Certain fiscal 2005 balances have been reclassified in the accompanying consolidated financial statements to conform to the fiscal 2006 presentation.

Special Item Transfers

The following institutions had special item transfers for fiscal 2006:

Special Item Transfers: Georgia Gwinnett College Georgia Perimeter College University System Office
Total

$21,281,180.17 (21,281,180.17)
47,612.11
$47,612.11

Georgia Gwinnett College and Georgia Perimeter College: Due to the creation of Georgia Gwinnett College by the State of Georgia, all assets purchased by the Gwinnett University Center were transferred to Georgia Gwinnett College as of July 1, 2005, along with their related liabilities. These assets were transferred from Georgia Perimeter College, which acted as custodian for the Gwinnett University Center. The net book value of the assets transferred was $37,147,254.71 and the associated capital lease liability transferred was $15,866,074.54. These assets, net of the capital lease liability, are included in the Statement of Net Assets and are noted as Special Item Transfers on the Statement of Revenues, Expenses, and Changes in Net Assets and on Note 6, Capital Assets.

Annual Financial Report FY2006 57

University System Office: The Georgia Public Telecommunications Commission ("the Commission") transferred Other Property and Equipment located at the tower sites through an Intergovernmental agreement to the University System Office. This agreement provides general obligation bonds to fund the digital conversion of the Commission's towers and transmitters. The value of this equipment at June 30, 2006 was $22,336,534.25 and the accumulated depreciation was $22,288,922.14 for a net book value of $47,612.11. This transfer of assets is noted as a Special Item Transfer on the Statement of Revenues, Expenses and Changes in Net Assets and on Note 6, Capital Assets.

Restatement of Prior Year Balances

The following institutions had restatements of prior year balances in FY2006:

Prior Year Adjustments: Abraham Baldwin Agricultural College Georgia Highlands College Georgia Southern University Savannah State University South Georgia College
Total

$2,995,324.48 (352,722.27)
(1,770,447.30) 193,105.93
(1,052,106.76)
$13,154.08

Abraham Baldwin Agricultural College has a restatement of prior year net assets increasing beginning net assets by $2,995,324.48. This is the result of adjustments to depreciable capital assets to correctly record asset values and associated depreciation.

Georgia Highlands College has a restatement of prior year net assets decreasing beginning net assets by $352,722.27. This is due primarily to a correction of a prior year error related to invalid PELL receipts.

Georgia Southern University has a restatement of prior year net assets decreasing beginning net assets by $1,770,447.30. This is due to (a) Georgia Southern University Housing Foundation Capital Lease assets which were not depreciated in the prior year, (b) Library Collections depreciation that was overstated in the prior year and (c) Capitalized Collections that were capitalized but did not meet the capitalization threshold in prior years.

Savannah State University has a restatement of prior year net assets that increases beginning net assets by $193,105.93. This restatement is a result of adjustments to depreciation to correct amounts reported in fiscal 2005.

South Georgia College has a restatement of prior year net assets decreasing beginning net assets by $1,052,106.76. In the prior fiscal year, the College failed to properly record all of its depreciable capital assets and associated depreciation in accordance with the College's asset capitalization policies. As a result, adjustments were made to depreciable capital assets in order to correctly state their balances.

Annual Financial Report FY2006 58

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 System's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University System of Georgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, 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, 2006, the carrying values of deposits were $337,637,282.92 and the bank balances were $387,250,418.75. Of the University System's deposits, $383,160,247.58 were uninsured. Of these uninsured deposits, $111,210,783.34 were collateralized with securities held by the financial institution's trust department or agent in the University System's name, $173,097,087.08 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System's name and $98,852,377.16 were uncollateralized.
Annual Financial Report FY2006 59

B. 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 of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Fair Value

LessThan 1 Year

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

Investment type
Debt Securities U.S. Treasuries U.S. Agencies - Explicitly Guaranteed U.S. Agencies - Implicitly Guaranteed Certificates of Deposit Corporate Debt General Obligation Bonds M oney Market Mutual Fund M ortgage Backed Securities (U.S. Agencies) M unicipal Obligation M utual Bond Fund Repurchase Agreements

$21,330,787.24 7,546,649.93
138,180,897.71 35,000.00
4,536,010.34 1,057,413.90
17,910.74 235,637.59
5,000.00 42,713,942.01 8,185,658.49 $223,844,907.95

$5,393,924.33 3,343,785.03 77,222,314.16
35,000.00 334,605.00
17,910.74
5,000.00
7,363,658.49 $93,716,197.75

$11,590,799.67 4,197,633.75 53,251,076.86
2,686,614.20 144,229.65
34,466.62
42,479,489.15 822,000.00
$115,206,309.90

$3,387,443.45 5,231.15
685,989.90

$958,619.79 7,021,516.79

1,514,791.14 122,398.90

790,785.35

52,992.71 148,178.26

234,452.86

$6,003,300.11 $8,919,100.19

Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Real Estate Investment Fund Cash Surrender Value
Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool

41,141,713.17 43,715,988.78
241,927.49 7,348,609.90
8,349.11
162,290,861.05 5,678,048.37

$484,270,405.82

Annual Financial Report FY2006 60

Investment Pools
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 28 days at June 30, 2006.
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 $1.97 at June 30, 2006. The Georgia Extended Asset Pool is an AAAf rated investment pool by Standard and Poor's. The duration for the month of June, 2006 was .92 years.
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 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, possessing at most, an average degree of investment risk.
The Regents' Investment Pool funds are described below. Investment fund balances within the University System (the Primary Government) have been eliminated in this report, with the underlying investment instruments of the pools reported instead.
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 ten years, with a maximum of
Annual Financial Report FY2006 61

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.
Balanced 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.
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 to 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.
Annual Financial Report FY2006 62

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.

Condensed financial information for the investment pool follows:

Regents Investment Pool Statement of Net Assets
June 30, 2006

Regents Investment Pool Statement of Changes in Net Assets For the Fiscal Year Ended June 30, 2006

Assets
Cash and Cash Equivalents Investments Interest Receivable Net Assets

$

1,233,523

143,528,392

434,469

$

145,196,384

Additions Investment Income

Interest

$

Fair Value Increases

Less: Investment Expense

Total Additions

$

4,786,712 3,147,696 (392,834) 7,541,574

Distribution of Net Assets External Participant Account Balance $ Internal Participant Account Balance
$

21,802,873 123,393,511 145,196,384

Deductions

Pool Participant Withdrawals $ (38,540,792)

Capital Transactions Total Deductions

7,884,627 $ (30,656,165)

Net Decrease

$ (23,114,591)

Net Assets July 1, 2005

168,310,975

June 30, 2006

$ 145,196,384

Annual Financial Report FY2006 63

Investment Risks:
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 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 US Treasury government agency, and corporate debt instruments having minimum investment grade credit ratings of BAA by Moody's and/or Standard & 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 of Georgia 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 of Georgia 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, 2006, $29,695,786.55 of the University System's applicable investments were uninsured and held by the investment's counterparty in the University System's name and $200,337,818.09 were uninsured and held by the investment's counterparty's trust department or agent, but not in the University System's name.
Annual Financial Report FY2006 64

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 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 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. The University System investments subject to credit quality risk follow:

Fair Value

AAA

AA

A

Ba

Baa

Baaa

Unrated

Related Debt Investments U. S. Agencies Certificates of Deposit Corporate Debt

$138,180,897.71 $85,922,006.32 $59,034.60

$0.00

$0.00

$0.00

$0.00 $52,199,856.79

35,000.00

35,000.00

4,536,010.34 258,158.25 1,532,432.26 1,466,682.76 155,669.00 422,896.20 688,789.07 11,382.80

General Obligation Bonds Money M arket M utual Fund Mortgage Backed Securities (U.S. Agencies) Municipal Obligation Mutual Bond Fund Repurchase Agreements - Underlying
U. S. Agency Securities

1,057,413.90 17,910.74 190,594.96 5,000.00
42,713,942.01
8,185,658.49

1,057,413.90

184,096.36 5,000.00
11,747,866.33

407,898.41

6,622,658.49

17,910.74 6,498.60
30,558,177.27
1,563,000.00

$194,922,428.15 $105,797,199.65 $1,999,365.27 $1,466,682.76 $155,669.00 $422,896.20 $688,789.07 $84,391,826.20

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 explicitly guaranteed by the U.S. Government are exempt from this requirement.

Annual Financial Report FY2006 65

The following investments of the University System of Georgia subject to concentration of credit risk exceed 5% of total investment holdings as of June 30, 2006:

Investment

Amount

% of Total

Federal National Mortgage Association $50,493,332.13

10%

Federal Home Loan Mortgage Corporation $43,270,973.78

9%

Federal Home Loan Bank

$27,619,610.76

6%

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 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, 2006, the Diversified Fund had 7.5% (approximately $5 million) 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.

Annual Financial Report FY2006 66

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006:

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

June 30, 2006
$21,048,757.60 13,163,845.97 51,792,044.16 1,599,099.98 9,222,551.00 82,869,006.09 87,320,779.36
267,016,084.16 12,253,819.26
$254,762,264.90

Note 4. Inventories Inventories consisted of the following at June 30, 2006:

Bookstore Food Services Physical Plant Other
Total

June 30, 2006
$12,798,012.11 1,888,680.88 2,092,462.40 2,970,517.72
$19,749,673.11

Note 5. Notes/Loans Receivable
Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) and comprise substantially all of the loans receivable at June 30, 2006. 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, 2006 the allowance for uncollectible loans was approximately $2,167,406.67.

Annual Financial Report FY2006 67

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

Restated Beg. Bal. July 1, 2005

Special Item Transfer

Additions

Reductions

End. Bal. June 30, 2006

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

$155,620,175.45 16,158,540.58 137,916,303.25 309,695,019.28

$0.00 $28,010,039.68 3,552,011.00
140,926,453.34 0.00 172,488,504.02

$92,255.00 (137,237.93) 113,210,380.02 113,165,397.09

$183,537,960.13 19,847,789.51 165,632,376.57 369,018,126.21

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

251,787,150.17 4,195,098,141.82
225,761,727.04 921,716,680.11 232,643,106.46 556,693,815.18
1,233,868.93 6,384,934,489.71

22,336,534.25 22,336,534.25

16,075,664.35 201,971,231.45
8,096,364.09 86,867,747.10 150,553,167.94 32,025,870.45
0.00 495,590,045.38

1,539,238.49 (45,238,620.62)
158,064.99 44,469,296.33 75,239,540.79 3,493,450.22
168,667.93 79,829,638.13

266,323,576.03 4,442,307,993.89
233,700,026.14 986,451,665.13 307,956,733.61 585,226,235.41
1,065,201.00 6,823,031,431.21

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

48,026,105.53 1,200,170,780.01
69,981,748.06 632,272,655.75 25,598,677.06 421,020,093.44
405,881.38 2,397,475,941.23

22,288,922.14 22,288,922.14

4,173,240.07 113,442,128.43
5,726,438.88 80,726,313.02 13,268,935.91 23,553,718.07
24,358.82 240,915,133.20

986,841.36 180,752.60 187,425.43 41,535,702.57 10,632,374.66 3,513,146.67
5,709.06 57,041,952.35

51,212,504.24 1,313,432,155.84
75,520,761.51 693,752,188.34 28,235,238.31 441,060,664.84
424,531.14 2,603,638,044.22

Total Capital Assets, Being Depreciated, Net

3,987,458,548.48

47,612.11 254,674,912.18

22,787,685.78 4,219,393,386.99

Capital Assets, net

$4,297,153,567.76

$47,612.11 $427,163,416.20 $135,953,082.87 $4,588,411,513.20

Annual Financial Report FY2006 68

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2006:

June 30, 2006

Prepaid Tuition and Fees Research Other Deferred Revenue
Totals

$102,909,868.74 36,829,433.25 44,255,061.46
$183,994,363.45

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences US DOE Settlement Notes & Loans Total
Total Long Term Obligations

Restated Beg. Bal. July 1, 2005

Additions

Reductions

End. Bal. June 30, 2006

$676,703,440.14
140,641,725.65 1,670,218.32 2,672,065.60
144,984,009.57 $821,687,449.71

$183,854,441.56 107,932,330.65
107,932,330.65 $291,786,772.21

$25,125,117.99
102,485,407.63 458,333.26 117,146.52
103,060,887.41 $128,186,005.41

$835,432,763.71
146,088,648.67 1,211,885.06 2,554,919.08
149,855,452.81 $985,288,216.52

Current Portion
$24,993,937.99
83,845,304.90 499,999.92 115,328.14
84,460,632.96 $109,454,570.95

Note 9. Significant Commitments
The University System of Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $43,686,383.82 as of June 30, 2006. 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 and equipment.
CAPITAL LEASES
The University System of Georgia is obligated under approximately $835 million in capital lease liability as of June 30, 2006. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2036. Expenditures for fiscal year 2006 were $68,653,095.69 of which $43,394,577.83 represented interest. Total principal paid on capital leases was $25,258,517.86 for the fiscal year ended June 30, 2006. Interest rates range from 0.65 percent to 10 percent.

Annual Financial Report FY2006 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. Major capital lease details are listed below:
Georgia Institute of Technology
Georgia Institute of Technology has four capital leases with related parties in fiscal year 2006. 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, 2006 the remaining long-term debt obligation (principal) under the lease is $19,025,000.00.
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, 2006 the remaining long-term debt obligation (principal) under the lease is $42,605,000.00.
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, 2006 the remaining long-term debt obligation (principal) under the lease is $134,536,960.00.
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, 2006 the remaining long-term debt obligation under the lease is $68,885,000.00.
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, 2006 the remaining longterm debt obligation (principal) under the lease is $62,874,061.76. 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, 2006 totaling $13,309,471.15.
Annual Financial Report FY2006 70

Georgia State University
Georgia State University has two capital leases with related parties associated with buildings. In July 2001, Georgia State University entered into 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, 2006 on these capital leases is $29,881,093.13 and $11,466,858.64, respectively. Each year the monthly payments for both of these leases will increase by the greater of 2 percent or the CPI.
Georgia State University also has various capital leases for equipment with unrelated parties with an outstanding balance at June 30, 2006 in the amount of $818,837.40.
Medical College of Georgia
Medical College of Georgia entered into a 30 year capital lease agreement during fiscal 2006 with Medical College of Georgia Physicians Practice Group Foundation (PPG), a discretely presented component unit. The lease entitles the College to use the third, fourth and fifth floors of the Cancer Research Center. The lease has an effective interest rate of 6.85 percent and expires in 2036. The outstanding liability at June 30, 2006 is $27,517,640.50.
Medical College of Georgia has various other capital leases for equipment with an outstanding balance at June 30, 2006 in the amount of $1,316,141.70.
University of Georgia
The University of Georgia has six real property capital leases with the University of Georgia Real Estate Foundation (UGAREF), a related entity that is discretely presented in these financial statements. Interest rates on the capital leases range from 0.65 percent to 8.48 percent and expire in fiscal years 2032, 2033, three expire in 2034, and one expires in 2036.
In August of 2001, the University of Georgia entered into a 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 a 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 a capital lease with the UGAREF, whereby, the University leases the Complex Carbohydrate Research Center for a 30year period that began on September 25, 2003 and expires September 30, 2033. The University of Georgia entered into two capital leases with the UGAREF, whereby the University leases the East Campus Village dormitory complex and the East Village Commons dining hall for a 30year period that began July 1, 2004, and expires June 30, 2034. The University of Georgia entered into a capital lease with UGAREF whereby the University leases the Coverdell Center for a 30-year period that began December 9, 2005 and expires November 30, 2035. The outstanding liability at June 30, 2006 on these capital leases is $163,656,705.22.
Annual Financial Report FY2006 71

The University also has various capital leases for equipment with an outstanding balance of $463,082.07 at June 30, 2006.
Georgia Southern University
Georgia Southern University has five real property capital leases with Georgia Southern University Housing Foundation, Inc. (Housing Foundation), a related entity that is discretely presented in these financial statements.
In October 2002, Georgia Southern University entered into a capital lease of $42,668,051.33 at 4.89 percent with the Housing Foundation whereby the University leases buildings (Southern Courtyard and Southern Pines) for a twenty-seven year period that began September 2003 and expires October 2031. The outstanding liability at June 30, 2006, for this capital lease was $40,190,523.86.
In July 2005, Georgia Southern University entered into a capital lease of $2,230,349.81 at 4.94 percent with the Housing Foundation whereby the University leases a facility (Clements Baseball Stadium) for a twenty-four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2006, for this capital lease was $2,185,181.44.
In July 2005, Georgia Southern University entered into a capital lease of $694,056.02 at 4.94 percent with the Housing Foundation whereby the University leases a facility (Athletic Training Center) for a twenty-four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2006, for this capital lease was $679,976.78.
In July 2005, Georgia Southern University entered into a capital lease of $1,677,441.30 at 4.94 percent with the Housing Foundation whereby the University leases a facility (Soccer Stadium) for a twenty-four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2006, for this capital lease was $1,642,736.98.
In July 2005, Georgia Southern University entered into a capital lease of $30,179,998.26 at 4.94 percent with the Housing Foundation whereby the University leases buildings (Eagle Village) for a twenty-four year period that began August 2005 and expires July 2030. The outstanding liability at June 30, 2006, for this capital lease was $29,539,516.35.
Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2006 in the amount of $274,503.09.
Valdosta State University
Valdosta State University has three capital leases with related entities in the current fiscal year. Interest rates on these leases range from 4.25 percent to 10 percent and lease expirations range from 2007 to 2031.
In 2006, Valdosta State University entered into a capital lease of $7,116,694 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC. The University leased Lowndes Hall, a housing unit located on the main campus for a twenty-five year period. In 2005, the University entered into a capital lease for a twenty-five year period at an amount of
Annual Financial Report FY2006 72

$19,285,471.00 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC, for Centennial Hall, a housing unit located on Sustella Avenue. Finally, in 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, 2006 on these capital leases is $7,193,676.00, $18,261,647.66, and $807,063.31 respectively.
Valdosta State University also has various capital leases for equipment with an outstanding balance at June 30, 2006 in the amount of $89,391.33.
Augusta State University
Augusta State University entered into two capital leases with related entities in fiscal 2006. In August 2005, Augusta State University entered into a capital lease of $20,246,136.67 at 5.23 percent with Augusta State University Foundation (ASU Foundation), whereby the University leases a student housing complex for a thirty year period that began September, 2005 and expires January, 2035.
In February 2005, the University entered into a capital lease of $11,782,962.26 at 4.72 percent with ASU Foundation, whereby the University leases a student center building for a 29 year period that began March, 2006 and expires June, 2034.
The University is responsible for operating costs, such as utilities and insurance for both leases listed above. The outstanding liability at June 30, 2006 on these capital leases is $20,622,109.93 and $11,922,522.55 respectively. The University may cancel the lease agreements at the end of any fiscal year when sufficient appropriations, revenues, income, grants or other funding sources are not available. The Augusta State University Foundation is a component unit of Augusta State University and is discretely presented in these financial statements.
Augusta State University has a capital lease for equipment with an outstanding balance at June 30, 2006 totaling $187,750.00.
Kennesaw State University
Kennesaw State University has seven 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, 2006 on this capital lease is $3,718,606.24.
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 FY2006 73

ground lease, ownership of the parking decks transfers to the University. The outstanding liability at June 30, 2006 on this capital lease is $21,648,745.89.
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, 2006 on these capital leases is $3,219,123.71.
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, 2006 on this capital lease is $171,687.97.
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, 2006 on this capital lease is $13,762,826.48.
In April 2006, the University entered into a capital lease of $4,015,944.18 at 8.22 percent whereby the University leases a portion of an office building for a twenty-four year period that began April 2006 and expires June 30, 2030. The University is obligated to lease additional space in the building as it becomes available. At the expiration of the lease, ownership of the building transfers to the University. The outstanding liability at June 30, 2006 on this capital lease is $3,979,085.84.
In April 2006, the University entered into a capital lease of $1,814,401.89 at 5.07 percent whereby the University leases 7.242 acres of unimproved land for a twenty-four year period that began April 2006 and expires June 30, 2030. At the expiration of the lease, ownership of the land transfers to the University. The outstanding liability at June 30, 2006 on this capital lease is $1,806,019.00.
Southern Polytechnic State University
Southern Polytechnic State University has capital leases for two facilities with related entities in the current fiscal year. In July 2005, Southern Polytechnic State University entered into a capital lease of $11,643,862.28 at 5.00 percent with the Southern Polytechnic State University Foundation, Inc., a discretely presented component unit, whereby the University leases a building for a twenty-two year period that began July 2005 and expires June 2027. Also in July 2005, Southern Polytechnic State University entered into a capital lease of $22,148,455.52 at 5.00 percent with the Southern Polytechnic State University Foundation, Inc., whereby the University leases a building for a twenty-four year period that began July 2005 and expires June
Annual Financial Report FY2006 74

2029. The outstanding liability at June 30, 2006 on these capital leases is $33,003,905.06. The University at its option may terminate the lease and purchase the Foundation's interest for the unamortized principal balance and the payment of $1.
Georgia Gwinnett College
Georgia Gwinnett College has one capital lease on the Gwinnett University Center. In November 2001, Georgia Perimeter College entered into this 22-year lease with an implicit interest rate of 5.15 percent. On July 1, 2005, the leased assets and related liability were transferred from Georgia Perimeter College to Georgia Gwinnett College. Current outstanding balance as of June 30, 2006 is $15,417,892.57. This lease will expire in 2023.
University System Office
The University System Office has nine capital leases payable in monthly installments with terms expiring in various years between 2009 and 2025. Interest rates range from 3.83 percent to 5.00 percent.
The University System Office entered into four new capital lease obligations in the current fiscal year. In December 2005, lease obligation number 257 was completed for numerous items of equipment for a principal amount of $3,795,715.69 at an interest rate of 4.79 percent. In January 2006, lease obligation number 273 was completed for ExLibris Software for a principal amount of $997,365.00 at an interest rate of 5.00 percent. In May 2006, the University System Office entered into a capital lease of $1,278,000.00 at 3.83 percent for numerous items of equipment and a capital lease of $955,000.00 at 4.03 percent for software licenses. In May 2006, the University System Office refinanced lease obligation numbers 224, 232, 240 and 257 resulting in a decrease in interest rates from 4.95 percent, 5.65 percent, 5.65 percent and 4.79 percent, respectively to 4.10 percent for each lease obligation. The outstanding liability at June 30, 2006 on these leases is $26,264,959.19.
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 2036. 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 real property, copiers and other small business equipment. System-wide real property and equipment operating lease expense for fiscal 2006 was $33,867,934.57. System-wide remaining payments on operating leases total $198,848,019.32.
Annual Financial Report FY2006 75

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, 2006, are as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 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

Total Capital Leases
$72,673,464.87 72,078,259.47 71,144,128.77 69,758,291.16 66,120,998.79
325,257,064.06 333,000,938.08 290,465,146.19 215,300,075.84
63,546,089.37 1,579,344,456.60
715,317,285.14 28,594,407.75
$835,432,763.71

Total Operating Leases
$28,507,392.41 12,419,020.12 11,036,210.31 10,478,946.88 10,081,336.23 41,730,472.05 25,467,379.44 27,093,952.56 23,433,309.32 8,600,000.00
$198,848,019.32

Annual Financial Report FY2006 76

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 2006, 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

2006 2005 2004

100% 100% 100%

Employees' Retirement System of Georgia

Required Contribution
$109,977,005.24 $106,062,476.85 $106,773,703.51

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 60. 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

Annual Financial Report FY2006 77

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 2006 amounted to $456,199.20, of which $365,619.14 was made by the University System and $90,580.06 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, 2006 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.
Annual Financial Report FY2006 78

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 2006, 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 $66,770,332.24 (9.65%) and $34,582,390.99 (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 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.
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 2006 amounted to $6,559,436.96 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.
Annual Financial Report FY2006 79

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. 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 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, 2006, is shown below:

Unpaid Claims and Claim Adjustments July 1, 2005
Incurred Claims and Claim Adjustments Expenses Provisions for Insured Events of the current year
Payments Claims and Claim Adjustments Attributable to Insured Events of the Current Year and of Prior Years
Unpaid Claims and Claim Adjustments June 30, 2006

$ 27,583,054.00 245,882,647.27 245,422,228.27
$ 27,983,473.00

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

Annual Financial Report FY2006 80

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 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, 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, 2006, there were 12,597 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30,
Annual Financial Report FY2006 81

2006, the University System of Georgia recognized as incurred $54,377,135.38 of expenditures, which was net of $20,017,644.95 of participant contributions.

Note 15. Natural Classifications with Functional Classifications

The University System's operating expenses by functional classification for FY2006 are shown below:

Functional Classification FY2006

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

In st ruct io n

Research

Public Service

Academic Support

St udent Services

In st it ut ion al Support

$633,842,239.79 227,426,174.10 118,708,576.27
2,016,427.96 12,774,039.14 2,787,215.61 6,659,370.97 100,399,654.01 31,483,891.41

$204,137,301.01 227,418,827.77 50,557,018.17
314,836.04 18,367,791.19 2,522,524.92 1,754,320.28 172,650,018.04 21,569,924.21

$46,594,651.84 132,995,608.16 26,730,764.56
786,955.02 6,160,704.07 1,810,098.07 19,959,579.45 144,650,470.34 5,449,000.40

$11,919,015.18 170,452,290.06 27,993,491.05
129,364.85 4,141,499.90
173,062.13 2,437,004.90 94,288,515.42 26,507,711.88

$640,582.94 98,045,340.56 14,646,673.18
21,565.04 2,203,682.87 2,565,422.49 1,604,626.62 51,455,210.93 3,224,143.22

$1,801,283.30 215,663,072.00 65,999,518.07
296,434.30 3,496,631.32 8,191,617.73 10,279,938.75 368,789,545.18 18,982,491.01

Total Expenses

$1,136,097,589.26 $699,292,561.63 $385,137,831.91 $338,041,955.37 $174,407,247.85 $693,500,531.66

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

P lan t Operations & Maintenance

Scholarships & Fellowships

Functional Classification FY2006

Auxiliary Enterprises

Unallocated Expenses

MCG only Patient Care

T ot al Expenses

$235,248.41 109,488,110.01 19,416,837.16
(8,268,039.62) 328,460.90
98,384,982.81 133,919,257.42 29,395,572.30

$0.00 4,813.57 31,320.23
143,652,614.91 211,378.53

$845,514.69 100,288,267.51 14,719,106.12
8,558,420.87 1,454,982.55 12,460,121.07 19,714,230.30 200,027,814.67 30,711,971.41

$0.00 636.51
907,122.75 73,590,427.36

$2,497,669.89 67,598,206.37 11,004,448.59
241,001.44
326,759.49 93,545,565.32

$902,513,507.05 1,349,380,710.11
349,808,389.91 3,855,964.46 49,168,793.38
174,162,676.93 161,120,813.57 1,360,844,552.61 240,915,133.20

$382,900,429.39 $143,900,127.24 $388,780,429.19 $74,498,186.62 $175,213,651.10 $4,591,770,541.22

Annual Financial Report FY2006 82

Note 16. Component Units
Georgia Institute of Technology
Georgia Tech Foundation, Inc. Georgia Tech Foundation, Inc. (Foundation), is a legally separate, tax-exempt component unit 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's 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 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 2006, the Foundation distributed approximately $67.9 million to the Institute for restricted and unrestricted purposes. Note 10 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.
Investments for Component Units:
The Georgia Tech Foundation holds investments totaling $1.112 billion as of June 30, 2006, of which $327.4 million is the corpus of the endowment (permanently restricted). The corpus is nonexpendable, but the earnings on the investments may be spent in accordance with donor restrictions or in accordance with the Foundation's spending policy. The Foundation has established a spending policy in which up to 6% of the twelve (12) quarter average market value of the endowment funds are allocated from the earnings for expenditure. In fiscal year 2006, the Foundation allocated 5.15% of that average.
Annual Financial Report FY2006 83

Investments are comprised of the following amounts at June 30, 2006:

Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Venture Capital, Buyout Funds and distressed securities Diversifying strategies
Total Investments

Cost
$5,217,160.36 21,941,353.76 27,821,556.77 351,946,212.78 53,192,067.63 33,464,313.18 169,582,333.62 249,186,465.48
$912,351,463.58

Fair Value
$5,217,160.36 22,373,110.11 26,849,942.38 478,800,912.57 54,277,620.03 37,182,570.20 211,977,917.03 275,269,767.32
$1,111,949,000.00

Capital Assets for Component Units:

Georgia Tech Foundation, Inc. holds the following Capital Assets at June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$2,553,000.00 2,553,000.00
38,051,000.00 7,000,000.00
45,051,000.00 6,731,000.00
38,320,000.00 $40,873,000.00

Annual Financial Report FY2006 84

Long-term Liabilities for Component Units:
Changes in long-term liabilities for Georgia Tech Foundation, Inc. for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities

$268,430.75 222,055,000.00

$485,436.25 44,220,000.00
9,598,252.70

$471,297.33 5,799,000.00

$282,569.67 44,220,000.00 216,256,000.00 9,598,252.70

$282,569.67 44,220,000.00 4,385,000.00
980,932.05

Total Long Term Liabilities

$222,323,430.75 $54,303,688.95 $6,270,297.33 $270,356,822.37 $49,868,501.72

Lines of Credit The Foundation has two $30 million revolving lines of credit. At June 30, 2006, $44,220,000 was the total aggregate outstanding on the lines of credit. Interest is calculated using the 30-day LIBOR rate plus 0.25%, which was 5.42% at June 30, 2006. One line of credit expires on June 30, 2007 and the other on December 31, 2006. The foundation expects to renew both lines of credit upon expiration.

Series 2001 Bond Issuance During May 2001, the Foundation borrowed $44.98 million in Series 2001A Bonds. These bonds were issued to provide funds to finance the costs of construction of the CRC, a facility that has been constructed on the Institute's campus. These bonds are general unsecured obligations of the Foundation. The interest rates on the outstanding bond principal ranges from 4% to 5.75% until maturity in November 2030.

Series 2002 Bond Issuance During January 2002, the Foundation borrowed $111.09 million in Series 2002A (tax exempt) Bonds and $73.19 million Series 2002B (taxable) Bonds. These bonds were issued to provide funds to finance the costs of the acquisition, construction and installation of an addition to the Institute's campus known as Technology Square. The Foundation leased the hotel and conference center portion of Technology Square to a third party in July, 2003. The other components of Technology Square were leased to the Board of Regents, on behalf of the Institute, under a capital lease effective July, 2004. The bonds are general unsecured obligations of the Foundation. The interest rates on the outstanding bond principal range from 5.23% to 6.6% through maturity in November 2031.

Annual Financial Report FY2006 85

Annual debt service requirements to maturity for Georgia Tech Foundation's revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Bond Discount, net

Bonds Payable

Principal

Interest

Total

$4,385,000.00 4,605,000.00 4,825,000.00 5,060,000.00 5,310,000.00
31,385,000.00 41,760,000.00 48,030,000.00 61,255,000.00 11,260,000.00 217,875,000.00 (1,619,000.00) $216,256,000.00

$11,879,629.78 11,662,200.03 11,437,490.53 11,203,636.65 10,945,586.52 49,883,558.85 39,512,526.34 26,806,193.01 12,002,153.00 316,360.00 185,649,334.71
$185,649,334.71

$16,264,629.78 16,267,200.03 16,262,490.53 16,263,636.65 16,255,586.52 81,268,558.85 81,272,526.34 74,836,193.01 73,257,153.00 11,576,360.00
403,524,334.71 (1,619,000.00)
$401,905,334.71

Georgia Tech Athletic Association Georgia Tech Athletic Association (the Athletic Association) is a legally separate, tax-exempt component unit of the Georgia Institute of Technology (Institute). The Athletic 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 from the Athletic Association, all of the resources are restricted to support the intercollegiate athletic program for Georgia Tech. Because these resources are used for the benefit of the Institute, the Athletic Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements.
The Athletic Association is a private nonprofit organization that reports under GASB standards, in accordance with Statements of Governmental Accounting Standards ("SGAS") No. 35, Basic Financial Statements-and Management's Discussion and Analysis-for Public Colleges and Universities, as amended by SGAS No. 37, Basic Financial Statements-and Management's Discussion and Analysis-State and Local Governments: Omnibus-an Amendment of GASB Statements No. 21 and No. 34, and SGAS No. 38, Certain Financial Statement Note Disclosures. The financial statement presentation required by these statements provide a comprehensive, entity-wide perspective of the Association's assets, liabilities, net assets, revenues, expenses, and changes in net assets. The Athletic Association's fiscal year is July 1 through June 30.
During the year ended June 30, 2006, the Athletic Association distributed approximately $9.5 million to the Institute for athletic scholarship support and other payments that were either expense reimbursements or support for Institute programs. Complete financial statements for the Athletic Association can be obtained from the Georgia Tech Athletic Association, Attention: Mollie Simmons Mayfield, Assistant Director of Athletics, 150 Bobby Dodd Way, NW, Atlanta, GA 30332-0455.

Annual Financial Report FY2006 86

Deposits and Investments for Component Units:
During the year ended June 30, 2005, the Athletic Association adopted SGAS No. 40, Deposit and Investment Risk Disclosures, which amends SGAS No. 3, Deposits With Financial Institutions, Investments (Including Repurchase Agreements), and Reverse Repurchase Agreements. This statement requires the Association to disclose custodial risk related to deposits and investment securities. Custodial credit risk is the risk that in the event of a bank failure, the Athletic Association's deposits or funds invested may not be returned to it.
The Association does not have a policy that addresses custodial credit risk. As of June 30, 2006, $5,194,189 of the Athletic Association's bank balance of $5,294,189 was uncollateralized and exposed to custodial credit risk.
The Athletic Association's investments are held and reported by Georgia Tech Foundation and are represented by a $68,152,231 Due from Component Unit balance on the Statement of Net Assets.
Capital Assets for Component Units:
Georgia Tech Athletic Association had the following Capital Asset activity for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Total Assets Being Depreciated
Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning Balances 7/1/2005
$0.00 65,888.00 65,888.00
127,611,520.00 423,778.00
2,238,651.00 130,273,949.00
23,555,082.00 253,535.00
1,092,226.00 24,900,843.00
105,373,106.00
$105,438,994.00

Additions
$49,946.00 473,447.00 523,393.00

Reductions
$0.00 65,888.00 65,888.00

Ending Balance 6/30/2006
$49,946.00 473,447.00 523,393.00

595,152.00
257,560.00 852,712.00

3,096,887.00
(3,096,887.00) 0.00

125,109,785.00 423,778.00
5,593,098.00 131,126,661.00

3,910,623.00 46,562.00 563,940.00
4,521,125.00
(3,668,413.00)
($3,145,020.00)

857,916.00
(857,916.00) 0.00

26,607,789.00 300,097.00
2,514,082.00 29,421,968.00

0.00

101,704,693.00

$65,888.00 $102,228,086.00

Annual Financial Report FY2006 87

Long-term Liabilities for Component Units:

Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable
Total Long Term Debt

$751,616.00 1,012,694.00 109,761,479.00

$488,145.00

$300,767.00 24,480.00
1,799,972.00

$938,994.00 988,214.00 107,961,507.00

$938,994.00 25,480.00
1,830,000.00

$111,525,789.00 $488,145.00 $2,125,219.00 $109,888,715.00 $2,794,474.00

Notes Payable at June 30, 2006 represent the Athletic Association's obligation to Georgia Tech Foundation Facilities, Inc. with respect to the William C. Wardlaw Center. The effective interest rate at June 30, 2006 is 4.92%.

Annual debt service requirements to maturity for the Athletic Association's note payable are as follows:

Year Ending June Year

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016 6-10

2017 through 2021 11-15

2022 through 2026 16-20

2027 through 2031 21-25

Notes and Loans Payable

Principal

Interest

$25,480.00 26,979.00 27,978.00 29,477.00 30,975.00 179,357.00 230,816.00 296,264.00 140,888.00

$48,885.00 47,670.00 46,376.00 44,998.00 43,510.00
192,028.00 140,847.00
74,993.00 7,359.00

Total
$74,365.00 74,649.00 74,354.00 74,475.00 74,485.00
371,385.00 371,663.00 371,257.00 148,247.00

$988,214.00

$646,666.00

$1,634,880.00

In December, 2001, the Development Authority of Fulton County issued the Georgia Tech Athletic Association Revenue Bonds, Series 2001 ("Series 2001 Bonds") with a par value of $112,080,000 to finance the construction of a new baseball stadium, demolish a portion of the Georgia Tech Football stadium, the construction of certain improvements thereto, other miscellaneous capital improvements, and to refinance the outstanding principal on the Series 1995 Bonds and other borrowings. The interest rates on the bonds range from 4% to 5.5% and the bonds mature in October, 2032.
On March 16, 2004, the Athletic Association entered into a master swap agreement with UBS AG, Stamford Branch ("UBS"), an investment bank, and simultaneously sold UBS, an Interest

Annual Financial Report FY2006 88

Rate Swaption ("swaption"). The swaption represents an option to enter into an interest rate swap. The swaption premium generated by this contract was an upfront payment to the Athletic Association of $2,367,000. In exchange for the swaption premium, UBS gains the right (but not the obligation) to enter into a specified swap agreement with the Athletic Association beginning on April 1, 2012. If the swaption is exercised, the Athletic Association and UBS will swap interest rate payments. The Athletic Association will pay interest to UBS based on the stated rates in the swap agreement. UBS would then pay the Athletic Association a floating rate based on the Bond Market Association Municipal Swap Index plus 21 basis points (0.21%), which approximates the expected interest cost on the variable rate refunding bonds. At June 30, 2006, the swaption had a fair value (representing a liability) of $4,439,680, as calculated by UBS. The swaption premium is recorded as a component of bonds payable in the statement of net assets and is being amortized on a straight-line basis over the remaining life of the bonds as a component of interest expense in the statement of revenues, expenses, and changes in net assets.

Annual debt service requirements to maturity for the Athletic Association's revenue bonds payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012hrough 2016 2017through 2021 2022through 2026 2027 through 2031 2032 through 2036

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

Principal

Bonds Payable Interest

$1,830,000.00 1,925,000.00 2,025,000.00 2,120,000.00 2,210,000.00
12,945,000.00 16,950,000.00 21,880,000.00 29,585,000.00 15,240,000.00

$5,426,211.00 5,332,336.00 5,233,586.00 5,137,911.00 5,045,346.00
23,338,856.00 19,330,381.00 14,404,582.00
8,914,410.00 791,043.00

Total
$7,256,211.00 7,257,336.00 7,258,586.00 7,257,911.00 7,255,346.00
36,283,856.00 36,280,381.00 36,284,582.00 38,499,410.00 16,031,043.00

Bond Discount/Swaption Premium, net

$1,251,507.00 $107,961,507.00

$92,954,662.00

$1,251,507.00 $199,664,662.00

Georgia Tech Research Corporation 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 the Institute. Because the 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

Annual Financial Report FY2006 89

were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Research Corporation's fiscal year is July 1 through June 30. During fiscal year 2006, GTRC distributed approximately $337 million to the Institute for restricted and unrestricted purposes. 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:

Georgia Tech Research Corporation holds investments in the amount of $960 thousand in the form of marketable securities as of June 30, 2006.

Cost

Fair Value

Equity Securities Total Investments

$0.00 $0.00

$959,595.00 $959,595.00

Capital Assets for Component Units:

Georgia Tech Research Corporation holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$4,312,482.00 4,312,482.00 2,463,169.00 1,849,313.00
$1,849,313.00

Georgia Advanced Technology Ventures, Inc. 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 for external financial reporting purposes in these financial statements. Georgia Advanced Technology Ventures fiscal year is July 1 through June 30.

Annual Financial Report FY2006 90

During the year ended June 30, 2006, Georgia Advanced Technology Ventures, Inc. distributed $178,500 to the Institute for operating supplies and services and $95,000 for salaries. 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 303320257 Attention: Joel Hercik.

Investments for Component Units:

Georgia Advanced Technology Ventures, Inc. holds investments in the amount of $1 million. These funds are invested in Georgia Venture Partners, LLC.

Capital Assets for Component Units:

Georgia Advanced Technology Ventures, Inc. holds the following Capital Assets as of June 30, 2006:
June 30, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$10,725,522.00 10,725,522.00
70,384,712.00 1,047,396.00
71,432,108.00 4,409,505.00
67,022,603.00 $77,748,125.00

Long-term Liabilities for Component Units:

Changes in long-term liabilities for the GATV for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Capital Lease Obligations Notes and Loans Payable
Total Long Term Debt

$49,631,945.00 6,821,580.00
$56,453,525.00

$981,386.00 3,900,234.00
$4,881,620.00

$0.00 14,374.00
$14,374.00

$50,613,331.00 10,707,440.00
$61,320,771.00

$0.00 4,383,096.00
$4,383,096.00

Annual Financial Report FY2006 91

Annual debt service requirements to maturity for lease purchase obligations are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037 through 2041

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

Principal

Capital Lease Payable Interest

($307,092.00) (237,920.00) (163,918.00) (77,434.00) 18,149.00 1,835,654.00 5,774,964.00
11,222,916.00 18,963,780.00 13,584,232.00

$3,419,780.00 3,438,286.00 3,452,211.00 3,460,684.00 3,463,029.00
17,094,092.00 15,863,417.00 13,063,516.00
8,133,616.00 1,382,966.00

Total
$3,112,688.00 3,200,366.00 3,288,293.00 3,383,250.00 3,481,178.00
18,929,746.00 21,638,381.00 24,286,432.00 27,097,396.00 14,967,198.00

$50,613,331.00

$72,771,597.00

$123,384,928.00

Annual estimated debt service requirements to maturity for Notes Payable are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

Principal
$4,383,096.00 30,507.00
6,032,338.00 34,278.00 36,335.00
190,886.00

Notes Payable Interest
$758,078.00 646,167.00 174,307.00 15,690.00 13,633.00 3,818.00

Total
$5,141,174.00 676,674.00
6,206,645.00 49,968.00 49,968.00
194,704.00

$10,707,440.00

$1,611,693.00

$12,319,133.00

Georgia Tech Facilities, Inc. 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 these 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 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

Annual Financial Report FY2006 92

were reclassified to the GASB presentation 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 $141,714,000 and bonds payable are included in the 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. During fiscal 2006, Facilities distributed $395,000 to the Institute for restricted and unrestricted purposes. Complete financial statements for Facilities can be obtained from the following address: Georgia Tech Facilities, Inc. Treasurer's Office, Lyman Hall, Room 315, Atlanta, GA 30332-0257 Attention: Joel Hercik.

Investments for Component Units:

Georgia Tech Facilities, Inc. holds investments in the amount of $188.5 million. Investments consist of marketable securities, bonds and real property as follows:

Cash held by investment organization Money Market Accounts Government and Agency Securities Real Estate Bankers Acceptance/Repo Agreements
Total Investments

Cost
$11,595,367.10 1,921,393.28 8,763,701.27
141,714,000.00 24,528,538.35
$188,523,000.00

Fair Value
$11,595,367.10 1,921,393.28 8,763,701.27
141,714,000.00 24,528,538.35
$188,523,000.00

Capital Assets for Component Units:

Georgia Tech Facilities, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$598,000.00 68,166,000.00 68,764,000.00
1,200,000.00 1,200,000.00
480,000.00 720,000.00 $69,484,000.00

Annual Financial Report FY2006 93

Long-term Liabilities for Component Units:

Georgia Tech Facilities, Inc. has five bond issues outstanding with balances totaling $212,675,000 and one Master Lease/Sublease agreement for $9,734,000.

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, the Molecular Science and Engineering Building, and the Electrical Substation. Interest rates on the bonds range from 2% to 5.25%. Also, for the 2005 Series bonds, Facilities has an interest rate swap agreement. Facilities retains an independent entity to provide periodic valuation of the interest rate swap. At June 30, 2006, the value is $1,231,000 and is reflected in Other Current Assets on the Statement of Net Assets.

The lease agreement finances the Georgia Tech Telecommunications Equipment and Installation project. To finance the equipment, Georgia Tech Facilities, Inc. entered into a Master Lease and Sublease Agreement with SunTrust Leasing Corporation (as Lessor) and the Development Authority of Fulton County (as lessee).

Changes in long-term liabilities for Facilities for the fiscal year ended June 30, 2006 are shown

below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2005

Additions

Reductions

June 30, 2006

One Year

Capital Lease Obligations Revenue/Mortgage Bonds Payable

$0.00 175,155,000.00

$9,734,000.00 39,670,000.00

$0.00 2,150,000.00

Total Long Term Debt

$175,155,000.00 $49,404,000.00 $2,150,000.00

$9,734,000.00 212,675,000.00
$222,409,000.00

$242,000.00 2,550,000.00
$2,792,000.00

Annual debt service requirements to maturity for Georgia Tech Facilities, Inc. revenue bonds

payable are as follows:

Bonds Payable

Principal

Interest

Total

Year ending June 30:

2007

1

$2,550,000.00

$9,988,000.00

$12,538,000.00

2008

2

3,921,000.00

9,913,000.00

13,834,000.00

2009

3

4,795,000.00

9,789,000.00

14,584,000.00

2010

4

4,950,000.00

9,642,000.00

14,592,000.00

2011

5

4,574,000.00

9,429,000.00

14,003,000.00

2012 through 2016

6-10

28,130,000.00

43,418,000.00

71,548,000.00

2017 through 2021

11-15

37,125,000.00

35,246,000.00

72,371,000.00

2022 through 2026

16-20

46,570,000.00

24,862,000.00

71,432,000.00

2027 through 2031

21-25

46,470,000.00

13,045,000.00

59,515,000.00

2032 through 2036

26-30

31,390,000.00

4,869,000.00

36,259,000.00

2037 through 2041

31-35

2,200,000.00

72,000.00

2,272,000.00

$212,675,000.00

$170,273,000.00

$382,948,000.00

Annual Financial Report FY2006 94

Annual debt service requirements to maturity for lease purchase obligations are as follows:

Year Ending June 30:
2007 2008 2009 2010
2011 2012 through 2016

Year
1 2 3 4
5 6-10

Capital Lease Payable

Principal

Interest

Total

$242,000.00 2,097,000.00 2,179,000.00 2,263,000.00
2,351,000.00 602,000.00

$366,000.00 332,000.00 251,000.00 167,000.00
79,000.00 6,000.00

$608,000.00 2,429,000.00 2,430,000.00 2,430,000.00
2,430,000.00 608,000.00

$9,734,000.00

$1,201,000.00

$10,935,000.00

Georgia Tech Alumni Association Georgia Tech Alumni Association (Alumni Association) is a legally separate, tax-exempt component unit 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 forty-three member Alumni Association board of trustees is self-perpetuating and consists of alumni and friends of the Institute. Although the Institute does not control the timing or amount of receipts from the Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests 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 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 Alumni Association's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Alumni Association distributed $839,139 to the Institute primarily for employee salary and insurance costs. Complete financial statements for the Alumni Association can be obtained from the Georgia Tech Alumni Association, Attention: Controller, 190 North Avenue, Atlanta, GA 30313.

Investments for Component Units: The Georgia Tech Alumni Association holds investments in the amount of $628,023. Investments consist of mutual funds as follows:

Mutual Funds Total Investments

Cost $725,894.00 $725,894.00

Fair Value $628,023.00 $628,023.00

Annual Financial Report FY2006 95

Capital Assets for Component Units:

Georgia Tech Alumni Association holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$0.00 7,077.00 7,077.00
702,586.00 618,011.00 1,320,597.00 815,729.00 504,868.00 $511,945.00

Georgia State University
Georgia State University Foundation, Inc. Georgia State University Foundation, Inc. (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 28-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 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. The fiscal year of the Foundation is July 1 through June 30.
During the year ended June 30, 2006, the Foundation distributed $14,843,631 to the University for both restricted and unrestricted purposes. This amount includes land transferred at its historical cost of $7,470,140 to the University. Complete financial statements for the Foundation can be obtained from James F. Winters, III, Controller, Georgia State University Foundation, P.O. Box 3963, Atlanta, GA 30302-3963 or in person at One Park Place South, Atlanta, GA.

Annual Financial Report FY2006 96

Investments for Component Units:

Georgia State University Foundation holds endowment and other investments in the amount of $108.7 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.

Investments are comprised of the following amounts at June 30, 2006:

Equities and Equity Funds Fixed Income Securities and Funds Real Estate Investment Trust Funds
Total Investments

Cost
$60,588,703.00 33,350,103.00 3,702,251.00
$97,641,057.00

Fair Value
$62,323,033.00 39,757,180.00 6,576,018.00
$108,656,231.00

Capital Assets for Component Units:

Georgia State University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$3,746,265.00 54,462,946.00 58,209,211.00
63,537,731.00 63,537,731.00 19,129,452.00 44,408,279.00 $102,617,490.00

Annual Financial Report FY2006 97

Long-term Liabilities for Component Units:

Changes in long-term liabilities for Georgia State University Foundation, Inc. for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Compensated Absences Rialto Center - Capital Lease Alpharetta Campus Facilities - Capital Lease Student Recreation Center - Bonds Piedmong Ellis - Promissory Note Piedmont Ellis - Bonds Piedmont Ellis- Unamortized Bond Prem. Other Liabilities

$0.00 3,833,028.27 7,226,925.00 28,015,000.00 8,833,332.00
0.00 0.00 0.00

$19,101.00
161,330,000.00 6,620,809.00 249,819.00

$0.00 263,001.27 388,275.00 1,490,000.00 8,833,332.00
289,136.00

$19,101.00 3,570,027.00 6,838,650.00 26,525,000.00
0.00 161,330,000.00
6,331,673.00 249,819.00

$19,101.00 281,246.00 404,975.00 1,550,000.00

Total Long Term Debt

$47,908,285.27 $168,219,729.00 $11,263,744.27 $204,864,270.00 $2,255,322.00

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 is being financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (the "Authority"). 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 in turn leases 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 extension of 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.

Annual Financial Report FY2006 98

Annual debt requirements to maturity for TUFF/Rialto Capital Lease Obligation are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

Capital Lease Obligation

Principal

Interest

Total

$281,246.00 300,755.00 321,618.00 343,927.00 367,785.00
1,954,696.00 $3,570,027.00

$231,538.00 212,029.00 191,166.00 168,857.00 144,999.00 310,100.00
$1,258,689.00

$512,784.00 512,784.00 512,784.00 512,784.00 512,784.00
2,264,796.00 $4,828,716.00

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 and are 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 in turn subleases the facilities to the Board of Regents of the University System of Georgia (Board of Regents) for the use by 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.

Annual debt requirements to maturity for Alpharetta Capital Lease Obligation are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2019

Year
1 2 3 4 5 6-10 11-13

Capital Lease Obligation

Principal

Interest

Total

$404,975.00 421,675.00 438,375.00 455,075.00 471,775.00
2,701,225.00 1,945,550.00 $6,838,650.00

$298,973.68 282,469.35 264,956.94 246,318.72 226,383.66 782,949.41 135,303.40
$2,237,355.16

$703,948.68 704,144.35 703,331.94 701,393.72 698,158.66
3,484,174.41 2,080,853.40 $9,076,005.16

Student Recreation Center Note Payable

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

Annual Financial Report FY2006 99

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%.

Annual debt service requirements to maturity for ADA/GSU Student Recreation Center Revenue Bonds Payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2019

1 2 3 4 5 6-10 11-13

Bonds Payable

P r inc i pal

Interest

$1,550,000.00 1,615,000.00 1,680,000.00 1,755,000.00 1,830,000.00
10,505,000.00 7,590,000.00
$26,525,000.00

$1,249,946.66 1,085,058.74 1,015,585.00 942,004.39 864,340.00 2,956,188.12 462,056.25
$8,575,179.16

Total
$2,799,946.66 2,700,058.74 2,695,585.00 2,697,004.39 2,694,340.00
13,461,188.12 8,052,056.25 $35,100,179.16

Piedmont Ellis Bonds

On September 8, 2005, $161,330,000 of tax-exempt and taxable revenue bonds were issued by the Atlanta Development Authority (ADA) on behalf of the Foundation with the proceeds to be used for the purpose of financing the acquisition, construction and equipping of certain land, buildings and personal property to be used as a student housing project. The project has approximately 1,984 beds, including community activity facilities, site amenities and parking for approximately 786 vehicles. There is a 22-month construction schedule for the project to be completed and open for occupancy in the fall semester of 2007. The real property upon which the project is located is owned by the Board of Regents and leased to the Foundation pursuant to a Ground Lease for a construction term of up to two years. Upon completion of the project, the Foundation will lease the facility to the Board of Regents on an annually-renewable basis for a term of 33 years for the use and benefit of the University. Principal payments are to be made annually starting September 1, 2009 and ending September 1, 2036. Interest is paid semiannually through 2036 at a rate specified in the revenue bonds ranging from 3.875% to 5.0%.

Annual Financial Report FY2006 100

Annual debt service requirements to maturity for ADA/GSU Piedmont Ellis Student Housing Revenue Bonds Payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037

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

Principal

Bonds Payable Interest

$0.00 0.00 0.00
1,270,000.00 1,580,000.00 13,105,000.00 22,345,000.00 28,735,000.00 36,680,000.00 46,805,000.00 10,810,000.00 $161,330,000.00

$7,762,467.50 7,762,467.50 7,762,467.50 7,713,784.18 7,642,822.50
36,740,777.49 32,817,020.89 26,488,895.89 18,218,854.18
7,663,229.21 78,822.92
$160,651,609.76

Total
$7,762,467.50 7,762,467.50 7,762,467.50 8,983,784.18 9,222,822.50
49,845,777.49 55,162,020.89 55,223,895.89 54,898,854.18 54,468,229.21 10,888,822.92 $321,981,609.76

Georgia State University Research Foundation, Inc. Georgia State University Research Foundation, Inc. (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.
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 the year ended June 30, 2006, the Research Foundation paid to the University $49,845,424 in grant revenue and $1,033,221 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.

Annual Financial Report FY2006 101

Deposits and Investments
Deposits:
The custodial credit risk for deposits is the risk that in the event of a bank failure, the Research Foundation's deposits may not be recovered. 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 Authority 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. Insurance of accounts provided by the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation.
At June 30, 2006, the Research Foundation's carrying amount of deposits was $5,296,043 and the bank balance was $6,380,292. Of the bank balance, $100,000 was covered by FDIC insurance and the remaining balance was uninsured and uncollateralized.
Investments:
At June 30, 2006, the carrying value and fair value of the Research Foundation's investments was $5,619,165. Investments are comprised of common stock and mutual funds. The common stock investment in the amount of $198,607 is held in the Research Foundation's name. Other investments are held by the Georgia State University Foundation on behalf of the Research Foundation.
Annual Financial Report FY2006 102

Capital Assets for Component Units:

Georgia State University Research Foundation, Inc. had the following Capital Asset activity for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress
T otal Capital Assets Not Being Depreciated

Beginning B al an ce s 7/1/2005
$150,024.00 0.00
150,024.00

Addi ti on s $1,493,967.00
1,493,967.00

Re ductions $0.00 0.00

En di n g B a l a n ce 6/30/2006
$1,643,991.00 0.00
1,643,991.00

Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements T otal Assets Being Depreciated

3,894,651.00 359,744.00
4,254,395.00

3,894,651.00

359,744.00

0.00

0.00

4,254,395.00

Less: Accumulated Depreciation Buildings Facilities and Other improvements T otal Accumulated Depreciation

402,948.00 269,719.00 672,667.00

87,629.00 21,584.00 109,213.00

490,577.00

291,303.00

0.00

781,880.00

T otal Capital Assets, Being Depreciated, Net Capital Assets, net

3,581,728.00 $3,731,752.00

(109,213.00) $1,384,754.00

0.00 $0.00

3,472,515.00 $5,116,506.00

Medical College of Georgia

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 mission 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 issued after November 30, 1989, that do not conflict with or contradict GASB pronouncements. The Company's fiscal year is July 1 through June 30.
Complete financial statements for the Company can be obtained from the Administrative Office at 1120 15th Street, Augusta, Georgia 30912.

Annual Financial Report FY2006 103

Deposits and Investments

At June 30, 2006, $62,482,586 of MCG Health, Inc.'s deposits was uninsured and collateralized by securities held by the pledging institution in the Company's name.

At June 30, 2006, MCG 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 policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.

A summary of investments follows:
Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

Investment type Debt Securities
U.S. Treasuries U.S. Agencies
Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage/Asset Backed Securities (Corporate)

$9,945,241.00
20,690,248.00 0.00
17,116,228.00 11,055,360.00 $58,807,077.00

$1,161,144.00 448,953.00
1,259,621.00 $2,869,718.00

$8,784,097.00
17,947,158.00
15,856,607.00 3,869,316.00 $46,457,178.00

$0.00 207,734.00
1,677,358.00 $1,885,092.00

$0.00 2,086,403.00
5,508,686.00 $7,595,089.00

Other Investments Equity Securities - Domestic Equity Securities - International Joint Venture Real Estate Investment Fund

17,646,518.00 162,145.00 883,695.00
$77,499,435.00

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.

As of June 30, 2006, none of MCG Health, Inc.'s investments are subject to Custodial Credit 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 Company's policy for managing credit quality risk is as follows: The

Annual Financial Report FY2006 104

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 Poor's and/or Moody's.
The investments subject to credit quality risk at June 30, 2006 are rated as follows:

Related Debt Investments
U. S. Agencies Corporate Debt Mortgage/Asset Backed Securities (Corporate)

Fair Value

AAA

AA

A

Unrated

$20,690,248.00 17,116,228.00 11,055,360.00

$20,690,248.00 1,250,737.00 8,830,722.00

$0.00 6,865,206.00

$0.00 8,508,867.00

$0.00 491,418.00 2,224,638.00

$48,861,836.00

$30,771,707.00

$6,865,206.00

$8,508,867.00

$2,716,056.00

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 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.

As of June 30, 2006, none of MCG Health, Inc.'s applicable investments exceed 5% of its total investment balance.

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.

MCG Health, Inc. holds investments totaling $162,145, or 0.2% in International equity securities. Foreign currency risk is considered negligible related to this holding in comparison to total investments.

Annual Financial Report FY2006 105

Capital Assets for Component Units: MCG Health, Inc.'s capital asset activity for the year ending June 30, 2006 was as follows:

Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2005
$2,978,188.00 5,529,336.00 8,507,524.00

Additions
$1,766,090.00 5,871,002.00 7,637,092.00

Reductions
$0.00 3,862,055.00 3,862,055.00

Ending Balance 6/30/2006
$4,744,278.00 7,538,283.00
12,282,561.00

Capital Assets, Being Depreciated: Building and Building Improvements Equipment Leasehold Improvements Capital Leases Total Assets Being Depreciated

3,551,922.00 113,201,406.00
12,343,253.00 6,902,737.00
135,999,318.00

208,466.00 5,304,197.00 3,994,640.00 6,838,963.00 16,346,266.00

123,241.00 572,909.00 251,898.00
948,048.00

3,637,147.00 117,932,694.00
16,085,995.00 13,741,700.00 151,397,536.00

Less: Accumulated Depreciation Buildings Equipment Leasehold Improvements Capital Leases Total Accumulated Depreciation

73,502.00 80,036,503.00
2,986,994.00 1,142,132.00 84,239,131.00

133,522.00 11,015,028.00
1,905,693.00 1,834,387.00 14,888,630.00

9,202.00 556,795.00
565,997.00

197,822.00 90,494,736.00
4,892,687.00 2,976,519.00 98,561,764.00

Total Capital Assets, Being Depreciated, Net

51,760,187.00

1,457,636.00

382,051.00

52,835,772.00

Capital Assets, net

$60,267,711.00

$9,094,728.00 $4,244,106.00

$65,118,333.00

Long-term Liabilities for Component Units:

MCG Health, Inc. is the lessee of certain equipment under noncancellable leases expiring in various years through 2011. Interest rates range from 4.99% 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, 2006 are shown below:

Compensated Absences Capital Lease Obligations Professional Liabilities
Total Long Term Debt

Beginning Balance July 1, 2005

Additions

Reductions

$8,892,686.00 3,734,546.00
8,826,000.00

$12,309,635.00 6,838,963.00
92,895.00

$11,471,061.00 1,941,023.00
363,895.00

$21,453,232.00 $19,241,493.00 $13,775,979.00

Ending Balance June 30, 2006

Amounts due within
One Year

$9,731,260.00 8,632,486.00
8,555,000.00

$9,731,260.00 2,353,836.00
2,139,000.00

$26,918,746.00 $14,224,096.00

Annual Financial Report FY2006 106

Debt Service Obligations:

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

Year Ending June 30:
2007 2008 2009 2010 2011

Year
1 2 3 4 5

Principal
$2,353,836.00 2,012,251.00 1,954,206.00 1,782,545.00 529,648.00
$8,632,486.00

Interest
$438,677.00 315,444.00 200,532.00
85,297.00 8,416.00
$1,048,366.00

Total
$2,792,513.00 2,327,695.00 2,154,738.00 1,867,842.00 538,064.00
$9,680,852.00

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 fundraising 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 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, 2006, the Foundation distributed $9.1 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, Georgia 30912 or from the Foundation's website at www.mcgfoundation.org.

Annual Financial Report FY2006 107

Investments for Component Units: Investments are comprised of the following amounts at June 30, 2006:

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate
Total Investments

Cost
$858,330.00 554,500.00 25,000.00
7,480,360.00 84,826,885.00
1,064,409.00
$94,809,484.00

Fair Value
$858,330.00 537,959.00 24,998.00
8,886,624.00 98,545,655.00
1,064,409.00
$109,917,975.00

Capital Assets for Component Units:
Medical College of Georgia Foundation, Inc. held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$6,676,594.00 325,545.00
7,002,139.00
2,877,341.00
4,124,798.00 $4,124,798.00

Long-term Liabilities for Component Units:

At June 30, 2006, Medical College of Georgia Foundation, Inc. long-term liabilities consisted of a $2,291,825 liability due under a split-interest agreement.

The 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 Medical College of Georgia (College). PPG acts primarily as a non-profit 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. 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 a sole partner and has sole voting control

Annual Financial Report FY2006 108

of each LLC. Because 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.

PPG is a private non-profit 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. 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 funded for 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 the 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, 2006, the PPG distributed $51.4 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.

Investments for Component Units:

PPG invests in mutual funds, equity securities and debt securities, which are measured at fair value. For investments other than common stock and mutual funds, classification between current and non-current is determined based upon individual investment maturity dates. Investments in common stock and mutual funds are actively traded and are classified as current. Investment income or loss (including realized gains and losses, interest and dividends) is included in revenues collected in excess of (less than) expenses paid.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Joint Venture Venture Capital

$11,354,661.00 8,709,351.08 9,452,764.52 9,362,035.12 585,000.00 62,500.00

$11,354,661.00 8,325,514.00
12,515,460.00 9,557,013.00 585,000.00 62,500.00

Total Investments

$39,526,311.72

$42,400,148.00

Annual Financial Report FY2006 109

In addition, PPG holds a Net Investment in a direct financing lease with the College in the amount of $27,517,640 as of June 30, 2006.

Capital Assets for Component Units:

PPG held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$885,901.00 0.00
885,901.00
2,364,064.00 5,769,846.00 8,133,910.00 4,697,062.00 3,436,848.00 $4,322,749.00

Long-Term Liabilities for Component Units:

Deferred Compensation - PPG administers a deferred compensation plan for various current and former MCG faculty members. Deferred Compensation represents the accounts held on behalf of these members and was ($505,990) at June 30, 2006.

Loan Payable - During 2004, the MCG-PPG Cancer Research Center, LLC (CRC) entered into a loan agreement with the Development Authority of Richmond County (the Authority), whereby the Authority issued bonds in the aggregate amount of $32,870,000 plus a premium of $498,784 and lent the proceeds thereof to CRC for the purpose of providing funds to finance the cost of construction of a portion of a cancer research center building on the campus of MCG. The loan agreement provides for semi-annual interest payments at interest rates ranging from 2.5 percent to 5.0 percent. Principal payments are due annually beginning December 2006 and continuing through December 2034.

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are

shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2005

Additions

Reductions

June 30, 2006

One Year

Notes and Loans Payable Loan Premium Other Long Term Debt
Total Long Term Debt

$32,870,000.00 498,784.00 471,830.00
$33,840,614.00

$0.00 34,160.00 $34,160.00

$0.00 19,477.00
$19,477.00

$32,870,000.00 479,307.00 505,990.00
$33,855,297.00

$650,000.00 $650,000.00

Annual Financial Report FY2006 110

Debt Service Obligations

Annual debt service requirements to maturity for the loan payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Note Payable

Principal

Interest

$650,000.00 670,000.00 685,000.00 705,000.00 725,000.00
3,965,000.00 4,735,000.00 5,865,000.00 7,460,000.00 7,410,000.00

$1,416,172.81 1,400,183.94 1,384,150.48 1,365,797.53 1,344,952.71 6,335,375.20 5,489,086.08 4,308,754.07 2,724,843.30 738,162.78

Total
$2,066,172.81 2,070,183.94 2,066,172.81 2,070,183.94 2,069,150.48
10,300,375.20 10,224,086.08 10,173,754.07 10,184,843.30
8,148,162.78

$32,870,000.00

$26,507,478.90

$55,236,728.66

Medical College of Georgia Research Institute, Inc. 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.
The Institute's financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board ("GASB"), in order to be consistent with the accounting principles followed by its primary government, the Medical College of Georgia. The Institute's fiscal year is July 1 through June 30.
During the year ended June 2006, the Institute sub-contracted approximately $50 million of research projects to the College. Complete financial statements for the Institute can be obtained from the Medical College of Georgia's Division of Sponsored Program Administration at Medical College of Georgia, Augusta, Georgia 30912.

Annual Financial Report FY2006 111

Deposits and Investments
As of June 30, 2006, $5,948,040 of the Institute's bank balance was exposed to custodial credit risk. $200,000 was uninsured and collateralized by the pledging bank's trust department, but not in the Institute's name and $5,748,040 was uninsured and uncollateralized.
The Institute had no investments as of June 30, 2006.
Capital Assets for Component Units:
The Institute's Capital Asset activity for the year ending June 30, 2006 was as follows:

Capital A ssets , Being Depreciated: Eq u ip me n t Total A ssets Being Depreciated
Les s: A ccumulated Depreciation Eq u ip me n t Total A ccumulated Depreciation
Total Capital As sets, Being Depreciated, Net
Capital A ssets , net

Beginning Balances 7/1/2005
$28,676.00 28,676.00
478.00 478.00 28,198.00 $28,198.00

Additions
$0.00 0.00

Reductions
$0.00 0.00

5,735.00 5,735.00 (5,735.00) ($5,735.00)

0.00 0.00 $0.00

Ending Balance 6/30/2006
$28,676.00 28,676.00
6,213.00 6,213.00 22,463.00 $22,463.00

Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of the Medical College of Georgia (College). The objectives and purposes of the Dental Foundation are to acquire and administer funds and property which are derived from fees charged for services rendered in the practice of dentistry at the School of Dentistry at the Medical College of Georgia by members of the faculty, residents and hygienists of the School of Dentistry. Dental Foundation funds are used to maintain and improve the high standard of instruction at the Medical College of Georgia Dental School for advanced study by members of the School's student body and faculty and for research in the dental health field. 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.
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 from March 1, 2005 through February 28, 2006. 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.
Annual Financial Report FY2006 112

During the year ended February 28, 2006, the Foundation distributed $1.2 million to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office of Medical College of Georgia, School of Dentistry, AD 1104, Augusta, Georgia 30912.

Investments for Component Units:

The Foundation's investments are comprised of the following amounts at February 28, 2006:

Certificates of Deposit U. S. Treasury Obligations Annuities Index Funds Cash Management Funds Domestic Equities
Total Investments

Cost
$1,042,000.00 751,537.00 200,000.00 400,000.00 201,360.00 987,399.00
$3,582,296.00

Fair Value
$993,989.00 725,717.00 242,355.00 378,600.00 201,680.00 1,072,469.00
$3,614,810.00

University of Georgia

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, 2007 and provides for annual renewal. The Real Estate Foundation's $50 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, 2007.

Annual Financial Report FY2006 113

In February 2006, the Board of Trustees of the Foundation agreed to transfer the sole membership of the Real Estate Foundation to the University of Georgia Research Foundation, Inc. (the "Research Foundation") contingent on a private letter ruling from the Internal Revenue Service accepting this transfer with no negative impact on the tax-exempt status of the outstanding bond debt. As of October 20, 2006, the anticipated date of ruling from the Internal Revenue Service is unknown. Upon receipt of an acceptable ruling, the bylaws of the Foundation and Real Estate Foundation will be amended to reflect the transfer of sole membership. Also at that time, the Foundation's guarantee of the Real Estate Foundation's revolving credit agreement will be replaced by a guarantee from the Research 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.
During the year ended June 30, 2006, the Foundation distributed $22,479,425 to the University for scholarships and donor restricted support. Facilities valued at $181 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. Complete financial statements for the Foundation can be obtained from the Foundation Office at 394 South Milledge Avenue, Athens, GA 30602.
Investments for Component Units:
The University of Georgia Foundation holds investments in the amount of $491 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.
Annual Financial Report FY2006 114

Investments are comprised of the following amounts at June 30, 2006:

Managed Cash Funds Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Split-Interest Investments Long-term Investment Pools
Total Investments

Cost
$172,451.00 887,911.00
1,089,390.00 6,795,849.00 1,145,048.00 17,315,885.00 13,313,088.00 350,152,974.00
$390,872,596.00

Fair Value
$172,451.00 852,747.00 879,477.00
7,203,604.00 1,267,232.00 17,315,885.00 15,027,655.00 447,848,858.00
$490,567,909.00

As of June 30, 2006, the long-term investment pool consists of investments in domestic and international equities (71.4%), fixed income instruments (6.5%), private equity investments (4.5%), real estate funds (6.2%), hedge funds (7.4%), timber, gas & oil (0.2%), and deposits (3.8%) that are held by outside investment managers.

The Long-Term Investment Pool includes assets held for the Athletic Association in the amount of $2,555,872. This amount is reported as Due from Component Units by this entity. The Foundation reports the liability for these investments in Due to Component Units.

Capital Assets for Component Units:

The University of Georgia Foundation holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$21,830,788.00 4,394.00
21,835,182.00
179,178,357.00 889,559.00
180,067,916.00 15,366,140.00
164,701,776.00 $186,536,958.00

Annual Financial Report FY2006 115

Long-Term Liabilities for Component Units:

Changes in long-term liabilities for the University of Georgia Foundation for the fiscal year ended June 30, 2006 are shown below:

Revenue/Mortgage Bonds Payable Notes and Loans Payable Bond Premiums/Discounts, net
Total Long Term Debt

Beginning Balance July 1, 2005
$196,090,000.00 15,336,557.00 1,593,914.00
$213,020,471.00

Additions
$0.00 4,914,342.00
$4,914,342.00

Reductions
$7,080,000.00 5,900,553.00 88,890.00
$13,069,443.00

Ending Balance June 30, 2006

Amounts due within
One Year

$189,010,000.00 14,350,346.00 1,505,024.00

$3,365,000.00 1,148,762.00

$204,865,370.00

$4,513,762.00

$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, a wholly owned subsidiary of the 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 $50 million credit agreement discussed below. The Foundation has guaranteed certain obligations, including the letter of credit, under the Real Estate Foundation's $50 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 (3.99% at June 30, 2006). The loan matures in 2031, subject to certain early repayment provisions. During the year ended June 30, 2006 principal payments of $4,255,000 were made.
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, 2006 was $102,506, and was recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $44,195 on the fair value of the derivative for the year ended June 30, 2006, as an adjustment to interest expense.
$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. The CCRC Entity used the proceeds of this loan to fund construction of the facility which was completed in October 2003.

Annual Financial Report FY2006 116

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, 2006 principal payments of $760,000 were made.
$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. The Housing Entity used the proceeds of this loan to fund construction of certain real estate projects which were completed in July 2004.
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, 2006, a principal payment of $1,825,000 was made.
$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 land and educational facility and by the Gainesville Campus Entity's interest in certain rents and leases derived from the land and educational facility. During 2003, the Gainesville Campus Entity used the proceeds of this loan to fund the acquisition of the land and educational facility.
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 year ended June 30, 2006, principal payments of $240,000 were made.
$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, 2006 and
Annual Financial Report FY2006 117

2005, 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.

Debt Service Obligations for Revenue and Mortgage Bonds Payable:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Total Bond Obligations

Principal

Interest

$3,365,000.00 14,875,561.00
3,595,000.00 3,695,000.00 3,825,000.00 21,320,000.00 26,615,000.00 34,280,000.00 50,184,439.00 27,255,000.00

$8,643,676.00 8,092,775.62 7,989,577.62 7,869,861.62 7,734,749.62
36,289,959.08 30,762,590.08 23,234,761.08 13,491,175.46
2,097,853.00

Total
$12,008,676.00 22,968,336.62 11,584,577.62 11,564,861.62 11,559,749.62 57,609,959.08 57,377,590.08 57,514,761.08 63,675,614.46 29,352,853.00

$189,010,000.00

$146,206,979.18

$335,216,979.18

Notes and Loans Payable

$50,000,000 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 during the year ended June 30, 2005, and then decreased to $50 million during the year ended June 30, 2006. 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, 2006, amounts outstanding or issued under this agreement included borrowings of $12,111,334, and letters of credit and bank credit reserves of $20,264,347, resulting in $17,624,319 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's 30day London InterBank Offered Rate ("LIBOR") plus 32-1/2 basis points (or 0.325%).

At June 30, 2006, the rate applicable to the borrowings was 5.454%. The Foundation has guaranteed certain 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 discussed above. 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

Annual Financial Report FY2006 118

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 has been amended to expire on July 31, 2007. 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, 2006, that is callable by the bank after the forbearance period is $12,390,969 and is included in the total principal payments due during the year ending June 30, 2008.

During 2006, the Real Estate Foundation entered into an interest rate cap agreement effectively limiting the interest rate on the revolving credit agreement to a 6.0% fixed rate until December 1, 2010. The Real Estate Foundation paid a premium of $122,000 in connection with this agreement. The fair value of the interest rate cap as of June 30, 2006 was $124,097 and was recorded as an other asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $2,097 on the fair value of the derivative for the year ended June 30, 2006 as an adjustment to interest expense.

$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, 2006, $1,179,250 was outstanding under this agreement. Interest is charged at a fixed rate of 7.13%. Principal payments in the amount of $22,250 are payable quarterly.

$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, 2006, $1,059,762 was outstanding under this agreement. Interest is charged at the bank's 30 day LIBOR rate plus .45%, or 5.56% at June 30, 2006. Principal and interest are payable monthly.

Debt Obligations for Notes and Loans Payable:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2020

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

Notes and Loans Payable

Prin c ip a l

Interes t

Total

$1,148,762.00 12,200,334.00
89,000.00 89,000.00 89,000.00 445,000.00 289,250.00

$861,559.04 135,911.67
69,009.00 62,664.00 56,318.00 186,405.00 36,091.00

$2,010,321.04 12,336,245.67
158,009.00 151,664.00 145,318.00 631,405.00 325,341.00

$14,350,346.00

$1,407,957.71

$15,758,303.71

Annual Financial Report FY2006 119

The University of Georgia Athletic Association, Inc. The University of Georgia Athletic Association, Inc. (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, 2006, 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 $25,500,018 and were recognized as expenses of the Association. Capital assets net of accumulated depreciation of $144.7M are included in the financial statements of the Association. These capital assets, excluding moveable equipment, are also included in the University's report. Complete financial statements for the Association can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602.
Deposits for Component Units: 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 Authority 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. Insurance of accounts provided by the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation.
Annual Financial Report FY2006 120

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 June 30, 2006, the book-carrying amount of the Association's deposits, including noncurrent cash and cash equivalents, was $75,456,272 and the bank balance was $78,469,403. The Association's bank balance is classified as follows at June 30, 2006:

Amount insured by the FDIC and FSLIC or Collateralized with securities held in the Association's name
Uncollateralized

$72,892,574 5,576,829
$78,469,403

Capital Assets for Component Units:

The University of Georgia Athletic Association, Inc. had the following Capital Assets activity for the year ended June 30, 2006:

Capital As sets , Not Being Depreciated: Construction W ork-in-Progress
Total Capital As s ets Not Being Depreciated
Capital As sets , Being Depreciated: Land Improvements Building , Building Improvements & Infras tructure Eq u ip me n t Total Ass ets Being Depreciated
Les s : Accumulated Depreciation Land Improvements Building , Building Improvements & Infras tructure Eq u ip me n t Total Accumulated Depreciation
Total Capital As s ets , Being Depreciated, Net
Capital As sets , net

Beginning Balances 7/1/2005
$4,761,467.00 4,761,467.00
16,902,083.00
167,196,490.00 6,652,886.00
190,751,459.00
4,748,033.00
28,720,933.00 4,787,253.00 38,256,219.00
152,495,240.00
$157,256,707.00

Additions
$8,686,344.00 8,686,344.00

Reductions
$4,491,941.00 4,491,941.00

Ending Balance 6/30/2006
$8,955,870.00 8,955,870.00

2,381,286.00
9,057,273.00 2,310,201.00 13,748,760.00

1,659,846.00 1,659,846.00

19,283,369.00
176,253,763.00 7,303,241.00
202,840,373.00

790,867.00
3,119,513.00 645,149.00
4,555,529.00
9,193,231.00
$17,879,575.00

1,493,862.00 1,493,862.00
165,984.00
$4,657,925.00

5,538,900.00
31,840,446.00 3,938,540.00 41,317,886.00
161,522,487.00
$170,478,357.00

Annual Financial Report FY2006 121

Long-term Liabilities for Component Units:

Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due Within
One Year

Revenue/Mortgage Bonds Payable Notes and Loans Payable-Primary Government Notes and Loans Payable Other Long-term Liabilities
Total Long Term Debt

$71,470,000.00 2,946,082.00 241,400.00 1,781,602.00

$30,000,000.00 1,830,348.00

$76,439,084.00 $31,830,348.00

$1,955,000.00 295,682.00 73,999.00 361,512.00
$2,686,193.00

$99,515,000.00 2,650,400.00 167,401.00 3,250,438.00
$105,583,239.00

$1,955,009.00 313,963.00 80,289.00 500,000.00
$2,849,261.00

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, 2007 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 (4.02% on June 30, 2006). The loan matures in 2031, subject to certain early repayment provisions.
On December 22, 2005, the Association entered into a fifteen and one-half year interest rate swap agreement for the remaining $33.1 million of the Series 2001 Bonds. Based on the swap agreement, the Association owes interest calculated at a fixed rate of 3.49% 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. 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 fair value of the interest rate swap agreement as of June 30, 2006 represented a $983,903 receivable for the Association had the swap been terminated at that time.
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, 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 (4.04% on June 30, 2006). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the Association redeemed $16 million of these bonds.

Annual Financial Report FY2006 122

On January 28, 2005, the Association 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 fair value of the interest rate swap agreement as of June 30, 2006, represented a $696,915 receivable for 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, 2007 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 (5.30% on June 30, 2006). The loan matures in 2021 and requires yearly principal reductions.
On December 22, 2005, the Association entered into a fifteen and one-half year interest rate swap agreement for the remaining $17.09 million of the Series 2005A Bonds. Based on the swap agreement, the Association owes interest calculated at a fixed rate of 5.058% 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 fair value of the interest rate swap agreement as of June 30, 2006 represented a $560,113 receivable for the Association had the swap been terminated at that time.
On August 25, 2005, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $30 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2005B (the Bonds) and entered into an agreement (the Loan Agreement) to loan $30 million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority. The letter of credit expires August 24, 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
Annual Financial Report FY2006 123

daily (4.04% on June 30, 2006). The loan matures in 2035, subject to certain early repayment provisions.

On August 25, 2005, the Association entered into a thirty year interest rate swap agreement for $30 million of the Series 2005B Bonds. Based on the swap agreement, the Association owes interest calculated at a fixed rate of 3.483% 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 fair value of the interest rate swap agreement as of June 30, 2006 represented a $908,349 receivable for the Association had the swap been terminated at that time.

Debt Service Obligations

Annual debt service requirements to maturity for Athletic Facilities (Athletic Association) revenue bonds payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Principal
$1,955,009.82 2,090,009.90 2,140,007.78 2,195,006.83 3,118,941.21
11,206,024.46 13,645,000.00 10,105,000.00 10,105,000.00 42,955,000.00

Bonds Payable Interest
$3,633,885.17 3,547,357.10 3,458,788.22 3,367,915.17 3,356,897.79
14,818,558.54 12,211,784.00
9,841,455.00 8,192,381.00
810,611.00

Total
$5,588,894.99 5,637,367.00 5,598,796.00 5,562,922.00 6,475,839.00
26,024,583.00 25,856,784.00 19,946,455.00 18,297,381.00 43,765,611.00

$99,515,000.00

$63,239,632.99

$100,691,640.99

Annual Financial Report FY2006 124

Annual debt service requirements to maturity for Athletic Facilities (Athletic Association) notes and loans payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016

Year
1 2 3 4 5 6-10

Principal

Notes and Loans Payable Interest

$394,252.18 420,497.10 354,008.22 375,907.17 399,160.79 873,975.54

$178,182.83 151,937.90 123,908.78 102,009.83 78,756.21 81,858.46

$2,817,801.00

$716,654.01

Total
$572,435.01 572,435.00 477,917.00 477,917.00 477,917.00 955,834.00
$3,534,455.01

University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation, Inc. (the Research Foundation) is a legally separate, tax-exempt component unit of The University of Georgia. The 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 2006, the Research Foundation transferred approximately $128 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. 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 Foundation does not have a deposit policy for custodial credit risk.

Annual Financial Report FY2006 125

At June 30, 2006, the book value of the Foundation's deposits was $3,679,515. The bank and investment account balances at June 30, 2006 were $5,670,586 of which $5,570,586 was uninsured. Of these uninsured deposits, $4,969,000 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $601,586 were uncollateralized.

Investments

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 Research Foundation's investments as of June 30, 2006 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
Explicitly Guaranteed
Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (U.S. Agencies) Mortgage Backed Securities (Corporate)

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$1,267,933.00
272,721.00 3,171,735.00 16,516,444.00 1,589,075.00 2,266,584.00 $25,084,492.00

$244,503.00
177,513.00 13,487,842.00
$13,909,858.00

$265,724.00
2,577,271.00 2,792,382.00 1,979,680.00 $7,615,057.00

$618,705.00
280,189.00 236,220.00
$1,135,114.00

$139,001.00
272,721.00 136,762.00
1,589,075.00 286,904.00
$2,424,463.00

Other Investments Equity Mutual Funds -Domestic Equity Mutual Funds -International Equity Securities - Domestic Equity Securities - International Managed Futures/Hedge Funds

2,033,496.00 1,467,511.00 5,770,342.00 1,123,901.00
832,676.00
$36,312,418.00

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. 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 Research Foundation will not be able to recover the value of the investment or collateral securities that are in possession of an outside party. The Foundation does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2006, $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 FY2006 126

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 investment policies specify that fixed income securities be of investment grade. The short-term investment policy specifies that corporate bonds be rated BBB (Standard & Poor's) or Baa (Moody's) or higher; the long-term policy requires a BBB (Standard & Poor's) or Baa3 (Moody's) rating or higher. The investment policy also requires that securities that drop below investment grade should be sold at the manager's discretion; in the event that a rating falls below investment grade, the manager will contact the financial advisor and advise them of the proposed strategy for disposition of the security.

Related Debt Investments
U. S. Agencies Corporate Debt

Fair Value

AAA

AA

A

Ba

Baaa

Unrated

$3,171,735.00 18,783,028.00

$673,833.00 368,609.00

$0.00 142,464.00

$0.00 4,589,223.00

$0.00 1,617,328.00

$0.00 12,065,404.00

$2,497,902.00

$21,954,763.00 $1,042,442.00

Mutual Bond Funds (Morningstar Ratings)

5-Star

504,848.00

4-Star

2,996,159.00

$142,464.00 $4,589,223.00 $1,617,328.00 $12,065,404.00 $2,497,902.00

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, 2006, investments in a single issuer where those investments exceed 5% of total investments were: Colonial Realty LP 5%; core Investment Grade Bond Trust 5%; Government National Mortgage Association 5%.

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 Foundation's investment policy.

Annual Financial Report FY2006 127

Capital Assets for Component Units:

University of Georgia Research Foundation, Inc. had Capital Assets activity as follows for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land (and other assets)
T otal Capital Assets Not Being Depreciated

Beginning Balance s 7/1/2005
$110,000.00 110,000.00

Addi ti on s
$0.00 0.00

Re ductions
$0.00 0.00

En di n g B al an ce 6/30/2006
$110,000.00 110,000.00

Capital Assets, Being Depreciated: Building and Building Improvements T otal Assets Being Depreciated

1,142,307.00 1,142,307.00

1,142,307.00

0.00

0.00

1,142,307.00

Less: Accumulated Depreciation Buildings T otal Accumulated Depreciation

645,149.00 645,149.00

46,082.00 46,082.00

691,231.00

0.00

691,231.00

T otal Capital Assets, Being Depreciated, Net Capital Assets, net

497,158.00 $607,158.00

(46,082.00) ($46,082.00)

0.00 $0.00

451,076.00 $561,076.00

Georgia Southern University

Georgia Southern University Foundation, Inc. Georgia Southern University Foundation, Inc. (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, 2006, the Foundation distributed $2,194,105.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Georgia Southern University Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Annual Financial Report FY2006 128

Investments for Component Units:

Georgia Southern University Foundation, Inc. holds endowment and other investments in the amount of $39 million. The $24 million corpus of the endowment portion 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 established a spending plan whereby 5% of the three year moving average of the endowment fair market value may be used for academic scholarships. The remaining earnings are set aside as a reserve. $2.3 million of the Foundation's reported investments are funds invested on behalf of the University. The University reports these funds as Short-term Investments.

In addition to investments in Money Market/Certificates of Deposits and Mutual Funds, Georgia Southern University Foundation, Inc. also holds investments in real property valued at $707,406.00.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Money Market Accounts/Certificates of Deposits Mutual Funds Real Estate
Total Investments

$2,490,962.00 34,287,317.00
707,406.00
$37,485,685.00

$2,490,962.00 35,678,104.00
707,406.00
$38,876,472.00

Capital Assets for Component Units

Georgia Southern University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$395,860.00 0.00
395,860.00
50,000.00 50,000.00 24,444.00 25,556.00 $421,416.00

Annual Financial Report FY2006 129

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 fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Boosters Foundation distributed $928,755.00 to the University for athletic scholarship support and for the support of other 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.

Capital Assets for Component Units

Southern Boosters, Inc. has the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Infrastructure Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$80,301.00 678,679.00 758,980.00
324,687.00 0.00
93,085.00 417,772.00
102,533.00
315,239.00 $1,074,219.00

Annual Financial Report FY2006 130

Long-Term Liabilities for Component Units

Southern Boosters, Inc. has a Note Payable to Sea Island Bank, payable in annual installments of $35,220.00 including interest at a variable rate (8.25% at June 30, 2006), through September 14, 2013, unsecured. The original note amount was $279,000.

Southern Boosters, Inc. obtained new financing in 2006 with a Note Payable to Park Avenue Bank. Interest is payable in quarterly installments at a variable rate (8.25% at June 30, 2006) and the note matures on November 13, 2006. This debt is secured by the Golf Practice facility.

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Notes and Loans Payable Total Long Term Debt

$250,553.00 $250,553.00

$400,722.00 $400,722.00

$20,971.00 $20,971.00

$630,304.00 $630,304.00

$417,468.00 $417,468.00

Notes Payable Obligations

Annual requirements to maturity for notes payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016

Year
1 2 3 4 5 6-10

Principal

Notes Payable Interest

$417,468.00 17,661.00 19,118.00 20,695.00 22,403.00
132,959.00

$35,350.00 17,559.00 16,102.00 14,525.00 12,817.00 26,740.00

Total
$452,818.00 35,220.00 35,220.00 35,220.00 35,220.00
159,699.00

$630,304.00

$123,093.00

$753,397.00

Georgia Southern University Housing Foundation, Inc. Georgia Southern University Housing Foundation, Inc. (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.

Annual Financial Report FY2006 131

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.

Buildings (Construction in Progress) valued at $27 million and the associated long-term debt of $41 million, plus the net Investment in Direct Financing Lease valued at $66 million and the associated long-term receivables of $68 million along with the associated long-term debt of $73 million are included in the financial statements of the Housing Foundation. The corresponding capital assets and associated long-term debt are included in the University's report. Complete financial statements for the Foundation can be obtained from Georgia Southern University Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Investments for Component Units

Georgia Southern University Foundation holds a Net Investment in direct financing leases with the University in the amount of $66,036,445 as of June 30, 2006.

Capital Assets for Component Units

Georgia Southern University Foundation held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Construction in Progress
Total Capital Assets not being Depreciated
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$27,043,744.00 27,043,744.00 0.00
$27,043,744.00

Long-Term Liabilities for Component Units
Student Housing Bonds were 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 rates on the Bonds vary, based on the Bond and the Year; from 2.75% to 5.25%.

Annual Financial Report FY2006 132

Changes in long-term liabilities for the Housing Foundation for the fiscal year ended June 30,

2006 are shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2005

Additions

Reductions

June 30, 2006

One Year

Bond Issuance Costs, net Revenue/Mortgage Bonds Payable
Total Long Term Debt

$1,153,489.00 114,225,000.00
$115,378,489.00

$0.00 0.00
$0.00

$113,489.00 985,000.00
$1,098,489.00

$1,040,000.00 113,240,000.00
$114,280,000.00

$0.00 1,785,000.00
$1,785,000.00

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031

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

Principal

Bonds Payable Interest

$1,785,000.00 2,685,000.00 2,840,000.00 3,000,000.00 3,170,000.00
17,745,000.00 21,835,000.00 27,710,000.00 32,470,000.00

$3,341,880.00 5,168,219.00 5,071,254.00 5,740,273.00 6,384,510.00
24,299,791.00 17,783,953.00 11,667,325.00
3,965,955.00

Total
$5,126,880.00 7,853,219.00 7,911,254.00 8,740,273.00 9,554,510.00
42,044,791.00 39,618,953.00 39,377,325.00 36,435,955.00

$113,240,000.00

$83,423,160.00

$183,683,061.00

Georgia Southern University Research and Service Foundation, Inc. Georgia Southern University Research & Service Foundation, Inc. (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 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

Annual Financial Report FY2006 133

presentation for external financial reporting purposes in these financial statements. The foundation's fiscal year is July 1 through June 30.
During fiscal year 2006, the Research Foundation transferred $4,524,543 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.
Valdosta State University
Valdosta State University Foundation- Consolidated (Foundation) is a legally separate, taxexempt component unit of Valdosta State University (University). The Foundation is also the sole member of VSU Foundation Real Estate I, LLC, and VSU Foundation Real Estate II, LLC. The Foundation and any subsidiaries under its control act primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The twenty-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, 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, which is different than that of the University.
Property and Equipment and Construction in Progress and the associated long-term debt are included in the consolidated financial statements of the Foundation; the corresponding capital assets and associated long-term debt are included in the University's report.
During the year ended December 31, 2005, the Foundation distributed $1,661,958 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Offices at 102 Georgia Avenue, Valdosta, GA 31698 or from the Foundation's website at http://www.valdosta.edu/foundation/.
Investments for Component Units:
Valdosta State University Foundation (consolidated) holds endowment investments in the amount of $17,815,329. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Valdosta State University Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the earnings may be used for academic scholarships. The remaining earnings are set aside as a reserve.
Annual Financial Report FY2006 134

Investments are comprised of the following amounts at December 31, 2005:

Money Market Accounts Life Income agreements Corporate Bonds Equity Securities Mutual Funds Equity Common Trust Funds
Total Investments

Cost
$499,042.00 654,632.00
4,216,822.00 2,436,440.00 1,411,471.00 5,085,401.00
$14,303,808.00

Fair Value
$499,042.00 654,632.00
4,950,863.00 2,750,539.00 1,376,015.00 7,584,238.00
$17,815,329.00

Capital Assets for Component Units:

Valdosta State University Foundation, Inc. holds the following Capital Assets as of December 31, 2005:

December 31, 2005

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$3,016,925.00 3,925,877.00 6,942,802.00
29,039,397.00 29,039,397.00
1,817,000.00 27,222,397.00 $34,165,199.00

Long-term Liabilities for Component Units:
Valdosta State University Foundation issued Bonds to finance the acquisition of facilities for Valdosta State University. The bonds mature serially and are collateralized by real estate. The interest rates for the 95 and 98 bonds are 4.8% and 5.0%, respectively. These Bonds are represented as Property and Equipment and a Bond Payable on the Foundation's financial statement. Since the University leases the property from the Foundation, the University has accounted for this transaction as a capital lease and related lease obligation.
The Foundation also incurred a Note payable to a local financial institution to assist with updating University Athletic facilities. 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.

Annual Financial Report FY2006 135

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 debt for the Foundation for the fiscal year ended December 31, 2005 are shown below:

Beginning Balance January 1, 2005

Additions

Reductions

Ending

Amounts due

Balance December 31, 2005

within One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable
Total Long Term Debt

$240,692.00 38,925,739.00
$39,166,431.00

$1,059,594.00 $1,059,594.00

$36,705.00 435,221.00
$471,926.00

$1,263,581.00 38,490,518.00
$39,754,099.00

$913,719.00 395,061.00
$1,308,780.00

Annual debt service requirements to maturity for Notes and Revenue Bonds Payable are as follows:

Year ending December 31:

2006

1

2007

2

2008

3

2009

4

2010

5

2011 through 2015

6-10

2016 through 2020

11-15

2021 through 2025

16-20

2026 through 2030

21-25

Unamortized Bond Premium, net

Notes and Bonds Payable

Principal

Interest

Total

$1,308,780.00 448,857.00
1,240,706.00 1,170,482.00 1,177,775.00 7,960,838.00 7,500,000.00 9,610,000.00 9,635,000.00 40,052,438.00 (298,339.00) $39,754,099.00

$1,716,230.00 1,716,230.00 1,694,905.00 1,668,455.00 1,640,805.00 7,545,962.50 6,085,335.00 3,964,675.70 1,247,312.30
27,279,910.50
$27,279,910.50

$3,025,010.00 2,165,087.00 3,025,010.00 2,165,087.00 2,935,611.00
15,506,800.50 13,585,335.00 13,574,675.70 10,882,312.30 66,864,928.50
(298,339.00) $61,674,831.50

Albany State University
Albany State University Foundation, Inc. (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

Annual Financial Report FY2006 136

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 follows GASB Statement No. 34, Basic Financial Statements and Managements Discussion and Analysis- for State and Local Governments, GASB Statement 35, Basic Financial Statements Management's Discussion and Analysis for Public Colleges and Universities, GASB Statement No. 37, Basic Financial Statements and Management's Discussion and Analysis for State and local Governments: Omnibus an amendment of GASB Statements No. 21 and No. 34, and GASB Statement No. 38, Certain Financial Statement Note Disclosures. The foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $32,993 to the University for restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 504 College Drive, Albany, GA 31705.

Deposits and Investments

Deposits:

As of June 30, 2006, the carrying amount of the Foundation's bank deposits was $901,031 and the respective bank balances totaled $957,432. Of the total bank balance, $209,999 was insured through the Federal Depository Insurance Corporation (FDIC). The remaining $747,433 was collateralized with pooled securities held by the financial institutions' trust departments, but not in the Foundation's name.

Investments:

Investments as of June 30, 2006 are summarized as follows:

Fair Value

Less Than 1 Year

Investment Maturity 1-5 Years 6-10 Years

More Than 10 Years

Investment type Certificates of Deposit General Obligation Bonds Money Market Mutual Fund Repurchase Agreements

$1,026,439.00

$0.00

$1,026,439.00

$0.00

$0.00

1,133,841.00

1,133,841.00

3,772,146.00

3,772,146.00

14,309,627.00

14,309,627.00

$20,242,053.00

$18,081,773.00

$2,160,280.00

$0.00

$0.00

Annual Financial Report FY2006 137

Capital Assets for Component Units:

Albany State University Foundation Inc. had the following Capital Asset activity for the year ended June 30, 2006:

Beginning

Ending

Balances

Balance

Capital Assets, Not Being Depreciated:

7/1/2005

Additions

Reductions

6/30/2006

Construction Work-in-Progress

$46,400.00

$25,198,104.00

$0.00

$25,244,504.00

Total Capital Assets Not Being Depreciated

46,400.00

25,198,104.00

0.00

25,244,504.00

Capital Assets, Being Depreciated: Facilities and Other Improvements Equipment Total Assets Being Depreciated

7,773,248.00 24,340.00
7,797,588.00

7,773,248.00

24,340.00

0.00

0.00

7,797,588.00

Less: Accumulated Depreciation Facilities and Other improvements Equipment Total Accumulated Depreciation

97,166.00 1,749.00
98,915.00

194,331.00 3,497.00
197,828.00

291,497.00

5,246.00

0.00

296,743.00

Total Capital Assets, Being Depreciated, Net

7,698,673.00

(197,828.00)

0.00

7,500,845.00

Capital Assets, net

$7,745,073.00

$25,000,276.00

$0.00

$32,745,349.00

Long-term Liabilities for Component Units:

The Foundation had the following activity in long-term liabilities for the year ended June 30, 2006:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Unamortized bond premium Notes and Loans Payable
Total Long Term Debt

$0.00 0.00 2,472,283.00
$2,472,283.00

$34,320,000.00 658,805.00
$34,978,805.00

$0.00 79,305.00 $79,305.00

$34,320,000.00 658,805.00
2,392,978.00
$37,371,783.00

$0.00 83,192.00 $83,192.00

Student Housing Bonds were issued by the Albany State University Real Estate Foundation, LLC, a single member Limited Liability Company, to finance student housing on University property. On July 1, 2005, the Foundation issued $33,110,000.00 Albany-Dougherty Inner City Authority Revenue Bonds, Series 2005A, and $1,210,000.00 Albany-Dougherty Inner City Authority Taxable Revenue Bonds, Series 2005B. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Albany State University.

Annual Financial Report FY2006 138

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2034

1 2 3 4 5-9 10-14 15-19 20-24 25-28

Principal

Bonds Payable Interest

$0.00 225,000.00 230,000.00 240,000.00 2,510,000.00 4,810,000.00 7,385,000.00 9,500,000.00 9,420,000.00

$1,576,737.00 1,576,737.00 1,567,175.00 1,557,400.00 7,584,488.00 6,944,663.00 5,685,975.00 3,645,625.00 1,094,575.00

Total
$1,576,737.00 1,801,737.00 1,797,175.00 1,797,400.00
10,094,488.00 11,754,663.00 13,070,975.00 13,145,625.00 10,514,575.00

$34,320,000.00

$31,233,375.00

$62,174,901.00

Albany State Foundation entered into an installment loan with SunTrust Bank to finance the construction of the Albany Municipal Coliseum facility at Albany State University. On May 7, 2004, Albany State University Foundation, Inc. entered into a loan agreement with SunTrust Bank for the purpose of completing the Albany Municipal Coliseum construction project. The multi-advance loan is in the amount of $2,181,889.00. The accrued interest is payable on the 1st day of each August beginning August 1, 2005, at a rate equal to the LIBOR index plus 2.5% per annum. The total principal payment will be due at maturity on August 1, 2007. The outstanding loan balance as of June 30, 2006 is $2,181,889.00.

Albany State Foundation entered into an installment loan with SunTrust Bank to finance the Albany Municipal Coliseum scoreboard. On October 29, 2003, Albany State University Foundation, Inc. entered into a loan agreement with SunTrust Bank for the purpose of purchasing a scoreboard for the Albany Municipal Coliseum. The term loan is in the amount of $332,092.00, with 12 interest only payments, at a rate of 4.130% per annum, beginning December 1, 2003. Beginning December 1, 2004, 47 monthly payments in the amount of $7,526.00 are due with final payment due on November 1, 2008. The outstanding loan balance as of June 30, 2006 is $211,089.00.

Annual debt service requirements to maturity for Albany Municipal Coliseum installment loan with SunTrust Bank are as follows:

Year Ending June 30:
2007 2008 2009

Year
1 2 3

Principal

Notes Payable Interest

$83,192.00 2,269,843.00
39,943.00

$109,318.00 105,816.00 799.00

Total
$192,510.00 2,375,659.00
40,742.00

$2,392,978.00

$215,933.00

$2,608,911.00

Annual Financial Report FY2006 139

Armstrong Atlantic State University

Armstrong Atlantic State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Armstrong Atlantic State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The 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 January 1 through December 31.

During the year ended December 31, 2005, the Foundation distributed $581,049 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, 11935 Abercorn Street, Savannah, GA 31419.

Investments for Component Units:

Armstrong Atlantic State University Foundation holds endowment investments in the amount of $5 million. 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 holds no investments in real property.

Investments are comprised of the following amounts at December 31, 2005:

Money Market Accounts Government and Agency Securities Fixed Income Debt Securities Equity Securities Mutual Funds
Total Investments

Cost
$76,764.00 1,564,037.00
288,557.00 2,243,903.00
218,619.00
$4,391,880.00

Fair Value
$76,764.00 1,548,089.00
285,831.00 2,900,336.00
218,619.00
$5,029,639.00

Annual Financial Report FY2006 140

Armstrong Atlantic State University Educational Properties Foundation, Inc. AASU Educational Properties Foundation, 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 apartment complexes, and operates student housing. The five-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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.

The Foundation holds real estate assets, the purchase and improvement of which have been financed through bond issuance. The corresponding capital leases and associated long-term debt are included in the University's report. During the year ended December 31, 2005, the Foundation distributed $815,731 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at Armstrong Atlantic State University, 11935 Abercorn Street, Savannah, GA 31419.

Capital Assets for Component Units:

The Foundation held the following Capital Assets as of December 31, 2005:

December 31, 2005

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Land Improvement Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$475,561.00 942,674.00
1,418,235.00
21,862,184.00 5,668,845.00 2,558,961.00 30,089,990.00
2,835,654.00
27,254,336.00 $28,672,571.00

Annual Financial Report FY2006 141

Long-term Liabilities for Component Units:

Student Housing Bonds were issued by the AASU Educational Properties Foundation 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 interest rate is 4.0%.

Resident Instruction Bonds were issued by the AASU Educational Properties Foundation to finance professional, continuing education and recreational facilities at Armstrong Atlantic State University. The bonds, serial and term, are secured by pledges of gross receipts from rents and leases. The interest rate is 3.55%.

Changes in long-term liabilities for the Foundation for the fiscal year ended December 31, 2005 are shown below:

Beginning Balance January 1, 2005

Additions

Reductions

Ending

Amounts due

Balance

within

December 31, 2005 One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$17,250,000.00 $17,250,000.00

$43,799,420.00 $43,799,420.00

$17,250,000.00 $17,250,000.00

$43,799,420.00 $43,799,420.00

$977,619.00 $977,619.00

Debt Service Obligations

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

Year ending December 31, 2006:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021

11-15

2022 through 2026

16-20

2027 through 2031

21-25

Principal
$650,405.00 525,406.00 540,405.00 555,406.00 575,405.00 595,406.00
3,342,028.00 4,057,027.00 5,052,028.00 6,948,119.00

Bonds Payable Interest
$827,342.00 964,313.00 947,900.00 931,000.00 913,613.00 891,413.00
4,098,615.00 3,387,915.00 2,383,315.00
938,502.00

Total
$1,477,747.00 1,489,719.00 1,488,305.00 1,486,406.00 1,489,018.00 1,486,819.00 7,440,643.00 7,444,942.00 7,435,343.00 7,886,621.00

$22,841,635.00

$16,283,928.00

$39,125,563.00

Annual Financial Report FY2006 142

Annual debt service requirements to maturity for Resident Instruction, Professional and Recreational (Educational Properties Foundation) revenue bonds payable are as follows:

Year ending December 31, 2006:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021 2022 through 2026

11-15 16-20

2027 through 2031

21-25

2032 through 2036

26-30

Principal
$327,214.00 432,216.00 457,216.00 452,216.00 467,216.00 482,216.00
2,641,079.00
3,166,080.00 3,806,079.00 4,716,080.00 4,010,173.00

Bonds Payable Interest
$906,309.00 893,189.00 876,314.00 857,914.00 843,452.00 829,389.00
3,889,080.00
3,345,255.00 2,646,607.00 1,692,188.00
433,225.00

Total
$1,233,523.00 1,325,405.00 1,333,530.00 1,310,130.00 1,310,668.00 1,311,605.00 6,530,159.00
6,511,335.00 6,452,686.00 6,408,268.00 4,443,398.00

$20,957,785.00

$17,212,922.00

$38,170,707.00

Augusta State University

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 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 foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $700,628 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, Augusta, GA 30904.

Annual Financial Report FY2006 143

Investments for Component Units:

Investments are comprised of the following amounts at June 30, 2006:

Government and Agency Securities Equity Securities Mutual Funds Real Estate
Total Investments

Cost
$2,925,158.00 8,660,784.00 2,772,505.00 20,000.00
$14,378,447.00

Fair Value
$2,884,042.00 9,395,402.00 2,809,405.00 20,000.00
$15,108,849.00

The Foundation also holds net investments in direct financing leases with the University of $32,544,633 as of June 30, 2006.
Long-term Liabilities for Component Units:
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 had principal outstanding in the amount of $1,544,695 at June 30, 2006. The loan was for real estate improvements at the Forest Hills Golf Club for the benefit of the Augusta State University Athletic Association, a related party. This note carries a variable interest rate of LIBOR plus 1.20% (6.6803% at June 30, 2006). Interest payments are due monthly. In August 2006, the loan will convert to a term loan with quarterly payments of principal and interest. This loan will mature May 24, 2011. The loan is secured by the Foundation's investment account with Georgia Bank & Trust.
ASU Jaguar Student Housing I, LLC had the following revenue bonds payable at June 30, 2006:
$19,515,000 ASU Jaguar Student Housing I, LLC, Revenue Bonds, Series 2004, dated August 1, 2004, due in annual installments of $85,000 to $1,445,000, through February 1, 2035, interest at 4.375% to 5.375%. The bonds were issued to finance property and equipment known as University Village on behalf of the University.
ASU Jaguar Student Center, LLC had the following revenue bonds payable at June 30, 2006:
$11,145,000 ASU Jaguar Student Center, LLC, Educational Facilities Revenue Bonds, Series 2005, dated February 1, 2005, due in annual installments of $170,000 to $705,000, through July 1, 2034, interest at 3.25% to 5%. The bonds were issued to finance property and equipment known as the Student Center on behalf of the University. Original issue premium on the Series 2005 Revenue Bonds was $192,518.

Annual Financial Report FY2006 144

Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2006 are shown below:

Notes and Loans Payable Series 2004 Bonds Payable Series 2005 Bonds Payable Premium on Bonds Payable

Beginning Balance July 1, 2005 $1,509,195.00 19,515,000.00 11,145,000.00
192,518.00

Additions $0.00

Reductions ($35,500.00)

Ending Balance June 30, 2006 $1,544,695.00 19,515,000.00 11,145,000.00
192,518.00

Amounts due within
One Year $142,000.00
85,000.00

Total Long Term Debt

$32,361,713.00

$0.00

($35,500.00)

$32,397,213.00

$227,000.00

Annual debt service requirements to maturity for the construction loan (Augusta State University Foundation) are as follows:

2007 2008 2009 2010 2011

Year

Principal

Interest

Total

1

$142,000

$82,846

$224,846

2

142,000

90,650

232,650

3

142,000

81,111

223,111

4

142,000

71,572

213,572

5

976,695

66,680

1,043,375

$1,544,695

$392,859

$1,937,554

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

2007 2008 2009 2010 2011 2012 2017 2022 2027 2032

through through through through through

2016 2021 2026 2031 2036

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

Principal $85,000 85,000 90,000 155,000 195,000
1,520,000 2,540,000 4,145,000 5,335,000 5,365,000
$19,515,000

Interest $1,011,020 1,007,578 1,003,838 999,563 991,813 4,785,538 4,336,913 3,496,706 2,277,450 722,138
$20,632,557

Total $1,096,020
1,092,578 1,093,838 1,154,563 1,186,813 6,305,538 6,876,913 7,641,706 7,612,450 6,087,138
$40,147,557

Annual Financial Report FY2006 145

Annual debt service requirements to maturity for Student Housing Revenue Bonds, Series 2005 (ASU Jaguar Student Center, LLC) bonds payable are as follows:

2007 2008 2009 2010 2011 2012 2017 2022 2027 2032

through through through through through

2016 2021 2026 2031 2036

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

Principal $0
170,000 170,000 175,000 200,000 1,350,000 1,710,000 2,095,000 2,645,000 2,630,000
$11,145,000

Interest $503,864 503,864 497,149 489,924 484,236 2,293,806 1,996,956 1,612,975 1,067,000 336,750
$9,786,524

Total $503,864 673,864 667,149 664,924 684,236 3,643,806 3,706,956 3,707,975 3,712,000 2,966,750
$20,931,524

Augusta State University Athletic Association Augusta State University Athletic Association (the Athletic Association) is a legally separate, tax-exempt component unit of Augusta State University (University). The Foundation manages all extramural athletic activities and constructs athletic facilities for use by the University and then leases the completed facilities to the institution. The twenty-member board of the Athletic 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 Athletic Association, the majority of resources or income thereon that the Athletic Association holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by the Athletic 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 Foundation is considered a component unit of the University and is discretely presented in the University's financial statements.

The Athletic 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 Athletic Association's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $12,000 to the University. Complete financial statements for the Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, Georgia 30904-2200.

Annual Financial Report FY2006 146

Capital Assets for Component Units:

Augusta State University Athletic Association held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Buildings and Improvements Infrastructure Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$3,416,691.00 0.00
981,941.00 4,398,632.00
2,340,010.00
2,058,622.00 $2,058,622.00

Long-term Liabilities for Component Units:

Augusta State University Athletic Association leases golf course equipment under capital leases that expire in June 2007, October 2007 and April 2010.

The Athletic Association entered into a Note Payable with a third party in September 2005 in the amount of $35,961 for equipment. The Note matures in September 2009.

In May 2005, the Athletic Association entered into a Note Payable agreement with Augusta State University Foundation, Inc., a related party, to finance golf course improvements. The Note is payable in quarterly installments, with interest accruing at the LIBOR rate plus 1.2%, and matures in May, 2011.

Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Capital Lease Obligations Notes and Loans Payable
Total Long Term Debt

$27,413.00 1,544,695.00
$1,572,108.00

$86,582.00 35,961.00
$122,543.00

$40,181.00 5,933.00
$46,114.00

$73,814.00 1,574,723.00
$1,648,537.00

$26,060.00 150,456.00
$176,516.00

Annual Financial Report FY2006 147

Debt Service Obligations

Annual debt service requirements to maturity for Athletic Association's capital leases are as follows:

Year Ending June 30:

Year

2007

1

2008

2

2009

3

2010

4

Total minimum lease payments

Less: Interest

Less: Executory costs (if paid) Principal Outstanding

Capital Leases
$30,914.00 19,825.00 17,832.00 14,860.00 83,431.00 (9,617.00) 0.00 $73,814.00

Annual debt service requirements to maturity for Athletic Association's notes payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011

Year
1 2 3 4 5

Notes Payable

Principal

Interest

Total

$150,456.10 151,157.95 151,918.08 144,496.40 976,694.47

$68,111.70 61,123.85 54,078.96 47,191.62 40,873.76

$218,567.80 212,281.80 205,997.04 191,688.02
1,017,568.23

$1,574,723.00

$271,379.89

$1,846,102.89

Clayton State University
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 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
Annual Financial Report FY2006 148

Foundation's fiscal year is January 1 through December 31. Due to this different fiscal year end, the Foundation's reported payable at December 31, 2005 to the University is not in agreement with the University's reported receivable as of June 30, 2006.

During the year ended December 31, 2005, the Foundation distributed $354,338 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Clayton State University, 2000 Clayton State Blvd, Morrow, Georgia, 30260.

Investments for Component Units:

The Walter & Emilie Spivey Foundation holds investments in the amount of $7.4 million as of December 31, 2005. Investments consist of marketable securities, bonds and real property as follows:

Cost

Fair Value

Money Market Accounts Corporate Bonds/Mutual Bond Funds Equity Securities Real Estate
Total Investments

$324,527.12 4,831,407.52 1,639,000.48
277,400.16
$7,072,335.28

$324,527.12 4,974,754.19 1,775,501.83
277,400.16
$7,352,183.30

Capital Assets for Component Units:

The Foundation holds the following Capital Assets as of December 31, 2005:

December 31, 2005

Capital Assets being Depreciated: Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$15,384.46 15,384.46 4,615.00 10,769.46
$10,769.46

Clayton State University Foundation, Inc. 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
Annual Financial Report FY2006 149

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, 2006, the Foundation distributed $228,873 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Clayton State University Foundation, Inc., Alumni Affairs Office, Harry Downs Continuing Education Building, 2000 Clayton State Blvd, Morrow, Georgia, 30260.

Investments for Component Units:

Clayton State University Foundation holds endowment investments in the amount of $2.2 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Clayton State University Foundation also holds investments in real property valued at $1,981,502.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Real Estate Georgia Investment Pools
BOR Total Return Fund

$1,981,502.00 2,205,425.00

$1,981,502.00 2,197,702.00

Total Investments

$4,186,927.00

$4,179,204.00

Columbus State University
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.
Annual Financial Report FY2006 150

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 year ended July 31, 2005. The amount due to Columbus State University, $20,996,341, results primarily from funds that are designated for payments on the construction of the RiverPark Campus. It is the intent of the Foundation that the facility be transferred to the University upon completion. The due from amount on the University's Statement of Net Assets does not agree due to the difference in fiscal year ends.

During the year ended July 31, 2005, the Foundation distributed $32,715,023 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.

Investments for Component Units:

Columbus State University Foundation, Inc. holds endowment investments in the amount of $28,114,178. 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 of 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 are comprised of the following amounts at July 31, 2005:

Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Board of Regents Pooled Funds
Total Investments

Cost
$326,254.00 7,103,936.00 3,239,396.00 9,460,146.00 1,252,910.00 5,304,792.00
$26,687,434.00

Fair Value
$326,254.00 7,076,839.00 2,931,282.00 10,589,281.00 1,260,300.00 5,930,222.00
$28,114,178.00

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 of Foundation Properties, Inc. is self-
Annual Financial Report FY2006 151

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 year ended July 31, 2005. The amount due to Columbus State University, $9,331,689, results primarily from funds that have been transferred from the Foundation which are designated for payments on the construction of the RiverPark Campus. It is the intent of Foundation Properties that the facility be transferred to the University upon completion. There is no corresponding due from amount on the University's Statement of Net Assets due to the difference in fiscal year ends.

During the year ended July 31, 2005, Foundation Properties, Inc. distributed $2,876,963 to the University. Complete financial statements for Foundation Properties, Inc. can be obtained from Foundation Properties, Inc. at 4225 University Avenue, Columbus, Georgia 31907.

Investments in Component Units:

Foundation Properties, Inc. holds investments as of July 31, 2005 in the amount of $6,149,745. Investments consist of marketable securities and bonds as follows:

Government and Agency Securities Corporate Bonds Equity Securities
Total Investments

Cost
$704,922.00 1,735,149.00 3,191,975.00
$5,632,046.00

Fair Value
$696,396.00 1,761,318.00 3,692,031.00
$6,149,745.00

Annual Financial Report FY2006 152

Capital Assets for Component Units:

Foundation Properties, Inc. held the following Capital Assets as of July 31, 2005:

July 31, 2005

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$10,915,291.00 13,154,551.00 24,069,842.00
48,916,453.00 1,616,375.00
50,532,828.00 4,784,689.00
45,748,139.00 $69,817,981.00

Long-term Liabilities for Component Units:

Student Housing Bonds are issued by the 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.

Changes in long-term liabilities for component units for the fiscal year ended July 31, 2005 are shown below:

Beginning Balance August 1, 2004

Additions

Reductions

Ending Balance July 31, 2005

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$27,380,000.00 $27,380,000.00

$15,614,724.00 $15,614,724.00

$652,024.00 $652,024.00

$42,342,700.00 $42,342,700.00

$870,450.00 $870,450.00

Annual Financial Report FY2006 153

Annual debt service requirements to maturity for Student Housing and Educational Programming revenue bonds payable are as follows:

Year ending July 31:

2006

1

2007

2

2008

3

2009

4

2010

5

2011-2015

6-10

Principal

Bonds Payable Interest

$870,450.00 12,297,250.00
945,000.00 14,830,000.00
3,960,000.00 9,440,000.00

$1,312,001.00 936,043.00 667,228.00 620,968.00 99,823.00 361,678.00

Total
$2,182,451.00 13,233,293.00
1,612,228.00 15,450,968.00
4,059,823.00 9,801,678.00

$42,342,700.00

$3,997,741.00

$46,340,441.00

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 year ended July 31, 2005.
During the year ended July 31, 2005 the Athletic Fund distributed $354,139 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 Athletic Fund, the amount due to Columbus State University, $18,756, 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 of June 30, 2006.

Annual Financial Report FY2006 154

Investments for Component Units:

Columbus State University Athletic Fund, Inc. holds endowment investments in the amount of $1,386,343. 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 of 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 are comprised of the following amounts at July 31, 2005:

Equity Securities Total Investments

Cost $1,000,078.00 $1,000,078.00

Fair Value $1,386,343.00 $1,386,343.00

Capital Assets for Component Units:

Columbus State University Athletic Fund, Inc. held the following Capital Assets at July 31, 2005:

July 31, 2005

Capital Ass ets being Depreciated: Machinery and Equipment
Total Capital Ass ets being Depreciated
Less Total Accumulated Depreciation
Total Capital Ass ets being Depreciated, Net Capital Assets, Net

$2,628.00 2,628.00 2,274.00 354.00 $354.00

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.

Annual Financial Report FY2006 155

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 year ended July 31, 2005.

During the year ended July 31, 2005, the Association distributed $9,500 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 to Columbus State University, $13,795, 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 of June 30, 2006.

Investments for Component Units:

Columbus State University Alumni Association, Inc. holds endowment investments in the amount of $124,420. 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 of 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.

Investments are comprised of the following amounts at July 31, 2005:

Certificates of Deposit Equity Mutual Funds
Total Investments

Cost
$78,989.00 70,087.00
$149,076.00

Fair Value
$78,989.00 45,431.00
$124,420.00

Annual Financial Report FY2006 156

Capital Assets for Component Units:
Columbus State University Alumni Association, Inc. held Capital Assets as of July 31, 2005 as follows:

July 31, 2005

Capital Ass ets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Ass ets being Depreciated
Less Total Accumulated Depreciation
Total Capital Ass ets being Depreciated, Net Capital A ssets, Net

$9,900.00 400.00
10,300.00
6,496.00
3,804.00 $3,804.00

Georgia College and State University
Georgia College & State University Foundation, Inc. (Foundation) and Georgia College & State University Alumni Association, Inc. (Alumni Association) are legally separate, taxexempt 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 Alumni Association are self-perpetuating 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 Alumni Association, the majority of resources or income thereon that the Foundation and Alumni Association holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation and Alumni Association can only be used by, or for the benefit of, the University, the Foundation and Alumni Association are considered component units of the University and are discretely presented in the University's financial statements.
The Foundation and Alumni 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 were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's and Alumni Association's fiscal year is July 1 through June 30.
During the year ended June 30, 2006, the Foundation distributed $297,100 and the Alumni Association distributed $191,110 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.

Annual Financial Report FY2006 157

Investments for Component Units:

Georgia College & State University Foundation holds endowment investments in the amount of $9.6 million and Georgia College & State University Alumni Association holds endowment investments in the amount of $5.2 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia College & State University Foundation and Alumni Association, in conjunction with the donors, has established a spending plan whereby 4.75% of the earnings may be used for academic scholarships and .25% of the earnings may be used for administrative expenses.

Investments are comprised of the following amounts at June 30, 2006:

Georgia College & State University Foundation, Inc.

Cost

Fair Value

Money Market Accounts Corporate Bonds Equity Securities
Total Investments

$1,243,488.00 3,042,682.00 4,717,644.00
$9,003,814.00

$1,243,488.00 2,938,003.00 5,455,946.00
$9,637,437.00

Georgia College & State University Alumni Association, Inc.:

Cost

Fair Value

Money Market Accounts Corporate Bonds Equity Securities
Total Investments

$246,724.00 1,780,300.00 2,797,493.00
$4,824,517.00

$246,724.00 1,719,704.00 3,241,396.00
$5,207,824.00

Annual Financial Report FY2006 158

Capital Assets for Component Units:

Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:
June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Furniture and Equipment Vehicles
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$372,188.00 6,364,814.00 6,737,002.00
75,646,127.00 3,599,332.00 121,538.00 79,366,997.00
3,783,577.00
75,583,420.00 $82,320,422.00

Georgia College & State University Alumni Association, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$24,000.00 24,000.00
227,692.00 110,600.00 338,292.00 270,576.00
67,716.00 $91,716.00

Long-term Liabilities for Component Units:

On December 1, 2003, Property II, LLC, a subsidiary of the Foundation, entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County (the Authority) whereby the Authority would issue certain bonds totaling $7,840,000 and loan the entire proceeds to Property II, LLC. Property II, LLC agreed to use the bond proceeds to construct and equip a student center and a parking lot located on the campus of the University. The principal and interest are payable solely from and secured by a lien upon certain interests in real property and certain assignments of rental income originating from rental agreements between Property II, LLC and the University System of Georgia. The rental agreements are annual arrangements and commence following the issuance of a certificate of occupancy. The

Annual Financial Report FY2006 159

serial bonds have various annual maturities with the final payment scheduled for September 1, 2022. Interest rates on the bonds range from 2.17% to 4.5%.

On July 14, 2004, Property III, LLC, a subsidiary of the Foundation, entered into a loan agreement with the Authority whereby the Authority would issue certain bonds totaling $89,000,000 and loan the entire proceeds to Property III, LLC. As part of the loan agreement, Property III, LLC agreed to use the bond proceeds to refund and redeem $55,875,000 in outstanding principal of a previous bond issue, to complete certain uncompleted projects, to perform capital renovations, improvements and acquisitions, to establish a debt service reserve, to establish certain amounts for capitalized interest and to pay the cost of issuance of the bonds. The principal and interest are payable solely from and secured by a lien upon certain leasehold deeds to secure debt and certain pledged revenues and assignments of rents and leases. Completion of various projects will be guaranteed by a letter of credit from a banking institution. The serial bonds have various annual maturities with the final payment due September 1, 2015. Interest rates on the bonds range from 4.5% to 6%.

On December 28, 2005, the Foundation entered into a loan agreement with a financial institution for $450,000 in order to purchase two houses that were gifted to the University. The Foundation is paying interest on the loan at 8.5% monthly. The principal balance is due September 28, 2006.

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable Bond Premium/Discount, net
Total Long Term Debt

$0.00 96,840,000.00
(536,924.00)
$96,303,076.00

$450,000.00 $450,000.00

$0.00 265,000.00 (18,924.00)
$246,076.00

$450,000.00 96,575,000.00
(518,000.00)
$96,507,000.00

$450,000.00 275,000.00
$725,000.00

Annual Financial Report FY2006 160

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing and Lease Revenue bonds payable are as follows:

Year Ending June 30: Year

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021

11-15

2022 through 2026

16-20

2027 through 2031

21-25

2032 through 2034

26-30

Principal
$275,000.00 915,000.00
1,115,000.00 1,335,000.00 1,575,000.00 11,735,000.00 16,050,000.00 20,880,000.00 24,340,000.00 18,355,000.00

Bonds Payable Interest
$5,264,056.25 5,241,181.25 5,197,431.25 5,142,031.25 5,066,781.25
23,738,694.25 20,188,631.75 15,357,614.50
9,083,437.00 1,696,050.00

Total
$5,539,056.25 6,156,181.25 6,312,431.25 6,477,031.25 6,641,781.25
35,473,694.25 36,238,631.75 36,237,614.50 33,423,437.00 20,051,050.00

$96,575,000.00

$95,975,908.75

$192,550,908.75

Annual debt service requirements to maturity for Notes Payable are as follows:

Year Ending June 30: Year

2007

1

Principal
$450,000.00

Note Payable Interest
$9,563.00

Total
$459,563.00

$450,000.00

$9,563.00

$459,563.00

Georgia Southwestern State University

Georgia Southwestern Foundation, Inc. The 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 six member board of the Foundation is selfperpetuating and consists of graduates and friends of the University, and members of the local community. 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

Annual Financial Report FY2006 161

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, 2006, the Foundation distributed $1,769,356.78 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Georgia Southwestern State University Business Office 800 Georgia Southwestern State University Drive, Americus, GA 31709.

Investments for Component Units:

Investments are comprised of the following amounts at June 30, 2006:

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Whole Life Insurance Policy
Total Investments

Cost
$482,611.30 15,302,989.54
4,462,327.31 15,278,196.61
90,243.00
$35,616,367.76

Fair Value
$482,611.30 15,293,758.99
4,197,403.93 16,956,236.97
90,243.00
$37,020,254.19

Capital Assets for Component Units:

Georgia Southwestern Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$1,006,964.07 10,804,862.88 11,811,826.95
662,375.24 46,578.30
708,953.54 85,599.60
623,353.94 $12,435,180.89

Long-term Liabilities for Component Units:
The Foundation borrowed $27,365,000 in November 2005 from the Americus-Sumter Payroll Development Authority ("PDA"). The loan proceeds were obtained by the PDA from the issuance of its Revenue Bonds, Series 2005 and are being used to construct two student housing

Annual Financial Report FY2006 162

buildings and parking facilities for use by the University. Upon completion of construction, the facilities will be leased to the University.

The bonds mature in the year 2037 and have interest rates ranging from 4% to 5.125%.

Long-term liability activity for the year ended June 30, 2006 is as follows:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$0.00 $0.00

$27,233,913.75 $27,233,913.75

$0.00 $0.00

$27,233,913.75 $27,233,913.75

$0.00 $0.00

Debt Service Obligations

Annual debt service requirements to maturity for Georgia Southwestern Foundation, Inc. revenue bonds payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037 through 2041
Bond Discount, net

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

Principal
$0.00 250,000.00
65,000.00 105,000.00 145,000.00 1,450,000.00 3,000,000.00 4,735,000.00 5,980,000.00 7,605,000.00 4,030,000.00 $27,365,000.00 ($131,086.25) $27,233,913.75

Bonds Payable Interest
$1,284,108.00 1,284,108.00 1,274,108.00 1,271,508.00 1,267,308.00 6,209,138.00 5,772,445.00 4,939,288.00 3,738,138.00 2,115,519.00 186,388.00
$29,342,056.00
$29,342,056.00

Total
$1,284,108.00 1,534,108.00 1,339,108.00 1,376,508.00 1,412,308.00 7,659,138.00 8,772,445.00 9,674,288.00 9,718,138.00 9,720,519.00 4,216,388.00
$56,707,056.00 ($131,086.25)
$56,575,969.75

Georgia Southwestern Research and Development Corporation, Inc. Georgia Southwestern Research and Development Corporation, Inc. (the Research Foundation) is a legally separate, tax-exempt component unit of Georgia Southwestern State 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. The fourteen 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

Annual Financial Report FY2006 163

University. Consequently, the Research 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 August 1 through July 31.

Complete financial statements for the Research Foundation can be obtained from the Administrative Office at 800 Georgia Southwestern State University Drive, Americus, GA 31709.

Capital Assets for Component Units:

Georgia Southwestern Research and Development Corporation, Inc. holds the following Capital Assets as of July 31, 2006:

July 31, 2006

Capital Assets being Depreciated: Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$1,203,600.00 1,203,600.00 902,700.00 300,900.00 $300,900.00

Kennesaw State University
The Kennesaw State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Kennesaw State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The Foundation also constructs buildings and facilities for use by the University and then leases the completed buildings to the institution. 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

Annual Financial Report FY2006 164

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, 2006, the Foundation distributed $4,140,377 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 Road, Mailbox 910, Kennesaw, GA 30144 or from the Foundation's website at www.kennesaw.edu/foundation.

Investments for Component Units:

Kennesaw State University Foundation holds endowment and other investments in the amount of $20.8 million. The $10.6 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation, in conjunction with the donors, has established a spending plan whereby 4% of the scholarship balance, in excess of $400, may be used for academic scholarships. The remaining 96% of the balance is set aside as a reserve.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Mutual Funds

$16,647,164.00

$20,793,027.00

Total Investments

$16,647,164.00

$20,793,027.00

The Foundation also holds a net investment in direct financing leases with the University of $45,674,605 at June 30, 2006.

Capital Assets for Component Units:

Kennesaw State University Foundation holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$8,274,083.00 114,424.00
8,388,507.00
105,301,702.00 3,141,980.00
108,443,682.00 10,282,846.00 98,160,836.00
$106,549,343.00

Annual Financial Report FY2006 165

Long-term Debt for Component Units:

Student Housing Revenue Bonds are issued by the Kennesaw State University Foundation to finance student housing on university property. The bonds mature at term and are secured by pledges of gross receipts from student housing at Kennesaw State University. The interest rate is variable.

Parking Facility Revenue Bonds are issued by the Kennesaw State University Foundation 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.

Teaching and Administrative Revenue Bonds are issued by the Kennesaw State University Foundation 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 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.

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Short term insurance note Educational Facilities Bonds University Facilities Taxable Senior Series - 2004B Student Housing Series 2004 A, C, D Parking Revenue Bonds University Facilities Lease Revenue Bonds University Facilities Revenue Bonds - 2006A University Facilities Taxable Revenue Bonds - 2006B Unamortized Cost of Issuance (reclassified to Other Assets) Unamortized bond premium Other Liabilities

Beginning Balance July 1, 2005
$0.00 13,005,000.00 8,050,000.00 102,230,000.00 36,380,000.00 8,400,000.00
0.00 0.00 (5,542,973.00) 4,279,421.00 0.00

Additions $133,157.00
12,810,000.00 2,245,000.00
137,170.00 243,896.00

Reductions $0.00
680,000.00
860,000.00
(5,542,973.00) 352,487.00

Ending Balance June 30, 2006 $133,157.00 12,325,000.00 8,050,000.00 102,230,000.00 35,520,000.00 8,400,000.00 12,810,000.00 2,245,000.00
0.00 4,064,104.00
243,896.00

Amounts due within
One Year $133,157.00 715,000.00 770,000.00 930,000.00 1,060,000.00 260,000.00

T otal Long Term Debt

$166,801,448.00 $15,569,223.00 ($3,650,486.00) $186,021,157.00 $3,868,157.00

Annual Financial Report FY2006 166

Annual debt service requirements to maturity for Student Housing, Parking and Teaching and Administrative bonds payable and other long-term debt are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037 through 2041

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

Notes Payable & Bonds Payable

Principal

Interest

Total

$3,868,157.00 4,230,000.00 4,400,000.00 4,585,000.00 4,800,000.00
26,695,000.00 30,400,000.00 34,105,000.00 31,725,000.00 29,130,000.00 11,839,104.00

$7,779,646.00 7,823,320.00 7,686,590.00 7,537,475.00 7,436,920.00
34,542,951.00 28,966,291.00 21,373,794.00 12,689,127.00
5,337,479.00 163,391.00

$11,647,803.00 12,053,320.00 12,086,590.00 12,122,475.00 12,236,920.00 61,237,951.00 59,366,291.00 55,478,794.00 44,414,127.00 34,467,479.00 12,002,495.00

$185,777,261.00

$141,336,984.00

$327,114,245.00

North Georgia College and State University
North Georgia College & State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt 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, 2006, the Foundation distributed $751,345 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the NGCSU Office of Advancement at 70 Alumni Drive, Dahlonega, GA 30533 or from the Foundation's page on the College's website at www.ngcsu.edu.

Annual Financial Report FY2006 167

Investments for Component Units:

North Georgia College & State University Foundation holds endowment investments in the amount of $15.86 million. 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 $1,339,154.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

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

$54,608.00 235,185.00 700,221.00
4,685.00 14,865,332.00
1,339,154.00
$17,199,185.00

$54,608.00 235,185.00 700,221.00
4,685.00 14,865,332.00
1,339,154.00
$17,199,185.00

Capital Assets for Component Units:

North Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$8,319,938.00 707,631.00
9,027,569.00
1,058,151.00
7,969,418.00 $7,969,418.00

Long-Term Liabilities for Component Units:

Student Housing Bonds were 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 effective interest rate, due to an interest rate swap agreement, is 4.25% until June 2007 and 4.28% effective June 2007 through maturity in June 2028. The estimated fair

Annual Financial Report FY2006 168

value of the interest rate swap was a liability of $52,115 at June 30, 2006 and is reported as an other current liability on the Statement of Net Assets.

Changes in long-term liabilities for the year ended June 30, 2006 are as follows:

Revenue/Mortgage Bonds Payable Other Long Term Liabilities
Total Long Term Liabilities

Beginning Balance July 1, 2005
$10,800,000.00 28,584.00
$10,828,584.00

Additions $0.00
$0.00

Reductions
$100,000.00 3,644.00
$103,644.00

Ending Balance June 30, 2006
$10,700,000.00 24,940.00
$10,724,940.00

Amounts due within
One Year $100,000.00
$100,000.00

Debt Service Obligations:

Annual debt service obligations to maturity for the Student Housing Bonds are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031

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

Principal

Bonds Payable Interest

$100,000.00 100,000.00 100,000.00 200,000.00 200,000.00
1,700,000.00 2,800,000.00 3,700,000.00 1,800,000.00

$450,500.00 446,250.00 442,000.00 433,500.00 425,000.00
1,938,000.00 1,419,500.00
709,750.00 38,250.00

Total
$550,500.00 546,250.00 550,500.00 546,250.00 542,000.00
3,638,000.00 4,219,500.00 4,409,750.00 1,838,250.00

$10,700,000.00

$6,302,750.00

$15,744,250.00

Southern Polytechnic State University
Southern Polytechnic State University Foundation, Inc. (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 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.

Annual Financial Report FY2006 169

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, 2006, the Foundation distributed $321,089 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.

Prior Year Adjustment As of July 1, 2005, the Foundation's net assets have been restated to properly record the investment in direct financing leases from Southern Polytechnic State University. The effect of this change in accounting method was to increase net assets at June 30, 2005 by $1,271,621 for the cumulative effect of the change on net income for prior years. This change was made in recognition of the fact that the buildings revert to the University at the end of the lease agreement.

Investments for Component Units:

Southern Polytechnic State University Foundation holds endowment and other investments in the amount of $3 million. The $2.7 million corpus of the endowment portion is nonexpendable, but the earnings on the investments may be expended as restricted by the donors. The Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the earnings may be used for academic scholarships. The remaining 95% of the earnings are set aside as a reserve.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Corporate Bonds Equity Securities Certificates of Deposit

$857,276.00 1,989,901.00
272,045.00

$850,487.00 1,903,774.00
272,045.00

T otal Investments

$3,119,222.00

$3,026,306.00

Long-term Liabilities for Component Units:
During the year ended June 30, 2004, SPSU Student Housing I, LLC, a subsidiary of the Foundation, arranged for the sale of $35,690,000 Development Authority of the City of Marietta Georgia (the Issuer) Tax-Exempt Adjustment Mode Revenue Bonds (Student Housing Facilities Revenue Bonds) Series 2003 (the Bonds). The proceeds were loaned to SPSU Student Housing I, LLC to finance the development, purchase and construction of dormitory and apartment facilities and to pay certain costs of issuance of the bonds. The Issuer entered into a loan agreement with the SPSU Student Housing I, LLC dated December 1, 2003. The Bonds are secured by all property of the borrower. The Bonds interest ranges from 2.5 to 5.25 percent.
Annual Financial Report FY2006 170

Changes in long-term debt for the year ended June 30, 2006 are as follows:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Bond Premium, Net

$35,690,000.00 380,666.00

$0.00

$850,000.00 28,339.00

$34,840,000.00 352,327.00

$810,000.00

Total Long Term Debt

$36,070,666.00

$0.00

$878,339.00 $35,192,327.00

$810,000.00

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing Facilities revenue bonds payable are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021

11-15

2022 through 2026

16-20

2027 through 2031

21-25

Principal
$810,000.00 900,000.00 970,000.00
1,000,000.00 1,030,000.00 5,740,000.00 7,240,000.00 9,305,000.00 7,845,000.00

Bonds Payable Interest
$1,623,720.00 1,599,420.00 1,576,020.00 1,546,920.00 1,515,920.00 6,987,465.00 5,489,775.00 3,416,969.00 936,000.00

Total
$2,433,720.00 2,499,420.00 2,433,720.00 2,499,420.00 2,546,020.00
12,727,465.00 12,729,775.00 12,721,969.00
8,781,000.00

$34,840,000.00

$24,692,209.00

$5 4,439,369.00

University of West Georgia
University of West Georgia Foundation, Inc. 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

Annual Financial Report FY2006 171

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, 2005, the Foundation distributed $1,440,543 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 $13.6 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, Inc. 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 amount is retained in each endowment account.

Investments are comprised of the following amounts at December 31, 2005:

Cost

Fair Value

Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Managed Futures

$265,146.00 2,956,400.00
515,348.00 7,929,520.00
200,000.00

$265,146.00 2,931,474.00
499,686.00 9,636,486.00
272,918.00

Total Investments

$11,866,414.00

$13,605,710.00

Capital Assets for Component Units:

The University of West Georgia Foundation, Inc. holds the following Capital Assets as of December 31, 2005:

December 31,2005

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$1,918,366.00 1,918,366.00
32,534,437.00 32,534,437.00
698,001.00 31,836,436.00 $33,754,802.00

Annual Financial Report FY2006 172

Long-term Liabilities for Component Units:

Student Housing Bonds were issued by the University of West Georgia Foundation, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at University of West Georgia.

Series 2004A bonds were issued on October 1, 2004 in the amount of $19,175,000 to fund the Construction of Phase II. The bonds bear interest rates ranging from 3.0% to 5.0%.

Series 2004B bonds were issued on October 1, 2004 in the amount of $180,000 to fund the Construction of Phase II. The bonds bear interest at a rate of 3.4%.

Series 2005 bonds were issued on March 1, 2005 in the amount of $13,860,000 as a result of refunding the Series 2003 bonds. These bonds funded the construction of Phase I, University Suites. The bonds bear interest rates ranging from 3.375% to 5.0%

In October 2004, the Foundation obtained a mortgage collateralized by an apartment complex purchased by the Foundation. The principal amount of the loan is $5,700,000.

The mortgage note payable is payable in monthly installments of interest computed at the rate of London Interbank Offered Rate (LIBOR) plus 1.2% per annum adjusted monthly as of the first business day of each month. At December 31, 2005 the rate was 5.49%. Principal is due at September 29, 2007.

Long-term liability activity for the Foundation for the year ended December 31, 2005 was as follows:

Beginning Balance January 1, 2005

Additions

Reductions

Ending Balance December 31, 2005

Amounts due within
One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable Bond Premium

$5,700,000.00 32,560,000.00
363,667.00

$0.00 13,860,000.00
0.00

$0.00 13,205,000.00
14,743.00

$5,700,000.00 33,215,000.00
348,924.00

$0.00 360,000.00
0.00

Total Long Term Debt

$38,623,667.00 $13,860,000.00 $13,219,743.00

$39,263,924.00

$360,000.00

Annual Financial Report FY2006 173

Debt Service Obligations

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

Year ending December 31,2005
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2029

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

Series 2004 A and B Bonds

Principal

Interest

Total

$0.00 455,000.00 485,000.00 535,000.00 600,000.00 3,285,000.00 3,980,000.00 5,030,000.00 4,985,000.00

$856,626.00 856,626.00 842,256.00 827,706.00 806,306.00
3,710,880.00 3,017,075.00 1,968,875.00
607,658.00

$856,626.00 1,311,626.00 1,327,256.00 1,362,706.00 1,406,306.00 6,995,880.00 6,997,075.00 6,998,875.00 5,592,658.00

$19,355,000.00

$13,494,008.00

$32,849,008.00

Year ending December 31,2005
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025
2026 through 2029

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

Principal

Series 2005 Bonds Interest

$360,000.00 370,000.00 385,000.00 375,000.00 400,000.00
2,290,000.00 2,845,000.00 3,480,000.00
3,355,000.00

$574,662.00 562,063.00 549,112.00 535,638.00 522,512.00
2,339,176.00 1,817,787.00 1,189,131.00
374,937.00

$13,860,000.00

$8,465,018.00

Total
$934,662.00 932,063.00 934,112.00 910,638.00 922,512.00
4,629,176.00 4,662,787.00 4,669,131.00 3,729,937.00
$22,325,018.00

Annual debt service requirements to maturity for Mortgage loans for the Foundation are as follows:

Year ending December 31,2005
2006 2007

Year
1 2

Mortgage Note Payable

Principal

Interest

$0.00 5,700,000.00

$0.00 0.00

Total
$0.00 5,700,000.00

$5,700,000.00

$0.00

$5,700,000.00

Annual Financial Report FY2006 174

UWG Real Estate Foundation, Inc. UWG Real Estate Foundation, Inc. (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 four University administrative positions plus five community directors, who are 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 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.

Construction and equipment valued at $27 million and the associated long-term debt of $30.9 million are included in the financial statements of the Foundation. Complete financial statements for the Foundation can be obtained from the Treasurer, Office of Business and Finance 1601 Maple Street, Carrollton, Georgia 30118.

Prior Year Adjustment A prior year adjustment was necessary to restate the beginning unrestricted net assets for interest not properly accrued or capitalized in fiscal year 2005.

Capital Assets for Component Units:

UWG Real Estate Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets, Net

$27,066,600.00 27,066,600.00
$27,066,600.00

Long-term Liabilities for Component Units:
Resident Instruction Bonds were issued by the UWG Real Estate Foundation, Inc. to finance Student Center facilities at University of West Georgia. The bonds mature serially and are
Annual Financial Report FY2006 175

serviced by a pledge of a portion of student fee and appropriations formerly used for square footage support. The interest rate can fluctuate between 3% and 5.25% over the term of the bonds.

Changes in long-term liabilities for UWG Real Estate Foundation for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Bond Premium, net Total Long Term Debt
Debt Service Obligations

$30,720,000.00 217,852.00
$30,937,852.00

$0.00 0.00
$0.00

$0.00 7,476.00
$7,476.00

$30,720,000.00 210,376.00
$30,930,376.00

$0.00 7,476.00
$7,476.00

Annual debt service requirements to maturity for Student Housing (Real Estate Foundation) revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Principal

Bonds Payable Interest

$0.00 360,000.00 390,000.00 425,000.00 465,000.00 2,950,000.00 4,265,000.00 6,235,000.00 8,355,000.00 7,275,000.00

$1,427,520.00 1,422,120.00 1,410,383.00 1,395,545.00 1,378,326.00 6,600,594.00 5,898,985.00 4,660,094.00 2,759,945.00 695,039.00

Total
$1,427,520.00 1,782,120.00 1,800,383.00 1,820,545.00 1,843,326.00 9,550,594.00
10,163,985.00 10,895,094.00 11,114,945.00
7,970,039.00

$30,720,000.00

$27,648,551.00

$58,368,551.00

Abraham Baldwin Agricultural College
Abraham Baldwin Agricultural College Foundation, Inc. (Foundation) is a legally separate, tax-exempt 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 selfperpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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.

Annual Financial Report FY2006 176

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, 2006, the Foundation distributed $253,406 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 Units:

Investments are comprised of the following amounts at June 30, 2006:

Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds
Total Investments

Cost
$1,573,579.00 865,818.00
3,108,629.00 883,351.00
$6,431,377.00

Fair Value
$1,558,573.00 822,439.00
3,271,604.00 1,044,154.00
$6,696,770.00

Capital Assets for Component Units:

Abraham Baldwin Agricultural College Foundation, Inc. held the following Capital Assets as of June 30, 2006:
June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$2,080,799.00 0.00
2,080,799.00
26,907,284.00 1,229,090.00
28,136,374.00 2,161,656.00
25,974,718.00 $28,055,517.00

Annual Financial Report FY2006 177

Long-term Liabilities for Component Units:

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 gross receipts from student housing at Abraham Baldwin Agricultural College. The interest rates range from 1.75% to 4.25%.

Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2006 are shown below:

Revenue Bonds Payable Real Estate Foundation Student Housing Bond Premium, net Other Long-term liabilities
Total Long Term Debt

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

$30,930,000.00 969,405.00 8,666.00
$31,908,071.00

$0.00 $0.00

$0.00 40,113.00
(1.00)
$40,112.00

$30,930,000.00 929,292.00 8,667.00
$31,867,959.00

$725,000.00 4,423.00
$729,423.00

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:

Principal

Bonds Payable Interest

Total

2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2020 through 2026 2027 through 2030

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

$725,000.00 785,000.00 870,000.00 900,000.00 925,000.00
5,105,000.00 6,115,000.00 7,790,000.00 7,715,000.00

$1,289,394.00 1,270,519.00 1,249,831.00 1,226,581.00 1,201,519.00 5,512,253.00 4,437,712.00 2,718,687.00 680,481.00

$2,014,394.00 2,055,519.00 2,119,831.00 2,126,581.00 2,126,519.00
10,617,253.00 10,552,712.00 10,508,687.00
8,395,481.00

$30,930,000.00

$19,586,977.00

$50,516,977.00

Dalton State College
Dalton State College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Dalton State College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. The forty 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

Annual Financial Report FY2006 178

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 April 1 through March 31. Amounts reported due to or due from the College do not agree because of the different fiscal year ends.

During the year ended March 31, 2006, the Foundation distributed $375,243 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:

Investments are comprised of the following amounts at March 31, 2006:

Cash held by investment organization Certificate of Deposit Corporate Bonds Equity Securities
Total Investments

Cost
$346,209.40 362,867.00
2,436,566.00 5,795,926.00
$8,941,568.40

Fair Value
$405,457.00 388,206.00
2,537,723.00 6,857,996.00
$10,189,382.00

Capital Assets for Component Units:

Dalton State College Foundation, Inc. held the following Capital Assets as of March 31, 2006:

March 31, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$925,000.00 925,000.00
2,807,198.00 5,527.00
2,812,725.00 36,190.00
2,776,535.00 $3,701,535.00

Annual Financial Report FY2006 179

Long-term Liabilities for Component Units:

On September 30, 2005, the Foundation assumed an outstanding note payable related to the purchase of the Wood Valley Apartment complex. The principal balance of the note at the time of assumption was $2,475,000 and accrued interest at an annual rate of 5.54%. The note matures on March 11, 2015.

Changes in long-term liabilities for component units for the fiscal year ended March 31, 2006 are shown below:

Notes and Loans Payable

Beginning Balance April 1, 2005

Additions

Reductions

Ending

Amounts due

Balance March 31, 2006

within One Year

$0.00 $2,475,000.00

$4,593.00

$2,470,407.00

$45,462.00

Total Long Term Debt

$0.00 $2,475,000.00

$4,593.00

$2,470,407.00

$45,462.00

Debt Service Obligations

Annual debt service requirements to maturity for Dalton State College Foundation notes payable are as follows:

Year Ending March 31: Year

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

Principal

Notes Payable Interest

$45,462.00 47,716.00 50,833.00 53,763.00 56,862.00
2,215,771.00

$137,634.00 135,380.00 132,263.00 129,333.00 126,234.00 485,869.00

Total
$183,096.00 183,096.00 183,096.00 183,096.00 183,096.00
2,701,640.00

$2,470,407.00

$1,146,713.00

$3,617,120.00

Gainesville State College
Gainesville State College Foundation (Foundation) is a legally separate, tax-exempt component unit of Gainesville State College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. The thirty-six member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College and is discretely presented in the College's financial statements.

Annual Financial Report FY2006 180

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, 2005, the Foundation distributed $403,157 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at P O Box 1358, Gainesville, GA 30503.

Investments for Component Units:

Gainesville State College Foundation holds endowment investments in the amount of $9.1 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Gainesville State College Foundation, in conjunction with the donors, has established a spending plan whereby 3-5% of the total market value at November 30th may be used for academic scholarships. Normally, not more than 2% is spent.

Gainesville State College Foundation Investments are comprised of the following amounts at December 31, 2005:

Co s t

Fair Value

Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds

$1,293,759.00 16,180.00
1,631,681.00 6,187,101.00

$1,293,759.00 15,826.00
1,623,633.00 6,148,627.00

Total Inves tments

$9,128,721.00

$9,081,845.00

Capital Assets for Component Units:
Gainesville State College Foundation holds the following Capital Assets as of December 31, 2005:

Capital Ass ets Disclosure
Capital Ass ets not being Depreciated: Land and other Ass ets
Total Capital Ass ets not being Depreciated Capital Ass ets, Net

December 31, 2005
$8,400.00 8,400.00
$8,400.00

Annual Financial Report FY2006 181

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 38member 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.

Capital Assets valued at $12.6 million and the associated long-term debt of $16.1 million are included in the financial statements of the Foundation. The Series 2004 Bond issue will be used to finance the cost of the construction and equipping of a new student housing complex containing approximately 459 beds, including related parking for approximately 597 vehicles and road and pedestrian walkway improvements located on the campus of Gordon College. Interest rates on the Series 2004 bonds range from 3 to 5%.

During the year ended December 31, 2005, the Foundation distributed $92,172 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 419 College Drive, Barnesville, GA 30204.

Investments for Component Units:

Gordon College Foundation Investments are comprised of the following amounts at December 31, 2005:

Co s t

Fair Value

Equity Securities Mutual Funds Real Estate

$6,130.00 2,893,090.00
293,659.00

$6,130.00 3,624,961.00
293,659.00

Total Inves tments

$3,192,879.00

$3,924,750.00

Capital Assets for Component Units:

The following represents Gordon College Foundation's Capital Assets for the Housing complex, which was in progress as of December 31, 2005:

Annual Financial Report FY2006 182

Capital As sets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital As sets being Depreciated
Less Total Accumulated Depreciation
Total Capital As sets being Depreciated, Net Capital Ass ets, Net

December 31, 2005
$12,137,201.00 579,964.00
12,717,165.00 150,594.00
12,566,571.00 $12,566,571.00

Long-Term Liabilities for Component Units: Long-term liability activity for the year ended December 31, 2005 was as follows:

Notes and Loans Payable Revenue/M ortgage Bonds Payable
Total Long Term Debt

Beginning Balance January 1, 2005
$0.00 0.00
$0.00

Additions

Reductions

Ending Balance December 31, 2005

Amounts due within
One Year

$362,977.00 16,135,000.00

$5,073.00

$357,904.00 16,135,000.00

$304,844.00 390,000.00

$16,497,977.00

$5,073.00

$16,492,904.00

$694,844.00

Debt Service Obligations

Annual debt service requirements to maturity for the Housing complex Series 2004 bonds payable are as follows:

Year ending December 31:
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

Principal
$390,000.00 405,000.00 415,000.00 430,000.00 440,000.00
2,455,000.00 3,005,000.00 3,780,000.00 4,815,000.00

Bonds Payable Interest
$721,465.00 709,700.00 697,550.00 685,100.00 671,125.00
3,107,950.00 2,559,625.00 1,788,750.00
746,000.00

Total
$1,111,465.00 1,114,700.00 1,111,465.00 1,114,700.00 1,112,550.00 5,562,950.00 5,564,625.00 5,568,750.00 5,561,000.00

$16,135,000.00

$11,687,265.00

$27,822,205.00

Final maturity is scheduled for August 1, 2030.

Annual Financial Report FY2006 183

Macon State College
Macon State College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Macon State College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. The twenty-four member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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, 2006, the Foundation distributed $1,524,296 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Development & Alumni Affairs Office at 100 College Station Drive, Macon, GA 31206 or from the Foundation's website at http://www.maconstate.edu/alumnifriends/.
Investments for Component Units:
Macon State College Foundation holds endowment and other investments in the amount of $6,452,102. The $6.2 million corpus of the endowment portion 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 three-year rolling average may be expended. The remaining percentage stays in tact.
Investments are comprised of the following amounts at June 30, 2006:

Equity Securities Georgia Investment Pools
BOR Diversified Fund
Total Inves tments

Co s t $1.00
6,366,294.00 $6,366,295.00

Fair Value $1.00
6,452,101.00 $6,452,102.00

Annual Financial Report FY2006 184

Middle Georgia College

Middle Georgia College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Middle Georgia College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. 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, 2006, the Foundation distributed $29,435 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Fiscal Affairs Office at 1100 Second Street, Cochran, GA 31014.

Investments for Component Units:

Middle Georgia College Foundation holds endowment investments in the amount of $638,718 as of June 30, 2006, detailed as follows:

Cost

Fair Value

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds
Total Investments

$1,568.00 74,948.00 71,436.00 416,230.00 110,034.00
$674,216.00

$1,568.00 74,105.00 68,593.00 390,400.00 104,052.00
$638,718.00

Annual Financial Report FY2006 185

Capital Assets for Component Units:

Middle Georgia College Foundation, Inc. holds Capital Assets as of June 30, 2006 as follows:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated

$79,482.00 10,202,318.00 10,281,800.00

Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net
Capital Assets, Net

0.00 0.00 $10,281,800.00

Long-term Liabilities for Component Units:

On November 1, 2005, the Bleckley-Cochran Development Authority (the "Authority) issued certain bonds totaling $26,850,000. Proceeds of the sale of the bonds will be loaned to MGC Real Estate Foundation, LLC whose sole member is Middle Georgia College Foundation, Inc.

Proceeds will be used to finance student housing on college property. The interest rates are as follows: Series 2005A, 3.5-3.75%; Series 2005A, 5.0%; Series 2005A, 4.125-4.625%; Series 2005B, 5.25%.

Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2006 are

shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2005

Additions

Reductions

June 30, 2006

One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$0.00 $0.00

$26,850,000.00 $26,850,000.00

$0.00 $0.00

$26,850,000.00 $26,850,000.00

$0.00 $0.00

Annual Financial Report FY2006 186

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing (Real Estate Foundation) revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Principal

Bonds Payable Interest

$0.00 0.00
40,000.00 80,000.00 120,000.00 1,320,000.00 2,875,000.00 5,105,000.00 7,625,000.00 9,685,000.00

$1,292,460.00 1,292,460.00 1,292,460.00 1,290,360.00 1,287,560.00 6,317,902.00 5,898,444.00 5,011,595.00 3,545,219.00 1,499,745.00

Total
$1,292,460.00 1,292,460.00 1,332,460.00 1,370,360.00 1,407,560.00 7,637,902.00 8,773,444.00
10,116,595.00 11,170,219.00 11,184,745.00

$26,850,000.00

$28,728,205.00

$55,578,205.00

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, 2006, the Foundation distributed $1,722.10 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the President, PO Box 990, Bainbridge, GA 39818-0990.

Annual Financial Report FY2006 187

Investments for Component Units:

Bainbridge College Foundation holds endowment investments in the amount of $78,813.56. 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, 2006:

Certificates of Deposit Total Investments

Cost $78,813.56 $78,813.56

Fair Value $78,813.56 $78,813.56

Coastal Georgia Community College
Coastal Georgia Community College Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Coastal Georgia Community College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The seven-member board of the Foundation is selfperpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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. Due to the different fiscal years of the College and Foundation, the due to's and due from's do not agree on the financial statements.
During the year ended December 31, 2005, the Foundation distributed $577,563 to the College 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, Inc. holds endowment and other investments in the amount of $7.7 million. The $4.3 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Annual Financial Report FY2006 188

Coastal Georgia Community College Foundation, Inc. investments are comprised of the following amounts at December 31, 2005:

Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds
Total Investments

Cost
$1,489,707.02 297,253.78
2,756,682.25 2,742.00
3,086,667.84
$7,633,052.89

Fair Value
$1,467,062.00 296,594.00
2,713,908.00 2,690.00
3,182,135.00
$7,662,389.00

Darton College
Darton College Foundation (Foundation) is a legally separate, tax-exempt component unit of Darton College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The fiftymember 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 College 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, 2006, the Foundation distributed $212,110.00 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Darton College Business Office at 2400 Gillionville Road, Albany, GA 31707.

Annual Financial Report FY2006 189

Investments for Component Units:

Darton College Foundation Investments are comprised of the following amounts at June 30, 2006:

Co s t

Cash held by investment organization Certificate of Deposit, maturities longer than 3 months Fixed Income Funds Equity Securities

$113,639.00 766,961.00 288,229.00 151,087.00

Total Inves tments

$1,319,916.00

Fair Value
$113,639.00 766,961.00 279,110.00 183,095.00
$1,342,805.00

Capital Assets for Component Units:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$308,826.00 308,826.00
123,324.00 123,324.00
3,444.00 119,880.00 $428,706.00

East Georgia College

East Georgia College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of East Georgia College (College). The Foundation acts primarily as a 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 July 1 through June 30.

Annual Financial Report FY2006 190

During the year ended June 30, 2006, the Foundation distributed $115,106 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 of Fiscal Affairs, 131 College Circle, Swainsboro, GA 30401.

Investments for Component Units:

East Georgia College Foundation holds investments in the amount of $704,885.00, and those investments are classified as either temporarily restricted or unrestricted. Typically, the net assets of the restricted funds are not expended and earnings on the investment may be expended as restricted by the donors. Some of the restricted net assets are defined as fully expendable by the donor for the purpose specified by the donor.

Investments are comprised of the following amounts at June 30, 2006:

Fair Value

Cash held by investment organization Money Market Accounts Equity Securities Georgia Investment Pools
BOR Diversifed Fund BOR Balanced Income Fund BOR Total Return Fund
Total Investments

$4.00 4,852.00 37,174.00
291,097.00 328,667.00
43,091.00
$704,885.00

Capital Assets for Component Units:

East Georgia College Foundation, Inc. held the following Capital Assets at June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Total Capital Assets being Depreciated, Net Capital Assets, Net

$153,600.00 0.00
153,600.00
0.00 $153,600.00

Georgia Highlands College
Georgia Highlands College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Highlands 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. Although the College does not control the timing or amount of receipts from the
Annual Financial Report FY2006 191

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.

During August, 2005, Floyd College Foundation, Inc. formally changed its name to Georgia Highlands College Foundation, Inc.; therefore the financial statements are presented under the new name.

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, 2006, the Foundation distributed $114,909 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3175 Cedartown Highway S.E. Rome, GA 30162.

Investments for Component Units:

Georgia Highlands College Foundation holds investments, including endowment investments, in the amount of $633,761. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Georgia Highlands College Foundation Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Equity Securities Mutual Funds

$546,269.74 44,845.00

$596,881.00 36,880.00

Total Investments

$591,114.74

$633,761.00

South Georgia College
South Georgia College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of South Georgia College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. The 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

Annual Financial Report FY2006 192

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, 2006, the Foundation distributed $195,917.13 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, in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships.

South Georgia College Foundation also holds investments in real property valued at $13,500.

South Georgia College Foundation Investments are comprised of the following amounts at June 30, 2006:

Co s t

Fair Value

Cash held by investment organization Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Short Term Fund BOR Balanced Income Fund BOR Total Return Fund

$358.16 140,720.00 16,000.00
13,500.00
957.00 96,092.00 2,520,876.00

$358.16 142,531.00 15,094.00 13,500.00
332.14 91,087.22 2,268,568.26

Total Inves tments

$2,788,503.16

$2,531,470.78

Annual Financial Report FY2006 193

Waycross College Waycross College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Waycross College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The twenty-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 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, 2006, the Foundation distributed $60,852.05 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, Georgia 3 1503.

Investments for Component Units:

Waycross College Foundation holds endowment investments in the amount of $1.25 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 dividends 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, 2006:

Co s t

Fair Value

Georgia Investment Pools Short Term Funds BOR Total Return Fund

$29,788.82 1,382,509.86

$29,788.82 1,215,460.56

Total Inves tments

$1,412,298.68

$1,245,249.38

Annual Financial Report FY2006 194

Balance Sheet (Non-GAAP Basis)

UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006

ASSETS

Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Ot he r Prepaid Expenditures Inve nt o r i e s Other Assets
Total Assets

$ 278,274,455.60 2 8 ,1 5 0 ,3 0 6 .7 7
6 1 ,4 9 4 ,8 2 0 .3 8 1 2 5 ,2 5 9 ,5 7 5 .4 1
2 9 ,5 4 6 ,1 6 1 .8 8 4 ,0 2 8 ,1 1 5 .6 3 9 3 6 ,1 4 6 .8 8
$ 527,689,582.55

LIABILITIES AND FUND EQUITY

Li abi l i t i e s Contracts Payable Grants Payable Accrued Payroll Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Re s e r ve d Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inve nt o r i e s Carry-Over "Per State Accounting Office" Early Retirement Program Unr e s e r ve d Surplus Regular Tobacco Settlement Funds
Total Fund Balances
Total Liabilities and Fund Balances

$

1 ,9 2 4 ,5 0 9 .7 3

1 ,6 8 5 .9 3

1 1 ,0 7 0 ,7 7 1 .3 5

1 6 0 ,1 6 8 ,6 1 2 .9 6

1 4 1 ,2 9 2 ,1 8 9 .0 0

1 7 ,5 1 6 ,3 5 6 .1 9

9 ,5 0 8 ,7 2 2 .7 5

$ 341,482,847.91

$

1 1 ,9 2 6 ,2 5 8 .4 7

8 ,0 3 4 ,1 2 9 .1 7

3 8 ,1 8 1 ,1 9 1 .1 1

7 ,9 6 2 ,5 1 8 .9 4

9 4 ,5 5 7 ,6 7 7 .9 8

9 ,6 2 6 ,1 0 5 .0 7

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

4 ,0 2 9 ,6 8 5 .8 5

7 ,3 8 2 ,8 4 5 .5 3

1 ,4 7 8 ,6 7 9 .9 8 3 ,4 6 1 .2 7
$ 186,206,734.64 $ 527,689,582.55

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

Annual Financial Report FY2006 195

Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)

UNIVERSITY SYSTEM OF G EORG IA CONSOLIDATED BUDG ET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-G AAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES
State Appropriation State General Funds Tobacco Funds
Federal Funds Other Funds
Total Revenues
EXPENDITURES
Center/EDI Agricultural Experiment Station Athens Tifton Veterinary Laboratories Center for Assistive Technology & Environmental
Access Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia Eminent Scholar Endowment Trust Fund Georgia Military College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute MCG Hopitals and Clinics Marine Institute Marine Resources Extension Center Office of Minority Business Payments to Georgia Cancer Coalition Public Libraries Regents Central Office Research Consortium Skidaway Institute of Oceanography Special Funding Initiative Student Education Enrichment Program Teaching Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital

ORIG INAL BUDG ET

F INAL B UDG ET

ACTUAL

VARIANCE

$ 1,796,565,144.00 $ 1,802,771,336.00 $ 1,802,771,336.00 $

0.00

5 ,7 5 0 ,0 0 0 .0 0

1 6 ,2 3 2 ,5 5 4 .0 0

1 6 ,2 3 2 ,5 5 4 .0 0

0.00

1,510,212,952.00

1 ,6 3 3 ,0 7 9 ,6 3 9 .0 0

1 ,2 2 4 ,3 7 1 ,8 0 9 .2 7

(408,707,829.73)

1,153,837,759.00 1,385,735,986.00 1,362,586,638.89

(23,149,347.11)

$ 4,466,365,855.00 $ 4,837,819,515.00 $ 4,405,962,338.16 $ (431,857,176.84)

$

22,346,381.00 $

24,044,266.00 $

20,549,209.36 $

3,495,056.64

70,923,128.00

8 1 ,3 4 5 ,0 0 7 .0 0

7 3 ,5 5 3 ,5 4 5 .4 5

7,791,461.55

4,695,512.00

6 ,6 9 5 ,5 1 2 .0 0

5 ,6 0 1 ,1 4 8 .2 3

1,094,363.77

7,685,074.00 54,873,885.00
632,486.00 3,011,535.00
0.00 2,500,092.00 31,178,349.00 3,625,810.00 129,760,053.00 31,703,580.00 1,690,798.00 2,611,550.00
860,499.00 0.00
38,257,751.00 7,264,505.00
21,287,489.00 7,190,477.00
29,821,275.00 304,035.00
3,983,814,634.00 3,148,784.00 7,178,173.00

5 ,0 6 7 ,4 2 1 .0 0 6 0 ,4 5 3 ,8 8 5 .0 0
1 ,0 3 6 ,4 8 6 .0 0 6 ,1 9 6 ,9 6 0 .0 0
500,000.00 2 ,8 9 6 ,7 3 4 .0 0 3 1 ,1 8 2 ,9 4 0 .0 0 3 ,6 2 5 ,8 1 0 .0 0 1 4 2 ,4 5 4 ,8 6 4 .0 0 3 1 ,5 1 0 ,0 8 0 .0 0 1 ,7 2 9 ,8 5 8 .0 0 4 ,2 9 3 ,5 5 0 .0 0
860,499.00 1 0 ,4 8 2 ,5 5 4 .0 0 4 0 ,7 0 1 ,4 7 7 .0 0
7 ,5 7 6 ,8 3 7 .0 0 2 2 ,7 1 2 ,4 8 9 .0 0
7 ,2 1 8 ,8 8 1 .0 0 3 0 ,2 3 1 ,2 7 5 .0 0
304,035.00 4 ,3 0 0 ,7 7 1 ,1 3 8 .0 0
3 ,1 4 8 ,7 8 4 .0 0 1 0 ,7 7 8 ,1 7 3 .0 0

3 ,9 6 1 ,9 5 9 .0 2 5 7 ,3 0 7 ,3 0 5 .8 3
9 1 4 ,8 6 0 .3 8 5 ,5 9 9 ,8 9 5 .6 8
5 0 0 ,0 0 0 .0 0 2 ,8 9 6 ,7 3 4 .0 0 1 6 ,9 5 8 ,6 4 9 .0 0
0.00 1 4 1 ,1 0 5 ,4 2 0 .4 8
3 1 ,5 1 0 ,0 8 0 .0 0 1 ,3 6 4 ,8 3 7 .0 5 3 ,2 6 6 ,2 0 8 .9 2 8 5 9 ,8 1 4 .4 3
1 0 ,4 7 9 ,0 9 2 .7 3 3 9 ,7 3 9 ,7 1 3 .9 5
7 ,5 5 7 ,0 8 6 .7 5 2 2 ,1 6 8 ,0 2 0 .7 4
7 ,6 7 8 ,2 2 9 .1 9 3 0 ,1 7 5 ,6 3 1 .4 3
3 0 4 ,0 3 4 .5 6 3 ,9 0 8 ,9 4 8 ,2 5 4 .5 2
3 ,1 4 8 ,7 8 4 .0 0 1 0 ,0 4 9 ,7 1 9 .8 5

1,105,461.98 3,146,579.17
121,625.62 597,064.32
0.00 0.00 14,224,291.00 3,625,810.00 1,349,443.52 0.00 365,020.95 1,027,341.08 684.57 3,461.27 961,763.05 19,750.25 544,468.26 (459,348.19) 55,643.57 0.44 391,822,883.48 0.00 728,453.15

Total Expenditures

$ 4,466,365,855.00 $ 4,837,819,515.00 $ 4,406,198,235.55 $ 431,621,279.45

Excess of Funds Available over Expenditures $
FUND B ALANCE JULY 1
Reserved Unreserved
ADJUSTM ENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to the Office of Treasury and Fiscal Services Year Ended June 30, 2005
Mandatory Transfers - Restricted Non-Mandatory Transfers Other Additions/Deletions
FUND B ALANCE JUNE 30

0.00 $

0.00 $

(235,897.39) $ (863,478,456.29)

1 8 4 ,1 7 4 ,0 2 2 .7 8 1 ,7 8 1 ,0 3 1 .5 4

6 ,0 9 1 ,5 3 5 .9 7 ( 1 ,0 0 4 ,0 0 9 .2 0 )

( 1 ,7 8 1 ,0 3 1 .5 4 ) ( 3 2 7 ,2 8 3 .8 3 )
( 2 ,4 9 3 ,0 4 2 .3 8 ) 1 ,4 0 8 .6 9
$ 186,206,734.64

Annual Financial Report FY2006 196

Budget Comparison and Surplus Analysis Report (Non-GAAP Basis), continued
UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED B UDGET COM PARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP B ASIS)
B UDGET FUND Ye ar Ende d June 30, 2006

SUM M ARY OF FUND B ALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Early Retirement Program
Total Reserved
Unreserved Surplus
Total Fund Balance

$ 11,926,258.47 8,034,129.17
38,181,191.11 7,962,518.94
94,557,677.98 9,626,105.07 3,024,181.27 4,029,685.85 7,382,845.53
$ 184,724,593.39
1,482,141.25
$ 186,206,734.64

Annual Financial Report FY2006 197

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA 270 Washington Street, SW., Atlanta, Georgia 30334
(404) 656-2237

ABRAHAM BALDWIN AGRICULTURAL COLLEGE Financial Report
For the Year Ended June 30, 2006

Abraham Baldwin Agricultural College Tifton, Georgia

Dr. David C. Bridges
President

Floyd E. Wright
Vice President for Fiscal Affairs

ABRAHAM BALDWIN AGRICULTURAL COLLEGE ANNUAL FINANCIAL REPORT FY 2006
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................................................................................................ 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

ABRAHAM BALDWIN AGRICULTURAL COLLEGE
Management's Discussion and Analysis

Introduction

Abraham Baldwin Agricultural College is one of the 35 institutions of higher education 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 technology and technology-related 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.

FY2006 FY2005 FY2004

Faculty
100 95 92

Students (Headcount)
3,423 3,362 3,407

Students (FTE)
2,929 2,849 2,760

Overview of the Financial Statements and Financial Analysis Abraham Baldwin Agricultural College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Abraham Baldwin Agricultural College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 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, 2006
$5,288,356.64 28,964,320.97
419,179.03 34,671,856.64
2,643,059.19 294,821.41
2,937,880.60
28,964,320.97
609,908.52
2,159,746.55 $31,733,976.04

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

The total assets of the institution increased by $7,582,089.31. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $6,997,515.01 of investment in plant, net of accumulated depreciation. This increase was primarily due to the construction of the new Nursing Education Building.
The total liabilities of the institution increased by $606,923.85. The primary cause for the increase was an increase in current liabilities resulting from the amount retained on construction contracts. The combination of the increase in total assets of $7,582,089.31 and the increase in total liabilities of $606,923.85 yields an increase in total net assets of $6,975,165.46. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $6,997,515.01.

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 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, 2006

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

$13,964,519.74 28,353,311.97 (14,388,792.23) 14,131,985.51
(256,806.72) 4,236,647.70 3,979,840.98 24,758,810.58 2,995,324.48 27,754,135.06 $31,733,976.04

$13,408,693.43 26,241,512.48 (12,832,819.05) 7,284,595.16
(5,548,223.89) 2,711,262.89 (2,836,961.00) 27,595,771.58
0.00 27,595,771.58 $24,758,810.58

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. 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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$3,138,515.75
6,235,519.93 362,415.54
4,115,837.06 112,231.46
13,964,519.74
12,885,969.98
1,214,926.41 37,064.87 (5,975.75)
14,131,985.51
4,229,431.42 7,216.28
4,236,647.70
$32,333,152.95

June 30, 2005
$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

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

Op eratin g Exp en s es In s tru ctio n Res earch Pu b lic Serv ice A cad emic Su p p o rt Stu d en t Serv ices In s titu tio n al Su p p o rt Plan t Op eratio n s an d M ain ten an ce Sch o lars h ip s an d Fello ws h ip s A u xiliary En terp ris es Un allo cated Exp en s es Patien t Care (M CG o n ly )
To tal Op eratin g Exp en s es
No n o p eratin g Exp en s es In teres t Exp en s e (Cap ital A s s ets )
To tal Exp en s es

June 30, 2006
$9,624,967.35
956,450.89 2,379,623.28 2,034,115.45 4,320,576.93 3,552,767.79 1,204,297.70 4,280,512.58
28,353,311.97
0.00 $28,353,311.97

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
0.00
$26,241,512.48

Under non-operating revenues (expenses) state appropriations increased by $829,206.24. This was in part due to salary and fringe benefit increases for current employees. Also, due to an upward trend in enrollment and gains in the area of student retention, Abraham Baldwin Agricultural College continues to employ additional faculty and staff to serve students. The compensation and employee benefits category increased by approximately $996,193.02.
Utilities decreased by approximately ($140,822.09) during the past year. The decrease was primarily associated with a new energy management system we installed.
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.

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 5

Cash Flows for the Years Ended June 30, 2006 and 2005, Condensed

C a s h P ro v id e d (u s e d ) B y : O p e ra t in g A c t iv it ie s N o n -c a p it a l F in a n c in g A c t iv it ie s C a p it a l a n d R e la t e d F in a n c in g A c t iv it ie s In v e s t in g A c t iv it ie s
N e t C h a n g e in C a s h C a s h , B e g in n in g o f Ye a r
Cas h , En d o f Year

June 30, 2006
($ 1 3 ,6 8 6 ,8 9 1 .0 9 ) 1 3 ,9 2 7 ,7 3 3 .1 5 (9 0 7 ,0 9 4 .8 6 ) 3 7 ,0 6 4 .8 7 (6 2 9 ,1 8 7 .9 3 ) 2 ,4 1 7 ,0 5 0 .9 1
$ 1 ,7 8 7 ,8 6 2 .9 8

June 30, 2005
($ 1 1 ,2 1 6 ,5 1 5 .2 6 ) 1 2 ,0 9 8 ,3 7 6 .6 4 ( 2 4 3 ,7 8 5 .5 9 ) 3 4 ,0 4 2 .6 5 6 7 2 ,1 1 8 .4 4 1 ,7 4 4 ,9 3 2 .4 7
$ 2 ,4 1 7 ,0 5 0 .9 1

Capital Assets The College had one significant capital asset addition to facilities in fiscal year 2006. The new Nursing Education Building was completed and is scheduled to open this Fall Semester. This building was funded in part by the Georgia State Finance and Investment Commission (GSFIC), the ABAC Foundation, Tift Regional Hospital, and the College.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities Abraham Baldwin Agricultural College had Long-Term Debt and Liabilities of $702,790.22 of which $407,968.81 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. As of June 30, 2006 The Abraham Baldwin Agricultural College Foundation, Inc. had endowment investments of approximately $6.7 million and long-term debt of approximately $31 million in the form of a bond issue. 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 much like last year and we will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
Dr. David C. Bridges, President Abraham Baldwin Agricultural College

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 6

Statement of Net Assets
ABRAHAM BALDWIN AG RICULTURAL COLLEG E STATEMENT OF NET ASSETS June 30, 2006

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 - Other Due From Component Units Pledges Receivable Inventories (note 4) 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 Pledges Receivable Capital A s s ets , net (note 6) Other As s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Depos its Held for Other Organizations Due to Primary Government Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Notes and Loans Payable (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

Abraham Baldwin Agricultural College
$1,787,862.98 102,743.75 942,485.68
1,871,039.91 95,946.23
469,980.09 18,298.00
5,288,356.64
419,179.03 28,964,320.97 29,383,500.00 34,671,856.64
685,781.50 273,350.32 512,390.87
128.37 429,127.49 334,311.83 407,968.81
2,643,059.19 294,821.41
294,821.41 2,937,880.60
28,964,320.97
609,908.52 2,159,746.55 $31,733,976.04

Component Unit Abraham Baldwin Agricultural College
Foundation, Inc.
$1,742,513.00
251,980.00 222,946.00
6,694.00 15,225.00 2,239,358.00
5,848,518.00 6,696,770.00
685,338.00 28,055,517.00
1,008,309.00 42,294,452.00 44,533,810.00
496,048.77
230,423.00 95,946.23
725,000.00 4,423.00
1,551,841.00
31,134,292.00 4,244.00
31,138,536.00 32,690,377.00
3,053,052.00 6,836,009.00 3,671,347.00 (1,716,975.00) $11,843,433.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 7

Statement of Revenues, Expenses and Changes in Net Assets
AB RAHAM BALDWIN AG RICULTURAL COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006

Component Unit

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) 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
Employee Benefits 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 A braham Baldwin A gricultural College
Total Operating Expens es Operating Income (los s )

Abraham Baldwin Agricultural College

Abraham Baldwin Agricultural College
Foundation, Inc.

$5,793,788.54 2,655,272.79
5,838,068.67 71,927.61 325,523.65 362,415.54 24,991.67
73,994.77 2,082,616.63
625,756.81 32,738.45 528,566.94 427,847.26 344,316.20 87,239.79 13,964,519.74
5,436,000.63 5,904,275.59 3,690,186.08
203,874.12 1,853,376.77
915,203.91 9,211,182.58 1,139,212.29
28,353,311.97 (14,388,792.23)

$0.00 1,650,565.00 4,523,923.00
6,174,488.00
105,212.00
2,086,702.00 1,362,013.00
253,406.00 3,807,333.00 2,367,155.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ABRAHAM BALDWIN AGRICULTURAL COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

C ompone nt Unit

Abraham Baldwin Agricultural Colle ge

Abraham Baldwin Agricultural Colle ge
Foundation, Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 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

12,885,969.98 1,214,926.41 37,064.87
(5,975.75) 14,131,985.51
(256,806.72)
4,229,431.42 7,216.28
4,236,647.70 3,979,840.98
24,758,810.58 2,995,324.48
27,754,135.06 $31,733,976.04

(1,260,500.00)
(1,260,500.00) 1,106,655.00
544,977.00 544,977.00 1,651,632.00
10,191,801.00 0.00
10,191,801.00 $11,843,433.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 9

Statement of Cash Flows
AB RAHAM B ALDWIN AG RICULTURAL COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Purchas es of Capital A s s ets Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES 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, 2006
$3,160,015.06
5,244,982.94 195,442.26
(13,435,298.22) (11,374,815.27) (1,853,376.77)
(13,583.91) 54,799.21
73,994.77 1,883,690.95
627,171.02 33,540.79
539,140.01 427,847.26 364,614.19 384,944.62 (13,686,891.09)
12,885,969.98 (173,163.24) 1,214,926.41
13,927,733.15
(907,094.86) (907,094.86)
37,064.87
37,064.87 (629,187.93) 2,417,050.91 $1,787,862.98

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 10

Statement of Cash Flows, Continued
AB RAHAM B ALDWIN AG RICULTURAL COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($14,388,792.23)
1,139,212.29 (1,079,284.38)
(171,049.36) (4,643.79) 41,215.30
607,144.04 129,146.45
89,453.43 (49,292.84) ($13,686,891.09)
($4,236,647.70)

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 11

ABRAHAM BALDWIN AGRICULTURAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, 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 2006 12

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 predominant 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 2006 13

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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 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, 2006, GSFIC did not transfer any capital additions to Abraham Baldwin Agricultural College.
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 14

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 $752,083.06 as of 7-1-2005. For FY2006, $1,313,621.69 was earned in compensated absences and employees were paid $1,362,914.53, for a net decrease of $(49,292.84). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $702,790.22.
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 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 2006 15

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 Total Res tricted Expendable

June 30, 2006
$0.00 581,566.43
28,342.09 $609,908.52

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 Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$876,746.23 1,414,577.07 (131,576.75) $2,159,746.55

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 2006 16

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.
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $1,883,556.73 and the bank balance was $2,493,979.88. Of the college's deposits, $2,215,448.58 was uninsured and collateralized with securities held by the financial institution's trust department or agent in the college's name.
B. Investments The College had no investments as of June 30, 2006.
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 18

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$110,596.71 38,391.82
942,485.68 95,946.23
1,802,213.05 2,989,633.49
80,161.67
$2,909,471.82

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Total

June 30, 2006 $469,980.09 $469,980.09

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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 2006 19

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

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

Restated Beginning Balances 7/1/2005
$67,441.25 0.00
1,106,677.96 1,174,119.21

Additions
$0.00
4,890,233.26 4,890,233.26

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

0.00 32,550,160.55
607,439.00 3,323,928.83
0.00 2,812,526.99
156,200.00 39,450,255.37

216,254.91 50,749.39
267,004.30

77,475.64 177.00
77,652.64

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

0.00 10,774,590.82
546,695.10 1,948,164.07
0.00 2,372,902.07
19,892.08 15,662,244.14

748,626.86
298,718.93
90,489.00 1,377.50
1,139,212.29

61,640.90 177.00
61,817.90

Total Capital Assets, Being Depreciated, Net

23,788,011.23

(872,207.99)

15,834.74

Capital Assets, net

$24,962,130.44

$4,018,025.27

$15,834.74

Ending Balance 6/30/2006
$67,441.25 0.00
5,996,911.22 6,064,352.47
0.00 32,550,160.55
607,439.00 3,462,708.10
0.00 2,863,099.38
156,200.00 39,639,607.03
0.00 11,523,217.68
546,695.10 2,185,242.10
0.00 2,463,214.07
21,269.58 16,739,638.53
22,899,968.50
$28,964,320.97

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 20

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $0.00
429,127.49 $429,127.49

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences Total
Total Long TermObligations

752,083.06 752,083.06
$752,083.06

1,313,621.69 1,313,621.69
$1,313,621.69

1,362,914.53 1,362,914.53
$1,362,914.53

702,790.22 702,790.22
$702,790.22

407,968.81 407,968.81
$407,968.81

Note 9. Significant Commitments

The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2006.

Note 10. Lease Obligations

Abraham Baldwin Agricultural College had no outstanding noncancellable lease obligations as of June 30, 2006, and the College had no expense for rental of real property or equipment under operating leases.

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 21

Note 11. Retirement Plans

Teachers Retirement System of Georgia Plan Description Abraham Baldwin Agricultural College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the 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 2006, 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

2006 2005 2004

100% 100% 100%

$731,016.27 $700,907.88 $752,741.88

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 60.

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 22

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, 2006, for employees covered by ERS was $77,104.41. The College's total payroll for all employees was $11,595,580.92.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the College amounted 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 2006 amounted to $9,183.15, of which $8,026.59 was made by the College and $1,156.56 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, 2006, financial report, which may be obtained through ERS.
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 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 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 2006, 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 $241,091.48 (9.65%) and $124,918.16 (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
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 24

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 2006 amounted to $20,799.42 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.
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 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 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, 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, 2006, there were 151 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Abraham Baldwin Agricultural College recognized as incurred $629,795.70 of expenditures, which was net of $196,960.24 of participant contributions.
Abraham Baldwin Agricultural College Annual Financial Report FY 2006 26

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$5,430,917.63 1,208,414.22 1,742,929.00

$0.00

$2,290.00 388,653.00
111,243.31

($3,600.00) 1,079,350.14 293,029.59

$2,893.00 1,255,862.51 327,069.32

$3,500.00 1,653,361.87 1,134,316.15

78,596.45 162,542.96
40,106.71 720,737.43 240,722.95

12,784.43 27,642.24
734.79 412,827.12
276.00

22,653.60
3,153.71 801,768.68 183,267.56

47,761.80 51,859.00 8,034.18 337,081.05 3,554.59

33,756.93 168,763.65 175,454.11 609,200.32 542,223.90

$9,624,967.35

$0.00

$956,450.89

$2,379,623.28

$2,034,115.45

$4,320,576.93

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

Auxiliary En terp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00
671,055.94 2,815,050.01
66,661.84

$0.00 1,204,297.70

$0.00 318,633.85
81,598.71
8,320.91 238,271.22
16,664.47 3,514,517.97
102,505.45

$0.00

$5,436,000.63 5,904,275.59 3,690,186.08 0.00 203,874.12 1,853,376.77 915,203.91 9,211,182.58 1,139,212.29

$3,552,767.79

$1,204,297.70

$4,280,512.58

$0.00

$28,353,311.97

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 27

Note 16. Component Units

Abraham Baldwin Agricultural College Foundation, Inc. (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, 2006, the Foundation distributed $253,406 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 Units:

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds
Total Investments

$1,573,579.00 865,818.00
3,108,629.00 883,351.00
$6,431,377.00

$1,558,573.00 822,439.00
3,271,604.00 1,044,154.00
$6,696,770.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 28

Capital Assets for Component Units:

Abraham Baldwin Agricultural College Foundation, Inc. held the following Capital Assets as of June 30, 2006:
June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$2,080,799.00 0.00
2,080,799.00
26,907,284.00 1,229,090.00
28,136,374.00 2,161,656.00
25,974,718.00 $28,055,517.00

Long-term Liabilities for Component Units:

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 gross receipts from student housing at Abraham Baldwin Agricultural College. The interest rates range from 1.75% to 4.25%.

Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2006 are shown below:

Revenue Bonds Payable Real Estate Foundation Student Housing Bond Premium, net Other Long-term liabilities
Total Long Term Debt

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

$30,930,000.00 969,405.00 8,666.00
$31,908,071.00

$0.00 $0.00

$0.00 40,113.00
(1.00)
$40,112.00

$30,930,000.00 929,292.00 8,667.00
$31,867,959.00

$725,000.00 4,423.00
$729,423.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 29

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:

Bonds Payable

Principal

Interest

Total

2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2020 through 2026 2027 through 2030

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

$725,000.00 785,000.00 870,000.00 900,000.00 925,000.00
5,105,000.00 6,115,000.00 7,790,000.00 7,715,000.00

$1,289,394.00 1,270,519.00 1,249,831.00 1,226,581.00 1,201,519.00 5,512,253.00 4,437,712.00 2,718,687.00 680,481.00

$2,014,394.00 2,055,519.00 2,119,831.00 2,126,581.00 2,126,519.00 10,617,253.00 10,552,712.00 10,508,687.00 8,395,481.00

$30,930,000.00

$19,586,977.00

$50,516,977.00

Abraham Baldwin Agricultural College Annual Financial Report FY 2006 30

ALBANY STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Albany State University Albany, Georgia

Dr. Everette J. Freeman
President

Bruce Spratt
Interim Vice President for Fiscal Affairs

ALBANY STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2006
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................................................................................................ 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

ALBANY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Albany State University is one of the 35 institutions of higher education 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. The University experienced minimal growth during the period as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
149 130 142

Students (Headcount)
3,649 3,668 3,681

Students (FTE)
3,302 3,297 3,272

Overview of the Financial Statements and Financial Analysis

Albany State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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.

Albany State University Annual Financial Report FY2006 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, 2006
$5,796,976.79 98,302,818.88
274,220.07 104,374,015.74
3,802,923.29 717,324.39
4,520,247.68
98,302,818.88
326,001.57
1,224,947.61 $99,853,768.06

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

The total assets of the institution decreased by ($4,130,736.47). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($3,786,703.52) 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 decreased by ($1,187,907.83). The combination of the decrease in total assets of ($4,130,736.47) and the decrease in total liabilities of ($1,187,907.83) yields a decrease in total net assets of ($2,942,828.64). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($3,786,703.52).

Albany State University Annual Financial Report FY2006 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.

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a neutral year with a decrease in the net assets at the end of the year primarily due to capital asset depreciation. 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

June 30, 2006

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

$31,906,037.90 54,585,767.37 (22,679,729.47) 19,736,900.83
(2,942,828.64) 0.00
(2,942,828.64) 102,796,596.70
0.00 102,796,596.70 $99,853,768.06

$28,491,449.59 52,231,521.40 (23,740,071.81) 19,672,058.77
(4,068,013.04) 0.00
(4,068,013.04) 106,864,609.74
0.00 106,864,609.74 $102,796,596.70

Albany State University Annual Financial Report FY2006 3

Revenue by Source For the Years Ended June 30, 2006 and 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

June 30, 2006
$8,161,717.80 15,060,485.46
1,064,948.59 7,368,544.44
250,341.61 31,906,037.90
19,816,925.94 455,808.00 171,808.80 (707,641.91)
19,736,900.83
0.00 $51,642,938.73

June 30, 2005
$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
0.00 $48,167,007.80

Albany State University Annual Financial Report FY2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$20,293,792.32 1,455,269.73 375,629.76 3,105,006.71 2,642,169.12 9,993,794.87 4,550,843.17 3,897,180.43 8,272,081.26
54,585,767.37
0.00
$54,585,767.37

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
3,499.44
$52,235,020.84

Revenues associated with student tuition and fees, net of sponsored and unsponsored scholarships, category increased by $3,058,064.43 during the year. The increase can be attributed to the increase in fees charged and hours registered along with one time adjustments made in the prior year.

The compensation and employee benefits category increased by $704,497.87.

Utilities increased by $313,318.54 during the past year.

Under non-operating revenues (expenses) state appropriations increased by $570,820.38. The net increase in non-operating revenues was $64,842.06.

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

Albany State University Annual Financial Report FY2006 5

used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

C ash F l o w s fo r the Ye ar s e nde d J une 3 0 , 2 0 0 5 and J une 3 0 , 2 0 0 6 C o nde nse d

C a s h P ro v id e d (u s e d ) By : O p e ra t in g A c t iv it ie s N o n -c a p it a l F in a n c in g A c t iv it ie s Ca p ita l a n d R e la te d F in a n c in g A c tiv itie s In v e s t in g A c tiv it ie s
N e t C h a n g e in C a s h C a s h , B e g in n in g o f Ye a r
Cas h , En d o f Year

June 30, 2006
( $ 1 9 ,4 2 8 ,9 9 2 . 6 4 ) 1 9 ,9 1 5 ,9 0 4 . 3 9 ( 4 3 6 ,4 0 8 . 8 2 ) 1 7 1 ,8 0 8 . 8 0 2 2 2 ,3 1 1 . 7 3 1 ,3 2 4 ,9 0 0 . 8 9
$ 1 ,5 4 7 ,2 1 2 . 6 2

June 30, 2005
( $ 1 8 ,5 7 0 ,5 0 0 . 1 9 ) 1 9 ,4 0 7 ,5 0 3 . 1 2 ( 3 5 7 ,4 1 5 . 3 9 ) 7 ,4 6 3 . 7 1 4 8 7 ,0 5 1 . 2 5 8 3 7 ,8 4 9 . 6 4
$ 1 ,3 2 4 ,9 0 0 . 8 9

Capital Assets

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt and Liabilities

Albany State University had Long-Term Debt and Liabilities of $1,374,957.22 of which $657,632.83 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. 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.

Dr. Everette J. Freeman, President Albany State University

Albany State University Annual Financial Report FY2006 6

Statement of Net Assets

ALBANY STATE UNIVERSITY STATEMENT OF NET ASSETS
June 30, 2006

ASS ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Inventories (note 4) Prepaid items Notes and M ortgages Receivable Other Ass ets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Capital A s s ets , net (note 6) Other Ass ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Compens ated A bs ences (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Other Long-Term Liabilities Notes and Loans Payable (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

Albany S tate Univers ity
$1,547,212.62 955,455.69
2,613,301.49 672,410.75 8,596.24
5,796,976.79
274,220.07 98,302,818.88 98,577,038.95 104,374,015.74
241,017.66 205,717.24 285,797.21 2,115,333.57
3,473.44 293,951.34 657,632.83 3,802,923.29 717,324.39
717,324.39 4,520,247.68
98,302,818.88
326,001.57 1,224,947.61 $99,853,768.06

Component Unit Albany S tate Univers ity
Foundation, Inc.
$901,031.00
17,638.00
80,000.00 239,264.00 1,237,933.00
18,081,773.00 2,160,280.00
32,745,349.00 1,206,601.00
54,194,003.00 55,431,936.00
7,190,436.00
1,124,103.00
83,192.00 8,397,731.00
34,320,000.00 658,805.00
2,309,786.00 37,288,591.00 45,686,322.00
5,107,867.00
2,734,700.00 1,276,805.00
626,242.00 $9,745,614.00

Albany State University Annual Financial Report FY2006 7

Statement of Revenues, Expenses, and Changes in Net Assets
ALB ANY STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Albany S tate Univers ity

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Gifts and Contributions 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
Employee Benefits 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 A lbany State Univers ity
Total Operating Expens es Operating Income (los s )

$11,704,459.62 3,542,741.82
13,467,324.75 679,675.41 913,485.30
1,064,948.59 21,027.50
1,770,607.16 1,489,421.57 2,051,656.89
118,416.55 359,370.29 1,432,868.70 146,203.28 229,314.11 31,906,037.90
10,006,004.48 14,366,588.09 6,792,176.37
0.02 382,984.39 5,027,068.34 2,146,927.32 12,348,547.93 3,515,470.43
54,585,767.37 (22,679,729.47)

Albany S tate Univers ity
Foundation, Inc.
$0.00 609,502.00
26,287.00
635,789.00
336,720.00 335,146.18 197,828.00
83,155.00 32,992.82 985,842.00 (350,053.00)

Albany State University Annual Financial Report FY2006 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ALBANY STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Albany State University

Albany State University
Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Total Other Revenues Increase in Net Assets
NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

19,816,925.94 455,808.00 171,808.80
(707,641.91) 19,736,900.83 (2,942,828.64)

(6,858.00) 1,837,251.00 (181,779.00)
1,648,614.00 1,298,561.00

0.00 (2,942,828.64)
102,796,596.70 0.00
102,796,596.70 $99,853,768.06

0.00 1,298,561.00
8,447,053.00 0.00
8,447,053.00 $9,745,614.00

Albany State University Annual Financial Report FY2006 9

Statement of Cash Flows

ALBANY STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006

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 Purchas es of Capital A s s ets Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Interes t on 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, 2006
$7,218,278.75
16,421,169.12 170,089.90
(22,495,590.24) (24,242,803.49) (5,027,068.34)
(30,400.63) 53,665.95
1,754,156.09 1,491,916.49 2,013,469.17
118,083.31 374,526.09 1,465,877.23 379,033.31 906,604.65 (19,428,992.64)
19,816,925.94 (356,829.55) 455,808.00
19,915,904.39
(436,408.82) (436,408.82)
171,808.80 171,808.80 222,311.73 1,324,900.89 $1,547,212.62

Albany State University Annual Financial Report FY2006 10

Statement of Cash Flows, Continued
ALBANY STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities

June 30, 2006
($22,679,729.47)
3,515,470.43
598,148.11 22,958.82 (6,553.48) 23,265.32 (633,831.43) (480,257.09) 76,857.99 134,678.16 ($19,428,992.64)

Albany State University Annual Financial Report FY2006 11

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Albany State University is reporting the activity for the Albany State University Foundation, Inc.
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
Albany State University Annual Financial Report FY2006 12

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. Albany State University did not have short-term investments during this past fiscal year.
Investments The University accounts for its investments, if applicable, 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. Albany State University did not have any investments during this past fiscal year.
Albany State University Annual Financial Report FY2006 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.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, 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.
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.
Albany State University Annual Financial Report FY2006 14

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Albany State University had accrued liability for compensated absences in the amount of $1,240,279.06 as of 7-1-2005. For FY2006, $887,069.37 was earned in compensated absences and employees were paid $752,391.21, for a net increase of $134,678.16. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,374,957.22.
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 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 FY2006 15

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Total Res tricted Expendable

June 30, 2006
($25,529.87) 348,816.86
2,714.58 $326,001.57

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 Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$115,065.54 1,039,282.24
70,599.83 $1,224,947.61

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes 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 FY2006 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.
Albany State University Annual Financial Report FY2006 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 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, 2006, the carrying value of deposits was $1,538,042.62 and the bank balance was $3,657,821.71. Of the University's deposits, $3,557,821.71 were uninsured. Of these uninsured deposits, $3,096,265.72 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $461,555.99 were uncollateralized.
Albany State University Annual Financial Report FY2006 18

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$897,542.29 744,400.93 955,455.69 1,406,305.31 4,003,704.22 434,947.04
$3,568,757.18

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Total

June 30, 2006 $672,410.75 $672,410.75

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education.

Albany State University Annual Financial Report FY2006 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital As s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital Ass ets Not Being Depreciated
Capital As s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total As s ets Being Depreciated
Les s : Accumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total Accumulated Depreciation
Total Capital Ass ets , Being Depreciated, Net
Capital As s ets , net

Beginning B al anc e s 7/1/2005
$2,922,366.00 0.00 0.00
2,922,366.00

Additions $0.00

Reductions $0.00

0.00

0.00

12,621,336.00 115,643,413.00
4,317,641.04 6,241,803.80
216,470.19 5,648,523.15
0.00 144,689,187.18

561,258.74 33,885.40 595,144.14

2,216,658.82 216,470.19 19,695.00
2,452,824.01

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

210,763.67 2,601,962.79
147,510.00 366,660.97
188,573.00
3,515,470.43
(2,920,326.29)
($2,920,326.29)

22,329.66 1,483,088.90
61,333.22 19,695.00
1,586,446.78
866,377.23
$866,377.23

Ending B al anc e 6/30/2006
$2,922,366.00 0.00 0.00
2,922,366.00
12,621,336.00 115,643,413.00
4,317,641.04 4,586,403.72
0.00 5,662,713.55
0.00 142,831,507.31
2,295,182.43 34,070,771.68 3,144,871.03 2,877,650.61
0.00 5,058,567.00
4,011.68 47,451,054.43
95,380,452.88
$98,302,818.88

Albany State University Annual Financial Report FY2006 20

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $348,636.53 1,766,697.04
$2,115,333.57

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

1,240,279.06 1,240,279.06
$1,240,279.06

887,069.37 887,069.37
$887,069.37

752,391.21 752,391.21
$752,391.21

1,374,957.22 1,374,957.22
$1,374,957.22

Current Portion
$0.00
657,632.83 657,632.83 $657,632.83

Note 9. Significant Commitments
The University did not have significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2006.

Albany State University Annual Financial Report FY2006 21

Note 10. Lease Obligations
Albany State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment.
Albany State University does not have any future or current commitments for capital leases.
Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4

Real Property Operating Leas es
$121,596.24 6,042.00 4,644.00 2,322.00
$134,604.24

OPERATING LEASES

During 2006 fiscal year, Albany State University's operating lease expense for rental of real property and equipment was $430,504.17

Albany State University Annual Financial Report FY2006 22

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 2006, 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

2006 2005 2004

100% 100% 100%

$ 1,397,829.64 $ 1,407,598.73 $ 1,411,636.84

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Albany State University Annual Financial Report FY2006 23

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, 2006, for employees covered by ERS was $28,840.00. The University's total payroll for all employees was $ 24,225,288.75.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $ 3,434.88, of which $3,002.28 was made by the University and $432.60 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, 2006, financial report, which may be obtained through ERS.
Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-
Albany State University Annual Financial Report FY2006 24

21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $543,076.39 (9.65%) and $ 280,868.18 (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 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
Albany State University Annual Financial Report FY2006 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 2006 amounted to $ 52,253.20 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.
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 employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Albany State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Albany State University Annual Financial Report FY2006 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 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, 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, 2006, there were 147 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Albany State University recognized as incurred $ 628,798.70 of expenditures, which was net of $ 220,626.64 of participant contributions.
Albany State University Annual Financial Report FY2006 27

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

Na tura lClassific ation
Fa c ulty S ta ff Be ne fits Pe rsona lSe rvic e s Tra ve l Scholarships and Fellowships Utilitie s Supplies and Others Services De pre c ia tion
Tota l Expe ns e s
Na tura l Cla s s ific a tion
Fa c ulty S ta ff Be ne fits P e rs on a l S e rvic e s Tra ve l S c ho la rs h ip s a n d Fe llows hip s Utilitie s S u pp lie s a n d Oth e rs S e rvic e s De pre c ia tion
Tota l Exp e n s e s

Ins truc tion

Re s e a rc h

$9,536,353.32 3,092,925.08 3,078,652.89

$94,305.50 421,108.18 88,083.43

107,365.64 430,107.99 171,640.33 2,096,697.80 1,780,049.27

41,976.49 4,000.00 2,892.90 786,978.50 15,924.73

$20,293,792.32

$1,455,269.73

Func tiona l Cla s s ific a tion FY2006

P u blic S e rvic e

Ac a de mic S u p po rt

$64,177.25 129,426.44
31,536.56

$39,458.40 1,654,624.57
456,035.03

7,074.22 7,550.00
499.89 135,365.40

36,266.32
23,163.06 685,270.05 210,189.28

$375,629.76

$3,105,006.71

S tude nt S e rvic e s
$42,750.00 1,312,068.20 382,589.06
40,767.74 47,839.00 32,536.10 780,935.42
2,683.60
$2,642,169.12

Ins titutiona l S up p ort
$228,960.01 5,005,641.18 2,015,853.37
101,625.51 125,990.39 110,941.53 2,379,683.60 25,099.28
$9,993,794.87

P la nt Op e ra tion s & Ma in te na n c e

Fun c tio na l Cla s s ific a tio n FY20 06

S c h ola rs hip s & Fe llo ws hip s

Auxilia ry En te rpris e s

Un a lloc a te d Exp e n s e s

$0.00 1,77 3,67 7.7 8
536,552.00 (65 5,14 0.2 2)
5,2 59 .19
1,6 40 ,7 81.11 554,534.68 69 5,17 8.6 3

$0.00
3,852,927.67 44,252.76

$0.00 97 7,116.6 6 202,874.03 65 5,14 0.2 4 42,649.28 558,653.29 164 ,47 2.4 0 4,884,829.72 786,345.64

$0.00

$4 ,55 0,8 43 .17

$ 3,8 97 ,180 .43

$8 ,27 2,08 1.2 6

$0.00

Tota l Exp e n s e s
$ 10 ,00 6,004 .4 8 14 ,36 6,58 8.0 9 6 ,79 2,176 .3 7 0.02 382,984.39 5,027,068.34 2 ,14 6,927 .3 2 12 ,34 8,54 7.9 3 3 ,515,470 .4 3
$54,585,767.37

Albany State University Annual Financial Report FY2006 28

Note 16. Component Units
Albany State University Foundation, Inc. (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 follows GASB Statement No. 34, Basic Financial Statements and Managements Discussion and Analysis- for State and Local Governments, GASB Statement 35, Basic Financial Statements Management's Discussion and Analysis for Public Colleges and Universities, GASB Statement No. 37, Basic Financial Statements and Management's Discussion and Analysis for State and local Governments: Omnibus an amendment of GASB Statements No. 21 and No. 34, and GASB Statement No. 38, Certain Financial Statement Note Disclosures. The foundation's fiscal year is July 1 through June 30.
During the year ended June 30, 2006, the Foundation distributed $32,993 to the University for restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 504 College Drive, Albany, GA 31705.
Deposits and Investments for Component Units:
Deposits:
As of June 30, 2006, the carrying amount of the Foundation's bank deposits was $901,031 and the respective bank balances totaled $957,432. Of the total bank balance, $209,999 was insured through the Federal Depository Insurance Corporation (FDIC). The remaining $747,433 was collateralized with pooled securities held by the financial institutions' trust departments, but not in the Foundation's name.
Albany State University Annual Financial Report FY2006 29

Investments: Investments as of June 30, 2006 are summarized as follows:

Investment type Certificates of Deposit General Obligation Bonds Money Market Mutual Fund Repurchase Agreements

Fair Value

Less Than 1 Year

Investment Maturity 1-5 Years 6-10 Years

More Than 10 Years

$1,026,439.00

$0.00

$1,026,439.00

$0.00

$0.00

1,133,841.00

1,133,841.00

3,772,146.00

3,772,146.00

14,309,627.00

14,309,627.00

$20,242,053.00

$18,081,773.00

$2,160,280.00

$0.00

$0.00

Capital Assets for Component Units:
Albany State University Foundation Inc. had the following Capital Asset activity for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Facilities and Other Improvements Equipment Total Assets Being Depreciated
Less: Accumulated Depreciation Facilities and Other improvements Equipment Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning Balances 7/1/2005
$46,400.00 46,400.00

Additions
$25,198,104.00 25,198,104.00

Reductions
$0.00 0.00

Ending Balance 6/30/2006
$25,244,504.00 25,244,504.00

7,773,248.00 24,340.00
7,797,588.00

7,773,248.00

24,340.00

0.00

0.00

7,797,588.00

97,166.00 1,749.00 98,915.00
7,698,673.00
$7,745,073.00

194,331.00 3,497.00
197,828.00
(197,828.00)
$25,000,276.00

0.00 0.00 $0.00

291,497.00 5,246.00
296,743.00
7,500,845.00
$32,745,349.00

Albany State University Annual Financial Report FY2006 30

Long-term Liabilities for Component Units:

The Foundation had the following activity in long-term liabilities for the year ended June 30, 2006:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Unamortized bond premium Notes and Loans Payable
Total Long Term Debt

$0.00 0.00 2,472,283.00
$2,472,283.00

$34,320,000.00 658,805.00
$34,978,805.00

$0.00 79,305.00 $79,305.00

$34,320,000.00 658,805.00
2,392,978.00
$37,371,783.00

$0.00 83,192.00 $83,192.00

Student Housing Bonds were issued by the Albany State University Real Estate Foundation, LLC, a single member Limited Liability Company, to finance student housing on university property. On July 1, 2005, the Foundation issued $33,110,000.00 Albany-Dougherty Inner City Authority Revenue Bonds, Series 2005A, and $1,210,000.00 Albany-Dougherty Inner City Authority Taxable Revenue Bonds, Series 2005B. The bonds, serial and term, are secured by pledges of gross receipts from student housing at Albany State University.

Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows:

Annual debt service requirements to maturity for Student Housing revenue bonds payable

are as follows:

Bonds Payable

Year ending June 30:

Principal

Interest

Total

2007

1

$0.00

$1,576,737.00

$1,576,737.00

2008

2

225,000.00

1,576,737.00

1,801,737.00

2009

3

230,000.00

1,567,175.00

1,797,175.00

2010

4

240,000.00

1,557,400.00

1,797,400.00

2011 through 2015

5-9

2,510,000.00

7,584,488.00

10,094,488.00

2016 through 2020

10-14

4,810,000.00

6,944,663.00

11,754,663.00

2021 through 2025

15-19

7,385,000.00

5,685,975.00

13,070,975.00

2026 through 2030

20-24

9,500,000.00

3,645,625.00

13,145,625.00

2031 through 2034

25-28

9,420,000.00

1,094,575.00

10,514,575.00

$34,320,000.00

$31,233,375.00

$62,174,901.00

Albany State University Annual Financial Report FY2006 31

Albany State Foundation entered into an installment loan with SunTrust Bank to finance the construction of the Albany Municipal Coliseum facility at Albany State University. On May 7, 2004, Albany State University Foundation, Inc. entered into a loan agreement with SunTrust Bank for the purpose of completing the Albany Municipal Coliseum construction project. The multi-advance loan is in the amount of $2,181,889.00. The accrued interest is payable on the 1st day of each August beginning August 1, 2005, at a rate equal to the LIBOR index plus 2.5% per annum. The total principal payment will be due at maturity on August 1, 2007. The outstanding loan balance as of June 30, 2006 is $2,181,889.00.

Albany State Foundation entered into an installment loan with SunTrust Bank to finance the Albany Municipal Coliseum scoreboard. On October 29, 2003, Albany State University Foundation, Inc. entered into a loan agreement with SunTrust Bank for the purpose of purchasing a scoreboard for the Albany Municipal Coliseum. The term loan is in the amount of $332,092.00, with 12 interest only payments, at a rate of 4.130% per annum, beginning December 1, 2003. Beginning December 1, 2004, 47 monthly payments in the amount of $7,526.00 are due with final payment due on November 1, 2008. The outstanding loan balance as of June 30, 2006 is $211,089.00.

Annual debt service requirements to maturity for Albany Municipal Coliseum installment loan with SunTrust Bank are as follows:

Year Ending June 30:
2007 2008 2009

Year
1 2 3

Notes Payable

Principal

Interest

Total

$83,192.00 2,269,843.00
39,943.00

$109,318.00 105,816.00 799.00

$192,510.00 2,375,659.00
40,742.00

$2,392,978.00

$215,933.00

$2,608,911.00

Albany State University Annual Financial Report FY2006 32

ARMSTRONG ATLANTIC STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

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 2006
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 ................................................................................................. 25 Note 12 Risk Management................................................................................................ 28 Note 13 Contingencies...................................................................................................... 29 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 15 Natural Classifications With Functional Classifications..................................... 30 Note 16 Component Units ........................................................................ 31

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 over 70 years ago by the city of Savannah, Armstrong Atlantic has become a vibrant 250-acre, urban campus of 6,400 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 with Waycross College, 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 institution continues to grow as shown by the comparison numbers that follow. The student body is 30 70% male-female and a mix of 20-80% nontraditional/traditional students. The average student age is 26. The average SAT for fall 2005 entering freshmen was 1020.

FY2006 FY2005 FY2004

Faculty
279 237 233

Students (Headcount)
6,710 7,009 6,653

Students (FTE)
5,502 5,614 5,325

Overview of the Financial Statements and Financial Analysis

Armstrong Atlantic State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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 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, 2006
$12,870,078.87 55,911,620.71 2,398,099.93 71,179,799.51
9,764,924.97 657,320.58
10,422,245.55
55,911,620.71 2,396,792.88 104,514.29
2,344,626.08 $60,757,553.96

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

The total assets of the institution increased by $3,606,214.88. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,692,311.69 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 $2,318,280.45. The combination of the increase in total assets of $3,606,214.88 and the increase in total liabilities of $2,318,280.45 yields an increase in total net assets of $1,287,934.43. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $1,692,311.69.

Armstrong Atlantic State University Annual Financial Report FY 2006 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, 2006

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

$33,155,195.05 66,825,630.74 (33,670,435.69) 30,872,896.93
(2,797,538.76) 4,085,473.19 1,287,934.43 59,469,619.53
0.00 59,469,619.53 $60,757,553.96

$29,435,342.59 58,433,277.45 (28,997,934.86) 24,938,904.65
(4,059,030.21) 9,556,546.08 5,497,515.87 53,972,103.66
0.00 53,972,103.66 $59,469,619.53

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:

Armstrong Atlantic State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$14,664,830.91
8,890,552.63 1,194,497.02 7,983,421.47
421,893.02
33,155,195.05
29,717,480.00
573,632.58 588,550.27
(6,765.92) 30,872,896.93
4,085,473.19
4,085,473.19 $68,113,565.17

June 30, 2005
$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

Armstrong Atlantic State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$25,924,596.06 2,551.93
1,193,604.87 6,919,468.34 3,524,273.02 9,080,154.57 6,331,994.70 3,037,034.35 8,507,399.53 2,304,553.37
66,825,630.74
0.00
$66,825,630.74

June 30, 2005
$24,549,178.43 25,457.23 530,814.19
6,430,866.92 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
0.00
$58,433,277.45

Residential life has approximately 800 student units on the campus. A division of the University Student Affairs manages the units, which are leased from our Educational Properties Foundation, Inc.
Auxiliary revenues increased dramatically by $2,892,210.50 primarily due to two enterprises. Residence halls' revenues increased $2,768,784.44 due to the University assuming operational authority over housing. Previously, an outside management company was responsible. They receipted rent payments and forwarded funds to EPFI. Now the University performs that task. Additionally, food services revenue increased $302,690.64. This is due to the introduction of a mandatory meal plan for housing students.
The compensation and employee benefits category increased by $3,757,121.06. This is due primarily to new staff hired to manage special programs and grants, and for new faculty.
Under non-operating revenue, State Appropriations increased $3,974,422.60 due to the two-year budget lag based on prior enrollment increases. Also, investment income increased $349,792.97 in large reason due to a rise in the interest rate on the University bank accounts.
Under capital gifts, state funds increased due primarily to our Library renovation project.
Under operating expenses, Public Services increased $662,790.68 due to new program activity. Institutional Support increased $4,026,380.36 in large measure to fund under-staffed areas and rents. Rents have increased dramatically by over $2.5 million due to space needed to
Armstrong Atlantic State University Annual Financial Report FY 2006 5

accommodate student growth. Even with these increases, we still have a several hundred thousand square foot deficit. Plant expenses show a reduction due to reclassification of rent (leases) even though utilities increased significantly.

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, 2006 and 2005, 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, 2006
($30,685,787.18) 31,554,221.10 (521,691.77) 448,120.10 794,862.25 5,528,831.14
$6,323,693.39

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

Capital Assets
No major projects were completed in FY 2006. The Library renovation was not complete.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Armstrong Atlantic State University had Long-Term Debt and Liabilities of $1,600,460.73 of which $943,140.15 was reflected as current liability at June 30, 2006.

Armstrong Atlantic State University Annual Financial Report FY 2006 6

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Armstrong Atlantic State University has included the financial statements and notes for all required component units for FY2006. The Armstrong Atlantic State University Foundation had endowment investments of $5 million as of December 31, 2005. The AASU Educational Properties Foundation, Inc. had long-term debt of $44 million 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 good. 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 2006 7

Statement of Net Assets

ARMSTRONG ATLANTIC STATE UNIVERISTY STATEMENT OF NET ASSETS June 30, 2006

Component Units

Arms trong Atlantic S tate Univeris ty

AAS U Foundation, Inc.

AAS U EPI Foundation, Inc.

ASS ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net (note 3) Receivables - Federal Financial As s is tance Receivables - Other Pledges Receivable Inventories (note 4) Prepaid items Other Ass ets Total Current As s ets

$6,323,693.39 550,000.00
1,285,540.78 4,118,881.12
591,963.58
12,870,078.87

$630,445.00 764,538.00
75,769.00
1,470,752.00

$331,650.00
29,823.00
15,361.00 1,504,710.00 1,881,544.00

Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Pledges Receivable Capital As s ets , net (note 6) Other Ass ets Total Noncurrent As s ets
TOTAL AS S ETS

2,386,145.77 11,954.16
55,911,620.71
58,309,720.64 71,179,799.51

4,265,101.00 14,434.00
4,279,535.00 5,750,287.00

11,006,218.00
28,672,571.00 39,678,789.00 41,560,333.00

LIAB ILITIES Current Liabilities Accounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Depos its Held for Other Organizations Compens ated Abs ences (current portion) Revenue/Mortgage Bonds Payable (current) Total Current Liabilities Noncurrent Liabilities Compens ated Abs ences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES

1,030,445.70 170,123.68
5,224,829.28 2,396,386.16
943,140.15
9,764,924.97
657,320.58
657,320.58 10,422,245.55

13,000.00

622,979.00 26,226.00

13,000.00
0.00 13,000.00

977,619.00 1,626,824.00
42,821,801.00 42,821,801.00 44,448,625.00

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

55,911,620.71
2,396,792.88 104,514.29
2,344,626.08 $60,757,553.96

3,877,927.00 1,803,635.00
55,725.00 $5,737,287.00

(2,615,921.00)
(272,371.00) ($2,888,292.00)

Armstrong Atlantic State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
ARMSTRONG ATLANTIC STATE UNIVERISTY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Units

Armstrong Atlantic State Univeris ty

AAS U 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) 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 rt atio n Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of AASU
Total Operating Expenses Operating Income (loss)

$17,033,756.60 2,368,925.69
7,111,627.02 414,724.14
1,364,201.47 1,194,497.02
2,769,532.99 2,907,952.98
303,098.39 102,169.50 177,583.60 1,664,480.02 58,603.99 421,893.02 33,155,195.05

$0.00 1,507,410.00
107,067.00
1,614,477.00

15,770,814.35 15,591,736.34 8,091,031.95
160,182.34 486,276.69 4,292,240.75 3,232,867.60 16,289,736.92 2,910,743.80
66,825,630.74 (33,670,435.69)

449,224.00
626,247.00 581,049.00 1,656,520.00 (42,043.00)

AAS U EPI Foundation, Inc.
$0.00
3,500,741.00
27,646.00 3,528,387.00
263,630.00
354,938.00 845,475.00 2,097,293.00 815,731.00 4,377,067.00 (848,680.00)

Armstrong Atlantic State University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ARMSTRONG ATLANTIC STATE UNIVERISTY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Units

Armstrong Atlantic State Univeristy

AASU Foundation, Inc.

AASU EPI Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts State 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

29,717,480.00 573,632.58 588,550.27
(6,765.92) 30,872,896.93 (2,797,538.76)
4,085,473.19
4,085,473.19 1,287,934.43
59,469,619.53 0.00
59,469,619.53 $60,757,553.96

207,036.00 28,240.00
235,276.00 193,233.00
535,480.00 535,480.00 728,713.00
5,008,574.00 0.00
5,008,574.00 $5,737,287.00

217,538.00 (1,730,746.00)
(1,513,208.00) (2,361,888.00)
0.00 (2,361,888.00)
(526,404.00) 0.00
(526,404.00) ($2,888,292.00)

Armstrong Atlantic State University Annual Financial Report FY 2006 10

Statement of Cash Flows
ARMSTRONG ATLANTIC STATE UNIVERISTY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Purchas es of Capital A s s ets Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES 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, 2006
$14,836,977.18
6,625,150.79 1,188,181.58 (28,032,201.04) (31,132,666.87) (4,292,240.75)
(3,559.53)
2,773,428.61 3,085,058.63
324,777.43 102,169.50 177,364.70 1,634,079.74
58,603.99 1,969,088.86 (30,685,787.18)
29,717,480.00 1,263,108.52 573,632.58
31,554,221.10
(521,691.77) (521,691.77)
448,120.10
448,120.10 794,862.25 5,528,831.14 $6,323,693.39

Armstrong Atlantic State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
ARMSTRONG ATLANTIC STATE UNIVERISTY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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

June 30, 2006
($33,670,435.69)
2,910,743.80 (2,751,458.09)
(61,704.29) (3,559.53)
336,529.36 2,364,252.89
89,373.54 100,470.83 ($30,685,787.18)
$140,430.17 ($4,085,473.19)

Armstrong Atlantic State University Annual Financial Report FY 2006 12

ARMSTRONG ATLANTIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Armstrong Atlantic State University is reporting the activity for the Armstrong Atlantic State University Foundation, Inc. and the AASU Educational Properties Foundation, Inc. (EPFI).
See Note 16, Component Units, for foundation notes.
Armstrong Atlantic State University Annual Financial Report FY 2006 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.
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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Armstrong Atlantic State University Annual Financial Report FY 2006 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 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.
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, 2006, GSFIC did not transfer any capital additions to Armstrong Atlantic State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Armstrong Atlantic State University Annual Financial Report FY 2006 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. Armstrong Atlantic State University had accrued liability for compensated absences in the amount of $1,499,989.90 as of 7-1-2005. For FY2006, $1,161,162.60 was earned in compensated absences and employees were paid $1,060,691.77, for a net increase of $100,470.83. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,600,460.73.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed 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.
Armstrong Atlantic State University Annual Financial Report FY 2006 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Total Res tricted Expendable

June 30, 2006
$60,038.19 10,702.16 33,773.94
$104,514.29

Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$575,571.05 469,533.93
65,510.29 1,234,010.81 $2,344,626.08

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 2006 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 2006 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, 2006, deposits were $6,862,430.86 and the bank balance was $8,022,523.71. Of the university's deposits, $7,722,523.71 were uninsured and collateralized with securities held by the financial institution's trust department or agent in the university's name.
Armstrong Atlantic State University Annual Financial Report FY 2006 19

B. Investments

At June 30, 2006, the carrying value of the University's investments was $2,386.145.77, 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 P ools Board of Regents Legal Fund Diversified Fund
Total Investment P ools

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

Armstrong Atlantic 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 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 has no formal policy for managing interest rate risk since all investments are in the Board of Regents Investment Pool.

The Weighted Average Maturity of the Legal Fund is 3.1 years. Of the University's total investment of $243,092.67 in the Legal Fund, $243,067 is invested in debt securities.

The Weighted Average Maturity of the Diversified Fund is 8.2 years. Of the University's total investment of $2,143,053.10 in the Diversified Fund, $629,177 is invested in debt securities.

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 has no formal policy for managing credit quality risk since all investments are in the Board of Regents Investment Pool. As previously stated, the Board of Regents Investment Pool is not rated.

Armstrong Atlantic State University Annual Financial Report FY 2006 20

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 has no formal policy for managing custodial credit risk since all investments are in the Board of Regents Investment Pool.
At June 30, 2006, $2,386,145.77 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, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$846,123.85 565,421.25 1,285,540.78 2,995,240.74 5,692,326.62 287,904.72
$5,404,421.90

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$524,468.23 67,495.35
$591,963.58

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, 2006.

Armstrong Atlantic State University Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$4,678,253.82 0.00
409,802.90 5,088,056.72

Additions
$0.00
4,085,473.19 4,085,473.19

Reductions $0.00
0.00

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

261,246.01 363,816.00 625,062.01

266,500.13 176,560.00 443,060.13

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

86,418.15 2,035,755.67
96,243.24 342,727.24
349,337.00 262.50
2,910,743.80
(2,285,681.79)
$1,799,791.40

159,020.42 176,560.00 335,580.42 107,479.71 $107,479.71

Ending B al anc e 6/30/2006
$4,678,253.82 0.00
4,495,276.09 9,173,529.91
2,597,714.58 57,518,701.57
3,246,633.78 4,367,908.95
0.00 8,960,527.99
10,500.00 76,701,986.87
576,659.24 18,162,223.82
1,210,370.20 3,458,213.31
0.00 6,553,542.00
2,887.50 29,963,896.07
46,738,090.80
$55,911,620.71

Armstrong Atlantic State University Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $2,980,112.58 2,244,716.70 $5,224,829.28

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

1,499,989.90 1,499,989.90
$1,499,989.90

1,161,162.60 1,161,162.60
$1,161,162.60

1,060,691.77 1,060,691.77
$1,060,691.77

1,600,460.73 1,600,460.73
$1,600,460.73

943,140.15 943,140.15
$943,140.15

Note 9. Significant Commitments The University had no significant unearned, outstanding, construction or renovation projects.

Note 10. Lease Obligations
Armstrong Atlantic State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, but is not obligated under capital leases or installment purchase agreements for the acquisition of real property.

Armstrong Atlantic State University Annual Financial Report FY 2006 23

CAPITAL LEASES Armstrong Atlantic State University has no Capital leases.

OPERATING LEASES
For fiscal year 2006, Armstrong Atlantic State University had three operating leases. One was with Educational Properties Foundation, Inc. (EPFI), a related party, to rent their recreation center for our Library while our Library was being renovated. The cost was $19,000/month. The second operating lease was also with EPFI to rent office space at Armstrong Center. This was $178,000/month. The remaining operating lease was with Michael Porton, Inc. to rent offices and classroom space in Hinesville, Georgia for the Liberty Center. Their lease was for $8,750/month.
Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 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

Real Property Operating Leas es
$2,241,000.00 2,241,000.00 2,241,000.00 2,241,000.00 2,241,000.00
11,205,000.00 $22,410,000.00

Armstrong Atlantic State University's FY2006 expense for rental of real property and equipment under operating leases was approximately $2,555,000.

Armstrong Atlantic State University Annual Financial Report FY 2006 24

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,376,452.74 $1,281,526.10 $1,277,277.54

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Armstrong Atlantic State University Annual Financial Report FY 2006 25

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, 2006, for employees covered by ERS was $84,003.71. The University's total payroll for all employees was $31,354,692.84.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, 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 2006 amounted to $10,046.82, of which 8,786.76 was made by the University and $1,260.06 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, 2006, financial report, which may be obtained through ERS.
Armstrong Atlantic State University Annual Financial Report FY 2006 26

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $1,136,761.60 (9.65%) and $589,082.11 (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 2006 27

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 2006 amounted to $100,611.84 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 2006 28

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, 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, 2006, there were 147 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Armstrong Atlantic State University recognized as incurred $581,797.55 of expenditures, which was net of $243,711.46 of participant contributions.
Armstrong Atlantic State University Annual Financial Report FY 2006 29

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$15,425,096.63 3,272,710.07 4,311,281.29
260,912.68 153,574.98 151,068.85 2,261,265.19 88,686.37

$0.00 724.75 1,827.18

$19,010.00 371,140.48 79,597.21
10,579.41
6,213.65 701,407.81
5,656.31

$318,340.24 3,677,852.05
973,754.92
95,096.88
102,856.47 1,389,261.88 362,305.90

$3,661.89 2,028,471.03
496,140.49
12,406.05 27,318.00 37,599.03 917,406.53 1,270.00

$1,725.90 4,489,840.41 1,772,198.17
160,182.34 105,671.58 273,617.64 146,810.53 1,998,958.96 131,149.04

$25,924,596.06

$2,551.93

$1,193,604.87

$6,919,468.34

$3,524,273.02

$9,080,154.57

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 710,591.70 210,532.12
816.37
2,617,532.22 2,789,076.01
3,446.28

$0.00
2,962,210.35 74,824.00

$2,979.69 1,041,130.60 247,527.75
68.97 875,519.78 170,786.85 6,155,709.36
13,676.53

$0.00 2,304,553.37

$15,770,814.35 15,591,736.34 8,091,031.95 160,182.34 486,276.69 4,292,240.75 3,232,867.60 16,289,736.92 2,910,743.80

$6,331,994.70

$3,037,034.35

$8,507,399.53

$2,304,553.37

$66,825,630.74

Armstrong Atlantic State University Annual Financial Report FY 2006 30

Note 16. Component Units

Armstrong Atlantic State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Armstrong Atlantic State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The 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 January 1 through December 31.

During the year ended December 31, 2005, the Foundation distributed $581,049 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, 11935 Abercorn Street, Savannah, GA 31419.

Investments for Component Units:

Armstrong Atlantic State University Foundation holds endowment investments in the amount of $5 million. 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 holds no investments in real property.

Investments are comprised of the following amounts at December 31, 2005:

Money Market Accounts Government and Agency Securities Fixed Income Debt Securities Equity Securities Mutual Funds
Total Investments

Cost
$76,764.00 1,564,037.00
288,557.00 2,243,903.00
218,619.00
$4,391,880.00

Fair Value
$76,764.00 1,548,089.00
285,831.00 2,900,336.00
218,619.00
$5,029,639.00

Armstrong Atlantic State University Annual Financial Report FY 2006 31

Armstrong Atlantic State University Educational Properties Foundation, Inc. AASU Educational Properties Foundation, 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 apartment complexes, and operates student housing. The five-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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.

The Foundation holds real estate assets, the purchase and improvement of which have been financed through bond issuance. The corresponding capital leases and associated long-term debt are included in the University's report. During the year ended December 31, 2005, the Foundation distributed $815,731 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at Armstrong Atlantic State University, 11935 Abercorn Street, Savannah, GA 31419.

Capital Assets for Component Units:

The Foundation held the following Capital Assets as of December 31, 2005:

December 31, 2005

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Land Improvement Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$475,561.00 942,674.00
1,418,235.00
21,862,184.00 5,668,845.00 2,558,961.00 30,089,990.00
2,835,654.00
27,254,336.00 $28,672,571.00

Armstrong Atlantic State University Annual Financial Report FY 2006 32

Long-term Liabilities for Component Units:

Student Housing Bonds were issued by the AASU Educational Properties Foundation 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 interest rate is 4.0%.

Resident Instruction Bonds were issued by the AASU Educational Properties Foundation to finance professional, continuing education and recreational facilities at Armstrong Atlantic State University. The bonds, serial and term, are secured by pledges of gross receipts from rents and leases. The interest rate is 3.55%.

Changes in long-term liabilities for the Foundation for the fiscal year ended December 31, 2005 are shown below:

Beginning Balance January 1, 2005

Additions

Reductions

Ending

Amounts due

Balance

within

December 31, 2005 One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$17,250,000.00 $17,250,000.00

$43,799,420.00 $43,799,420.00

$17,250,000.00 $17,250,000.00

$43,799,420.00 $43,799,420.00

$977,619.00 $977,619.00

Debt Service Obligations

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

Year ending December 31, 2006:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021

11-15

2022 through 2026

16-20

2027 through 2031

21-25

Principal
$650,405.00 525,406.00 540,405.00 555,406.00 575,405.00 595,406.00
3,342,028.00 4,057,027.00 5,052,028.00 6,948,119.00

Bonds Payable Interest
$827,342.00 964,313.00 947,900.00 931,000.00 913,613.00 891,413.00
4,098,615.00 3,387,915.00 2,383,315.00
938,502.00

Total
$1,477,747.00 1,489,719.00 1,488,305.00 1,486,406.00 1,489,018.00 1,486,819.00 7,440,643.00 7,444,942.00 7,435,343.00 7,886,621.00

$22,841,635.00

$16,283,928.00

$39,125,563.00

Armstrong Atlantic State University Annual Financial Report FY 2006 33

Annual debt service requirements to maturity for Resident Instruction, Professional and Recreational (Educational Properties Foundation) revenue bonds payable are as follows:

Year ending December 31, 2006:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021 2022 through 2026

11-15 16-20

2027 through 2031

21-25

2032 through 2036

26-30

Principal
$327,214.00 432,216.00 457,216.00 452,216.00 467,216.00 482,216.00
2,641,079.00
3,166,080.00 3,806,079.00 4,716,080.00 4,010,173.00

Bonds Payable Interest
$906,309.00 893,189.00 876,314.00 857,914.00 843,452.00 829,389.00
3,889,080.00
3,345,255.00 2,646,607.00 1,692,188.00
433,225.00

Total
$1,233,523.00 1,325,405.00 1,333,530.00 1,310,130.00 1,310,668.00 1,311,605.00 6,530,159.00
6,511,335.00 6,452,686.00 6,408,268.00 4,443,398.00

$20,957,785.00

$17,212,922.00

$38,170,707.00

Armstrong Atlantic State University Annual Financial Report FY 2006 34

ATLANTA METROPOLITAN COLLEGE
Financial Report
For the Year Ended June 30, 2006

Atlanta Metropolitan College Atlanta, Georgia

Harold E. Wade President

Tracey Cook-Robinson Interim Vice President for Fiscal Affairs

ATLANTA METROPOLITAN COLLEGE ANNUAL FINANCIAL REPORT FY 2006
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.................................................................................... 17 Note 3 Accounts Receivable............................................................................................ 18 Note 4 Inventories............................................................................................................ 18 Note 5 Capital Assets....................................................................................................... 19 Note 6 Deferred Revenue................................................................................................. 20 Note 7 Long-Term Liabilities .......................................................................................... 20 Note 8 Significant Commitments.................................................................20 Note 9 Retirement Plans ................................................................................................. 21 Note 10 Risk Management................................................................................................ 23 Note 11 Contingencies...................................................................................................... 23 Note 12 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 13 Natural Classifications With Functional Classifications..................................... 25

ATLANTA METROPOLITAN COLLEGE
Management's Discussion and Analysis

Introduction

Atlanta Metropolitan College is one of the 35 institutions of higher education in 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 1800 students per semester. The faculty and student enrollment count for each of the last three successive fall semesters shows the following pattern.

FY2006 FY2005 FY2004

Faculty
38 40 41

Students (Headcount)
1,748 1,802 1,907

Students (FTE)
1,351 1,382 1,406

Overview of the Financial Statements and Financial Analysis

Atlanta Metropolitan College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006 $2,619,271.91 12,721,262.86 15,340,534.77
1,224,921.91 227,432.30
1,452,354.21
12,721,262.86
1,166,917.70 $13,888,180.56

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

The total assets of the institution increased by $292,265.46. The increase in current assets is partly due to a receivable from GSFIC in the amount of $92,989.00. In previous years GSFIC paid vendors directly. Receivables also include approximately $56,000.00 from bookstore vendors as well as an amount due from the City of Atlanta for prior year water bill adjustments. A review of the Statement of Net Assets will reveal that there was a decrease of ($271,174.31) in investment in plant, net of accumulated depreciation.
The total liabilities for the year increased by $41,436.86. Deferred revenue increased by $69,243.66 primarily due to a grant from NASA.
The combination of the increase in total assets of $292,265.46 and the increase in total liabilities of $41,436.86 yields an increase in total net assets of $250,828.60.

Atlanta Metropolitan College Annual Financial Report FY 2006 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, 2006

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

$6,586,575.14 15,383,806.27 (8,797,231.13)
8,849,864.82
52,633.69 198,194.91 250,828.60 13,637,351.96
0.00 13,637,351.96 $13,888,180.56

$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
0.00 13,349,723.27 $13,637,351.96

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$2,359,588.58
2,868,724.05 36,072.28
1,195,864.70 126,325.53
6,586,575.14
7,541,310.93 1,120,413.49
109,021.22 79,119.18
8,849,864.82
195,534.90 2,660.01
198,194.91
$15,634,634.87

June 30, 2005
$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

Atlanta Metropolitan College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$3,893,202.08
1,181,421.94 696,355.46
1,570,185.56 3,012,734.50 2,242,109.32 1,556,688.88 1,231,108.53
15,383,806.27
0.00 $15,383,806.27

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
0.00 $15,515,143.60

The increase in student tuition and fees is mainly due to a 5% increase in fees offset by a 1% decrease in enrollment.
The compensation and employee benefits category decreased by approximately ($244,066.02). The decrease was due in part to attrition as well as two vacancies in key positions. The College is actively working to fill these vacancies.
The decrease in nonoperating grants and contracts is due to the loss of a grant through the US Department of Education. The grant was not renewed in September 2005.
The decrease in nonoperating capital grants and gifts is mainly due to a decrease in the projects funded and completed by GSFIC in the current year. GSFIC added approximately $90,000.00 to the entrance way projects during the year. The College also received approximately $90,000.00 in MRR funds toward the replacement of the chiller system in the Central Energy Plant.

Atlanta Metropolitan College Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($8,395,721.80) 8,824,577.93 (133,701.90) 79,119.18 374,273.41 1,364,566.43
$1,738,839.84

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

Capital Assets
Atlanta Metropolitan College continued work on the Campus Entry and Roadway Improvement Project. GSFIC has provided funding of approximately $990,000 for this project to date, which includes approximately $90,000 in the current fiscal year.
The College also recorded $90,689 in construction in progress on a $250,000 project to upgrade the chiller system in the Central Energy Plant.
For additional information concerning Capital Assets, see Notes 1, 5 and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Atlanta Metropolitan College had Long-Term Debt and Liabilities of $507,443.02 of which $280,010.72 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.
Atlanta Metropolitan College Annual Financial Report FY 2006 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 good. 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.
Harold E. Wade, President Atlanta Metropolitan College
Atlanta Metropolitan College Annual Financial Report FY 2006 7

Statement of Net Assets
ATLANTA METROPOLITAN COLLEGE STATEMENT OF NET ASSETS June 30, 2006

AS S ETS Current As sets Cas h and Cas h Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial Assis tance Receivables - Other Inventories (note 4) Prepaid items Total Current Ass ets
Noncurrent Assets Capital As sets , net (note 5) Total Noncurrent A ssets
TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Deferred Revenue (note 6) Other Liabilities Deposits Held for Other Organizations Compensated A bsences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated A bsences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS 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 AS S ETS

June 30, 2006
$1,738,839.84
201,602.00 423,547.29 240,565.99
14,716.79 2,619,271.91
12,721,262.86 12,721,262.86 15,340,534.77
256,905.22 226,352.68
28,369.90 136,747.49
4,836.34 291,699.56 280,010.72 1,224,921.91
227,432.30 227,432.30 1,452,354.21
12,721,262.86
1,166,917.70 $13,888,180.56

Atlanta Metropolitan College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

ATLANTA METROPOLITAN COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2006

REVENUES

June 30, 2006

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Less : Scholarship Allowances Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Bo o ks t o re Food Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits Other Personal Services Travel Scholars hips and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses Operating Income (los s)

$3,491,752.11 1,132,163.53
2,831,126.53 592.97
37,004.55 36,072.28 8,252.50
673,712.89 273,846.28 236,848.55
11,456.98 118,073.03 6,586,575.14
2,721,910.04 4,854,147.49 1,938,373.01
638.26 76,755.69 1,809,627.10 724,511.62 2,654,771.94 603,071.12 15,383,806.27 (8,797,231.13)

Atlanta Metropolitan College Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
ATLANTA METROPOLITAN COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
June 30, 2006

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Gift s Investment Income (endowments, auxiliary and other) Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot her 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

7,541,310.93
1,104,049.68 16,363.81
109,021.22 79,119.18
8,849,864.82 52,633.69
195,534.90 2,660.01
198,194.91 250,828.60
13,637,351.96 0.00
13,637,351.96 $13,888,180.56

Atlanta Metropolitan College Annual Financial Report FY 2006 10

Statement of Cash Flows
ATLANTA METROPOLITAN COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Auxiliary Enterprise Charges : Books tore Food 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 Trans actions Gifts and Grants Received for Other Than Capital Purposes Net Cas h Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Ass ets Net Cash us ed by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interes t on Investments Net Cash Provided (used) by Inves ting Activities Net Increase/Decreas e in Cas h Cas h and Cash Equivalents - Beginning of year Cas h and Cash Equivalents - End of Year

June 30, 2006
$2,324,630.46
2,860,435.29 3,404.00
(5,490,933.57) (7,589,863.40) (1,809,627.10)
664,624.20 270,951.77 236,166.73 11,125.94 123,363.88 (8,395,721.80)
7,541,310.93 53,832.29
1,229,434.71 8,824,577.93
2,660.01 (136,361.91) (133,701.90)
79,119.18 79,119.18 374,273.41 1,364,566.43 $1,738,839.84

Atlanta Metropolitan College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
ATLANTA METROPOLITAN COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
RECONCILIATION OF OPERATING LOSS TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (loss ) Adjustments to Reconcile Net Income (los s) to Net Cas h Provided (used) by Operating Activities
De p re c ia t io n Change in As sets and Liabilities:
Receivables , net In v e n t o rie s Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cas h Provided (used) by Operating Activities
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELA TED FINA NCING TRA NSA CTIONS
Change in receivable from State A gency affecting proceeds of capital debt Gift of capital ass ets reducing proceeds of capital grants and gifts

June 30, 2006
($8,797,231.13)
603,071.12 (206,545.23)
30,295.66 (12,916.79) (69,565.50) 69,243.66
(627.33) (11,446.26) ($8,395,721.80)
($92,989.00) ($198,194.91)

Atlanta Metropolitan College Annual Financial Report FY 2006 12

ATLANTA METROPOLITAN COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, 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 in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB
Atlanta Metropolitan College Annual Financial Report FY 2006 13

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 predominant 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-University 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 and resale inventories are carried using the weighted average method.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
Atlanta Metropolitan College Annual Financial Report FY 2006 14

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, 2006, GSFIC did not transfer any capital additions to Atlanta Metropolitan College.
Deferred Revenues Deferred revenues include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Atlanta Metropolitan College had accrued liability for compensated absences in the amount of $518,889.28 as of 7-1-2005. For FY2006, $350,975.10 was earned in compensated absences and employees were paid $362,421.36, for a net decrease of $(11,446.26). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $507,443.02.
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.
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
Atlanta Metropolitan College Annual Financial Report FY 2006 15

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, 2006
$0.00 1,613,776.07
51,337.30 (498,195.67) $1,166,917.70

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.
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 2006 16

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, 2006, the carrying value of deposits was $1,735,848.19 and the bank balance was $2,035,828.95. Of the College's deposits, $1,835,828.95 were uninsured. Of these uninsured deposits, $1,769,691.59 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $66,137.36 were uncollateralized.
Atlanta Metropolitan College Annual Financial Report FY 2006 17

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees Auxiliary Enterpris es and Other Operating Activities Federal Financial Ass is tance Georgia State Financing and Inves tment Commis sion Other
Les s Allowance for Doubtful Accounts
Net Accounts Receivable

$183,581.63 64,716.42 201,602.00 92,989.00 100,023.74 642,912.79 17,763.50
$625,149.29

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Food Services Other
Total

June 30, 2006
$174,749.43 5,659.77
60,156.79 $240,565.99

Atlanta Metropolitan College Annual Financial Report FY 2006 18

Note 5. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: In fras tru cture 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 cture 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 7/1/2005
$2,548,099.00
2,548,099.00

Additions
$89,879.93
99,154.97 189,034.90

Reductions $0.00
0.00

Ending Balance 6/30/2006
$2,637,978.93 0.00
99,154.97 2,737,133.90

15,591,583.80 863,547.00
2,632,212.72
1,939,887.89
21,027,231.41

6,500.00 126,693.36
9,668.55 142,861.91

30,485.00 30,485.00

0.00 15,598,083.80
863,547.00 2,758,906.08
0.00 1,919,071.44
0.00 21,139,608.32

6,296,968.81 588,275.19
1,944,394.24
1,753,255.00
10,582,893.24
10,444,338.17
$12,992,437.17

380,748.76 16,731.05 156,498.31
49,093.00
603,071.12
(460,209.21)
($271,174.31)

30,485.00 30,485.00
0.00 $0.00

0.00 6,677,717.57
605,006.24 2,100,892.55
0.00 1,771,863.00
0.00 11,155,479.36
9,984,128.96
$12,721,262.86

Atlanta Metropolitan College Annual Financial Report FY 2006 19

Note 6. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Other Deferred Revenue T o t a ls

June 30, 2006 $136,747.49 $136,747.49

Note 7. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leas es Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

518,889.28 518,889.28
$518,889.28

350,975.10 350,975.10
$350,975.10

362,421.36 362,421.36
$362,421.36

507,443.02 507,443.02
$507,443.02

Current Portion
$0.00
280,010.72 280,010.72 $280,010.72

Note 8. Significant Commitments
The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $134,784.00 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.

Atlanta Metropolitan College Annual Financial Report FY 2006 20

Note 9. 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 accordance with State statute and as advised by their independent actuary. For fiscal year 2006, 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

2006 2005 2004

100% 100% 100%

$ 546,314.79 $ 566,522.82 $ 570,996.52

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.

Atlanta Metropolitan College Annual Financial Report FY 2006 21

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 2006, 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 $63,236.54 (9.65%) and $32,817.00 (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 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 2006 amounted to $44,486.09 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.
Atlanta Metropolitan College Annual Financial Report FY 2006 22

Note 10. 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 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 11. 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.
Atlanta Metropolitan College Annual Financial Report FY 2006 23

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, 2006. Note 12. 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, 2006, there were 49 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Atlanta Metropolitan College recognized as incurred $184,654.59 of expenditures, which was net of $72,661.20 of participant contributions.
Atlanta Metropolitan College Annual Financial Report FY 2006 24

Note 13. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses
Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Others Services D e pre c ia tion
Total Expenses

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$2,696,901.66 364,454.91 668,335.56
8,428.94 18,911.45 23,132.11 82,761.97 30,275.48

$0.00

$0.00 623,072.59 134,974.99
28,381.58 51,048.81 6,090.74 336,564.70 1,288.53

$25,008.38 400,272.21 95,214.30
7,846.11
20,128.46 91,723.89 56,162.11

$0.00 1,127,104.14 271,498.28
638.26 15,723.10 4,500.00 13,258.35 133,541.11 3,922.32

$0.00 1,434,859.61
538,061.44
15,660.52 79,197.10 54,727.08 820,737.19 69,491.56

$3,893,202.08

$0.00

$1,181,421.94

$696,355.46

$1,570,185.56

$3,012,734.50

Pla n t Op e ra t io n s & M aintenance

Functional Classification FY2 0 0 6

Scholars hips & Fellows hips

A uxiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 599,660.47 191,998.03
621.36
598,074.90 411,078.24 440,676.32

$0.00 1,556,688.88

$0.00 304,723.56
38,290.41
94.08 99,280.86
9,099.98 778,364.84
1,254.80

$0.00

$2,721,910.04 4,854,147.49 1,938,373.01
638.26 76,755.69 1,809,627.10 724,511.62 2,654,771.94 603,071.12

$2,242,109.32

$1,556,688.88

$1,231,108.53

$0.00

$15,383,806.27

Atlanta Metropolitan College Annual Financial Report FY 2006 25

AUGUSTA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

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 2006
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................................................................................................ 29 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

AUGUSTA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Augusta State University is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
220 190 190

Students (Headcount)
6,333 6,368 6,135

Students (FTE)
5,361 5,354 5,149

Overview of the Financial Statements and Financial Analysis

Augusta State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006) 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, 2006
$10,922,309.79 103,105,989.12
1,198,997.19 115,227,296.10
5,640,287.35 33,026,923.17 38,667,210.52
70,297,171.25 305,890.98
1,452,688.91
4,504,334.44 $76,560,085.58

June 30, 2005
$9,457,216.11 72,334,791.91
1,338,532.23 83,130,540.25
4,813,603.24 985,949.48
5,799,552.72
71,924,518.83 307,215.06
1,410,737.41
3,688,516.23 $77,330,987.53

The total assets of the institution increased by $32,096,755.85. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $30,771,197.21 of investment in plant, net of accumulated depreciation. This increase is due to the addition of the University Village student housing complex and the new Jaguar Student Activities Center.
The total liabilities for the year increased by $32,867,657.80. The increase reflects the Capital Leases associated with the student housing and student center projects. The combination of the increase in total assets of $32,096,755.85 and the increase in total liabilities of $32,867,657.80 yields a decrease in total net assets of ($770,901.95). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($1,627,347.58).

Augusta State University Annual Financial Report FY 2006) 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, 2006

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

$27,932,553.96 55,285,756.61 (27,353,202.65) 25,354,119.14
(1,999,083.51) 1,228,181.56 (770,901.95) 77,330,987.53
0.00 77,330,987.53 $76,560,085.58

$24,933,094.94 51,575,471.58 (26,642,376.64) 25,494,988.16
(1,147,388.48) 21,995,459.69 20,848,071.21 56,482,916.32
0.00 56,482,916.32 $77,330,987.53

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a neutral 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:

Augusta State University Annual Financial Report FY 2006) 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$13,868,341.46
6,565,191.32 533,375.94
6,698,812.62 266,832.62
27,932,553.96
25,213,486.47 688,301.38 221,967.66 335,600.91 (14,458.70)
26,444,897.72
1,144,697.20 83,484.36
1,228,181.56
$55,605,633.24

June 30, 2005
$12,302,962.67
6,971,406.02 676,714.22
4,750,695.50 231,316.53
24,933,094.94
23,676,467.24 469,292.09
1,467,807.54 147,956.15 (266,534.86)
25,494,988.16
21,570,141.27 425,318.42
21,995,459.69
$72,423,542.79

Operating Revenues increased by $2,999,459.02, or 12 percent. Tuition and Fee revenue was up $1,565,378.79, or 13 percent, primarily from a five percent tuition increase along with the addition of a new student center fee. Auxiliary revenue grew $1,948,117.12 primarily from the addition of Augusta State University's first student housing operation and continued growth in bookstore sales.
Nonoperating Revenue increased by $949,909.56 or four percent as increased state appropriations more than offset a reduction in Gifts. State appropriations rose $1,537,019.23 or six percent. The decrease in Gifts reflects the fact that FY 2005 benefited from the funding received for non-capital furnishings and equipment for the new University Hall.
The Capital Gifts and Grants decreased substantially from the prior year which included the addition of the new classroom building, University Hall. Similarly, Other Capital Gifts and Grants benefited last year from funding from the ASU Foundation related to the new student center building.

Augusta State University Annual Financial Report FY 2006) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$20,809,959.18 85,735.17 359,945.78
5,927,662.36 3,325,752.82 6,472,980.09 8,506,844.46 3,804,456.48 5,992,420.27
55,285,756.61
1,090,778.58
$56,376,535.19

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
0.00
$51,575,471.58

The University's total expenses, as shown above, increased by nine percent. Excluding interest expense and Auxiliary operations due to the start-up of housing operations, core operating expenses increased by 4.4 percent versus FY 2005. This year-to-year increase came in total compensation expense, up $2.7 million or 8 percent, partially offset by reduced project spending. The growth in compensation expense includes merit increases, additional faculty positions and higher fringe benefit costs.
Instruction expenses rose 4.6 percent versus last year primarily due to the merit pay increases and the addition of faculty positions. Student Services expenses were up eight percent due to planned spending related to the new student center and to filling of vacant positions. Institutional Support costs increased 12 percent versus last year which benefited from credits in certain fringe benefit expenses. Over the past two years, Institutional Support costs have risen at an annual rate of 4 percent reflecting merit increases and higher fringe benefit costs.
Plant Operations expenses declined slightly overall as reduced project spending offset higher utility cost. Utilities increased $136,474.73 during the past year. The increase was primarily due to higher electricity rates and natural gas costs. Excluding utilities, Plant Operations were essentially flat versus FY 2005.
Auxiliary expenses rose significantly due to the first year's operating expenses at University Village, ASU's first student housing.

Augusta State University Annual Financial Report FY 2006) 5

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. 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, 2006 and 2005, 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, 2006
($23,722,199.73) 26,844,327.33 (2,211,919.04) 336,623.68 1,246,832.24 6,564,007.33
$7,810,839.57

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

Capital Assets
The University had two significant capital asset additions in FY 2006, the University Village student housing complex and the new Jaguar Student Activities Center. Both of these projects were funded through debt financing based on the projects' rental income and student fee income respectively. Both projects' assets are accounted for as Capital Leases.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Augusta State University had Long-Term Debt and Liabilities of $34,055,441.24 of which $1,028,518.07 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Augusta State University Annual Financial Report FY 2006) 6

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 FY2006. 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. 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. William A. Bloodworth Jr., President Augusta State University
Augusta State University Annual Financial Report FY 2006) 7

Statement of Net Assets

AUG USTA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

AS S ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Due From Component Units Leas es Receivable Pledges Receivable Inventories (note 4) 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 (note 6) Other As s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) 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) Revenue/M ortgage Bonds Payable (noncurrent) Notes and Loans Payable (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

Augus ta S tate Univers ity
$7,796,839.57 53,005.72
1,014,460.55 20,643.11
518,605.18 1,518,755.66
10,922,309.79
14,000.00 391,635.64 793,361.55
103,105,989.12 104,304,986.31 115,227,296.10
563,024.10 197,285.69
76,435.39 2,570.35
3,156,406.32 616,047.43 325,180.04 703,338.03
5,640,287.35 32,407,202.44
619,720.73
33,026,923.17 38,667,210.52
70,297,171.25 305,890.98
1,452,688.91 4,504,334.44 $76,560,085.58

Component Units

Augus ta S tate Univers ity
Foundation, Inc.

Augus ta S tate Univers ity Athletic As s ociation

$2,287,894.00
18,475.00
1,774,739.00 57,333.00
142,000.00
4,280,441.00
5,660,643.00 15,108,849.00
1,402,695.00 61,462,924.00
673,444.00
858,860.00 85,167,415.00 89,447,856.00

$240,613.00 10,587.00
6,511.00 257,711.00
2,058,622.00 2,058,622.00 2,316,333.00

682,641.89
1,637,308.00 2,350,803.00
143.11
85,000.00 142,000.00 4,897,896.00
29,055,722.00 30,767,518.00
1,402,695.00 61,225,935.00 66,123,831.00
12,902,730.00 1,110,142.00 4,681,228.00 4,629,925.00
$23,324,025.00

183,682.00 6,854.00
7,446.00
20,500.00 26,060.00
150,456.00 394,998.00
47,754.00
1,424,267.00 1,472,021.00 1,867,019.00
410,085.00
39,229.00 $449,314.00

Augusta State University Annual Financial Report FY 2006) 8

Statement of Revenues, Expenses and Changes in Net Assets
AUGUSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Interest and Dividend income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of Augusta State Univ.
Total Operating Expenses Operating Income (loss)

Augusta State University

Augusta State University
Foundation, Inc.

Augusta State University Athletic
Association

$16,518,237.96 2,649,896.50
6,418,752.12 86,624.76 59,814.44 533,375.94 56,922.86
1,670,541.00 2,987,629.68
255,457.64
1,710,312.82 74,871.48
209,909.76 27,932,553.96

$0.00 2,379,568.00
454,280.00
1,475,383.00 130,573.00
112,363.00 4,552,167.00

$0.00 794,131.00 794,131.00

14,574,372.36 13,372,846.30 7,594,060.96
10,601.41 294,510.48 4,540,074.26 1,914,565.93 9,570,817.91 3,413,907.00
55,285,756.61 (27,353,202.65)

821,073.00
700,628.00 1,521,701.00 3,030,466.00

364,818.00 31,401.00 5,892.00
56,714.00 254,720.00 150,056.00 28,875.00 12,000.00 904,476.00 (110,345.00)

Augusta State University Annual Financial Report FY 2006) 9

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

AUGUSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Component Units

Augusta State University

Augusta State University
Foundation, Inc.

Augusta State University Athletic
Association

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income 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

25,213,486.47
21,920.00 109,990.93 556,390.45 221,967.66 335,600.91
(1,090,778.58) (14,458.70)
25,354,119.14 (1,999,083.51)

1,159,614.00
(531,283.00) 3,247,065.00 3,875,396.00 6,905,862.00

1,144,697.20 83,484.36
1,228,181.56 (770,901.95)
77,330,987.53 0.00
77,330,987.53 $76,560,085.58

713,478.00 713,478.00 7,619,340.00
15,704,685.00 0.00
15,704,685.00 $23,324,025.00

7,109.00 (110,031.00)
43,956.00 (58,966.00) (169,311.00)
0.00 (169,311.00) 618,625.00
0.00 618,625.00 $449,314.00

Augusta State University Annual Financial Report FY 2006) 10

Statement of Cash Flows
AUGUSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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 Proceeds from Sale of Capital Assets 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, 2006
$14,112,227.05
6,529,207.79 390,305.66
(19,570,246.26) (27,826,195.73)
(4,540,074.26) (217,276.28) 355,788.55
1,589,812.15 2,996,289.46
43,550.81 254,242.46
1,723,564.32 81,158.90 355,445.65
(23,722,199.73)
25,213,486.47 223,720.44
1,407,120.42
26,844,327.33
(1,448,924.01) (187,750.00) (575,245.03)
(2,211,919.04)
1,022.77 335,600.91
336,623.68 1,246,832.24 6,564,007.33 $7,810,839.57

Augusta State University Annual Financial Report FY 2006) 11

Statement of Cash Flows, Continued
AUG USTA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($27,353,202.65)
3,413,907.00 62,978.41 (10,765.96)
(284,932.59) 138,512.27
44,378.11 109,463.32
75,565.07 81,897.29 ($23,722,199.73)
$32,029,098.93 ($1,144,697.20)

Augusta State University Annual Financial Report FY 2006) 12

AUGUSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations Augusta 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 Augusta State University is one of thirty-five (35) 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 2005. 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 FY2006, Augusta State University is reporting the activity for the Augusta State University Foundation and the Augusta State University Athletic Association.
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
Augusta State University Annual Financial Report FY 2006) 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 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Augusta State University Annual Financial Report FY 2006) 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 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, 2006, GSFIC did not transfer any capital additions to Augusta 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.
Augusta State University Annual Financial Report FY 2006) 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. Augusta State University had accrued liability for compensated absences in the amount of $1,241,161.47 as of 7-1-2005. For FY2006, $950,356.71 was earned in compensated absences and employees were paid $868,459.42, for a net increase of $81,897.29. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,323,058.76.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed 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 Total Res tricted Expendable

June 30, 2006
$274,738.33 896,244.69 281,705.89 $1,452,688.91

Augusta State University Annual Financial Report FY 2006) 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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$209,922.57 3,124,176.36
37,325.02 1,132,910.49 $4,504,334.44

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:
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
Augusta State University Annual Financial Report FY 2006) 17

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 2006) 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, 2006, the carrying value of deposits was $4,351,216.28 and the bank balance was $5,123,289.19. Of the university's deposits, $5,023,289.19 were uninsured. Of these uninsured deposits, $5,023,289.19 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name.
Augusta State University Annual Financial Report FY 2006) 19

B. Investments

At June 30, 2006, the carrying value of the University's investments was $3,843,008.93, 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 P ools Board of Regents Short-Term Fund Total Return Fund Sub Total
Office of Treasury and Fiscal Services Georgia Fund 1
Sub Total
Total Investment P ools

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

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. Participation in the Georgia Fund 1 Investment Pool is voluntary. 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 28 days.
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 has no formal policy for managing interest rate risk.
The Weighted Average Maturity of the Short-Term Fund is 1.3 years. Of the University's total investment of $3,362,951.32, $3,305,908 is invested in debt securities.
Augusta State University Annual Financial Report FY 2006) 20

The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $391,635.64 in the Total Return Fund, $127,204 is invested in debt securities. As previously stated, the Weighted Average Maturity of Georgia Fund 1 is 28 days. 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 has no formal policy for managing credit quality risk. The Board of Regents Investment Pool is not rated. Georgia Fund 1 is rated AAAm by Standard and Poor's. 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 has no formal policy for managing custodial credit risk. At June 30, 2006, $3,754,586.96 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.
Augusta State University Annual Financial Report FY 2006) 21

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$406,269.08 211,322.30
53,005.72 20,643.11 666,283.01 1,357,523.22 269,413.84
$1,088,109.38

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Phys ical Plant Other
Total

June 30, 2006
$481,724.13 23,648.18 13,232.87
$518,605.18

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the University had no allowance for uncollectible loans.

Augusta State University Annual Financial Report FY 2006) 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 7/1/2005
$5,416,504.05 0.00
954,642.33 6,371,146.38

Additions
$141,561.00
1,741,454.01 1,883,015.01

Reductions
$0.00 ($75,006.00) 954,642.33 879,636.33

Ending Balance 6/30/2006
$5,558,065.05 75,006.00
1,741,454.01 7,374,525.06

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

779,126.98
347,106.54 32,029,098.93
125,647.99
33,280,980.44

11,500.00 24,248.91 7,129.00 75,006.00 117,883.91

1,792,483.12 70,126,857.82 5,374,383.10 7,536,310.46 32,404,598.93 7,401,848.78
0.00 124,636,482.21

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

71,240.26 1,667,605.85
193,809.45 520,570.64 675,169.80 285,511.00
3,413,907.00
29,867,073.44
$31,750,088.45

11,500.00 7,129.00 18,629.00 99,254.91 $978,891.24

357,831.79 14,520,926.45 1,584,761.64 5,159,803.29
735,131.98 6,546,563.00
0.00 28,905,018.15
95,731,464.06
$103,105,989.12

Augusta State University Annual Financial Report FY 2006) 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $3,083,559.57
72,846.75 $3,156,406.32

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$399,748.91

Additions $32,520,383.57

Reductions

Ending Balance June 30, 2006

$187,750.00

$32,732,382.48

Current Portion
$325,180.04

Other Liabilities Compensated Absences Total
Total Long TermObligations

1,241,161.47 1,241,161.47
$1,640,910.38

950,356.71 950,356.71
$33,470,740.28

868,459.42 868,459.42
$1,056,209.42

1,323,058.76 1,323,058.76
$34,055,441.24

703,338.03 703,338.03
$1,028,518.07

Note 9. Significant Commitments

None

Note 10. Lease Obligations

Augusta 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.

Augusta State University Annual Financial Report FY 2006) 24

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2036. Expenditures for fiscal year 2006 were $1.5 M of which $1 M represented interest and $207,413 represented executory costs. Total principal paid on capital leases was $187,750 for the fiscal year ended June 30, 2006. Interest rates range from 4.72 percent to 5.23 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Land Buildings Equipment Total Assets Held Under Capital Lease

$0.00 31,424,536.26
244,930.69 $31,669,466.95

Augusta State University had three capital leases with related entities in the current fiscal year. In August 2005, Augusta State University entered into a capital lease of $20,246,136.67 at 5.23 percent with ASU Foundation, whereby the University leases a student housing complex for a thirty year period that began September, 2005 and expires January, 2035.
In February 2005, the University entered into an additional capital lease of $11,782,962.26 at 4.72 percent with ASU Foundation, whereby the University leases a student center building for a 29 year period that began March, 2006 and expires June, 2034.
The University is responsible for operating costs, such as utilities and insurance for both leases listed above. The outstanding liability at June 30, 2006 on these capital leases is $20,622,109.93 and $11,922,522.55 respectively. The University may cancel the lease agreements at the end of any fiscal year when sufficient appropriations, revenues, income, grants or other funding sources are not available. The Augusta State University Foundation is a component unit of Augusta State University.
Augusta State University also entered into an installment purchase agreement for equipment with the Office of Information and Instructional Technology (OIIT), a related state agency, on December 1, 2005. The outstanding liability at June 30, 2006 is in the amount of $187,750.00. The installment purchase is reported in the capital lease section in Note 6 Capital Assets Disclosure.
OPERATING LEASES
Augusta State University'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 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.
Augusta State University Annual Financial Report FY 2006) 25

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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 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

Real Property or Equipment

Capital Leas es

Operating Leas es

$2,135,159.72 2,032,754.33 2,064,169.40 2,140,170.39 2,199,880.81
11,631,364.62 12,496,432.58 13,455,551.05 13,710,225.84
8,804,581.62 70,670,290.36 30,702,033.91
7,235,873.97 $32,732,382.48

$123,357.94 13,718.44 5,273.96
$142,350.34

Augusta State University's FY2006 expense for rental of real property and equipment under operating leases was $122,122.38.

Augusta State University Annual Financial Report FY 2006) 26

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,359,863.76 $1,271,793.79 $1,262,302.30

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006) 27

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 2006, 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 $1,056,814.23 (9.65%) and $547,574.53 (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 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 2006 amounted to $68,263.20 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.
Augusta State University Annual Financial Report FY 2006) 28

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 2006) 29

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, 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, 2006, there were 147 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Augusta State University recognized as incurred $596,222.80 of expenditures, which was net of $193,707.50 of participant contributions.
Augusta State University Annual Financial Report FY 2006) 30

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$14,569,468.96 1,381,145.99 3,531,736.57 1,032.50 108,221.04 66,368.41 107,841.71 789,907.06 254,236.94

$5,339.17 37,642.06
509.64
24,736.47
265.48 17,242.35

$0.00 139,301.74 37,399.05
357.93
3,209.93 178,574.82
1,102.31

$4,853.86 3,167,930.93
773,621.06 5,000.01
58,835.55 2,334.24 41,834.59 1,417,064.93 456,187.19

$575.00 1,909,762.39
502,188.24
36,467.78 16,190.02 46,186.84 799,339.52 15,043.03

($5,864.63) 3,593,431.83 1,769,776.35
4,568.90 20,614.17 140,872.11 76,805.41 781,667.42 91,108.53

$20,809,959.18

$85,735.17

$359,945.78

$5,927,662.36

$3,325,752.82

$6,472,980.09

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2 0 0 6

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 2,250,072.27
739,571.36 (74,741.06)
9,127.74
1,608,105.34 1,900,205.89 2,074,502.92

$0.00 1,623.00
3,802,833.48

$0.00 891,936.09 239,258.69
74,741.06 36,149.80 511,476.00 30,316.63 3,686,815.92 521,726.08

$0.00

$14,574,372.36 13,372,846.30 7,594,060.96 10,601.41 294,510.48 4,540,074.26 1,914,565.93 9,570,817.91 3,413,907.00

$8,506,844.46

$3,804,456.48

$5,992,420.27

$0.00

$55,285,756.61

Augusta State University Annual Financial Report FY 2006) 31

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 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 foundation's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $700,628 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, Augusta, GA 30904.

Investments for Component Units:

Investments are comprised of the following amounts at June 30, 2006:

Government and Agency Securities Equity Securities Mutual Funds Real Estate
Total Investments

Cost
$2,925,158.00 8,660,784.00 2,772,505.00 20,000.00
$14,378,447.00

Fair Value
$2,884,042.00 9,395,402.00 2,809,405.00 20,000.00
$15,108,849.00

The Foundation also holds net investments in direct financing leases with the University of $32,544,633 as of June 30, 2006.
Long-term Liabilities for Component Units:
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 had principal outstanding in the amount of $1,544,695 at June 30, 2006. The loan was for real estate improvements at the

Augusta State University Annual Financial Report FY 2006) 32

Forest Hills Golf Club for the benefit of the Augusta State University Athletic Association, a related party. This note carries a variable interest rate of LIBOR plus 1.20% (6.6803% at June 30, 2006). Interest payments are due monthly. In August 2006, the loan will convert to a term loan with quarterly payments of principal and interest. This loan will mature May 24, 2011. The loan is secured by the Foundation's investment account with Georgia Bank & Trust.

ASU Jaguar Student Housing I, LLC had the following revenue bonds payable at June 30, 2006:

$19,515,000 ASU Jaguar Student Housing I, LLC, Revenue Bonds, Series 2004, dated August 1, 2004, due in annual installments of $85,000 to $1,445,000, through February 1, 2035, interest at 4.375% to 5.375%. The bonds were issued to finance property and equipment known as University Village on behalf of the University.

ASU Jaguar Student Center, LLC had the following revenue bonds payable at June 30, 2006:

$11,145,000 ASU Jaguar Student Center, LLC, Educational Facilities Revenue Bonds, Series 2005, dated February 1, 2005, due in annual installments of $170,000 to $705,000, through July 1, 2034, interest at 3.25% to 5%. The bonds were issued to finance property and equipment known as the Student Center on behalf of the University. Original issue premium on the Series 2005 Revenue Bonds was $192,518.

Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Notes and Loans Payable Series 2004 Bonds Payable Series 2005 Bonds Payable Premium on Bonds Payable
Total Long Term Debt

$1,509,195.00 19,515,000.00 11,145,000.00
192,518.00
$32,361,713.00

$0.00 $0.00

($35,500.00) ($35,500.00)

$1,544,695.00 19,515,000.00 11,145,000.00
192,518.00
$32,397,213.00

$142,000.00 85,000.00
$227,000.00

Annual debt service requirements to maturity for the construction loan (Augusta State University Foundation) are as follows:

2007 2008 2009 2010 2011

Year 1 2 3 4 5

Principal $142,000 142,000 142,000 142,000 976,695
$1,544,695

Interest $82,846 90,650 81,111 71,572 66,680
$392,859

Total $224,846 232,650 223,111 213,572 1,043,375
$1,937,554

Augusta State University Annual Financial Report FY 2006) 33

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

2007 2008 2009 2010 2011 2012 2017 2022 2027 2032

through through through through through

2016 2021 2026 2031 2036

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

Principal $85,000 85,000 90,000 155,000 195,000
1,520,000 2,540,000 4,145,000 5,335,000 5,365,000
$19,515,000

Interest $1,011,020 1,007,578 1,003,838 999,563 991,813 4,785,538 4,336,913 3,496,706 2,277,450 722,138
$20,632,557

Total $1,096,020
1,092,578 1,093,838 1,154,563 1,186,813 6,305,538 6,876,913 7,641,706 7,612,450 6,087,138
$40,147,557

Annual debt service requirements to maturity for Student Housing Revenue Bonds, Series 2005 (ASU Jaguar Student Center, LLC) bonds payable are as follows:

2007 2008 2009 2010 2011 2012 2017 2022 2027 2032

through through through through through

2016 2021 2026 2031 2036

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

Principal $0
170,000 170,000 175,000 200,000 1,350,000 1,710,000 2,095,000 2,645,000 2,630,000
$11,145,000

Interest $503,864 503,864 497,149 489,924 484,236 2,293,806 1,996,956 1,612,975 1,067,000 336,750
$9,786,524

Total $503,864 673,864 667,149 664,924 684,236 3,643,806 3,706,956 3,707,975 3,712,000 2,966,750
$20,931,524

Augusta State University Athletic Association Augusta State University Athletic Association (the Athletic Association) is a legally separate, tax-exempt component unit of Augusta State University (University). The Foundation manages all extramural athletic activities and constructs athletic facilities for use by the University and then leases the completed facilities to the institution. The twenty-member board of the Athletic 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 Athletic Association, the majority of resources or income thereon that the Athletic Association holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by the Athletic 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 Foundation is considered a component unit of the University and is discretely presented in the University's financial statements.

Augusta State University Annual Financial Report FY 2006) 34

The Athletic 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 Athletic Association's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $12,000 to the University. Complete financial statements for the Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, Georgia 30904-2200.

Capital Assets for Component Units:

Augusta State University Athletic Association held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Buildings and Improvements Infrastructure Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$3,416,691.00 0.00
981,941.00 4,398,632.00
2,340,010.00
2,058,622.00 $2,058,622.00

Long-term Liabilities for Component Units:

Augusta State University Athletic Association leases golf course equipment under capital leases that expire in June 2007, October 2007 and April 2010.

The Athletic Association entered into a Note Payable with a third party in September 2005 in the amount of $35,961 for equipment. The Note matures in September 2009.

In May 2005, the Athletic Association entered into a Note Payable agreement with Augusta State University Foundation, Inc., a related party, to finance golf course improvements. The Note is payable in quarterly installments, with interest accruing at the LIBOR rate plus 1.2%, and matures in May, 2011.

Augusta State University Annual Financial Report FY 2006) 35

Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Capital Lease Obligations Notes and Loans Payable
Total Long Term Debt

$27,413.00 1,544,695.00
$1,572,108.00

$86,582.00 35,961.00
$122,543.00

$40,181.00 5,933.00
$46,114.00

$73,814.00 1,574,723.00
$1,648,537.00

$26,060.00 150,456.00
$176,516.00

Debt Service Obligations

Annual debt service requirements to maturity for Athletic Association's notes payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011

Year
1 2 3 4 5

Notes Payable

Principal

Interest

Total

$150,456.10 151,157.95 151,918.08 144,496.40 976,694.47

$68,111.70 61,123.85 54,078.96 47,191.62 40,873.76

$218,567.80 212,281.80 205,997.04 191,688.02
1,017,568.23

$1,574,723.00

$271,379.89

$1,846,102.89

Annual debt service requirements to maturity for Athletic Association's capital leases are as follows:

Year Ending June 30:

Year

2007

1

2008

2

2009

3

2010

4

Total minimum lease payments

Less: Interest

Less: Executory costs (if paid)

Principal Outstanding

Capital Leases
$30,914.00 19,825.00 17,832.00 14,860.00 83,431.00 (9,617.00) 0.00
$73,814.00

Augusta State University Annual Financial Report FY 2006) 36

BAINBRIDGE COLLEGE
Financial Report
For the Year Ended June 30, 2006

Bainbridge College Bainbridge, Georgia

Dr. Thomas A. Wilkerson President

Ms. Natalie Higley Vice President for Fiscal Affairs

BAINBRIDGE COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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................................................................................................ 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

BAINBRIDGE COLLEGE
Management's Discussion and Analysis

Introduction

Bainbridge College is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
54 49 41

Students (Headcount)
2,475 2,620 2,268

Students (FTE)
1,825 1,979 1,583

Overview of the Financial Statements and Financial Analysis

Bainbridge College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006
$3,494,261.39 5,986,633.95 615,919.39
10,096,814.73
1,599,994.39 177,399.04
1,777,393.43
5,986,633.95 546,053.95 96,668.57
1,690,064.83 $8,319,421.30

June 30, 2005
$3,375,783.16 4,692,632.50 3,846.69 8,072,262.35
1,752,620.38 135,071.49
1,887,691.87
4,692,632.50 544,333.43 166,240.28
781,364.27 $6,184,570.48

The total assets of the institution increased by $2,024,552.38. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,294,001.45 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 ($110,298.44). The combination of the increase in total assets of $2,024,552.38 and the decrease in total liabilities of ($110,298.44) yields an increase in total net assets of $2,134,850.82. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $1,294,001.45.

Bainbridge College Annual Financial Report FY 2006 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, 2006

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

$9,122,484.95 15,310,908.73 (6,188,423.78)
7,320,911.60
1,132,487.82 1,002,363.00 2,134,850.82 6,184,570.48
0.00 6,184,570.48 $8,319,421.30

$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

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

Bainbridge College Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$1,731,968.83 6,023,582.29
246,523.16 964,907.52 155,503.15 9,122,484.95
7,300,821.03
34,117.40 (14,026.83) 7,320,911.60
1,002,363.00 1,002,363.00 $17,445,759.55

June 30, 2005
$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

Bainbridge College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$6,862,721.90
814,756.22 933,929.50 1,825,947.30 932,616.98 2,928,593.18 822,525.55 189,818.10
15,310,908.73
0.00 $15,310,908.73

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
0.00 $14,963,286.75

All student driven revenue depicts increases. Student Tuition and Fees increased $78,333.50 while Federal Grants and Contracts increased $51,641.39, and Auxiliary Enterprises increased $76,678.86; all depicting the continued increase in enrollment. Other operating revenue also saw an increase of $123,322.51.
The compensation and employee benefits category increased by approximately $1,035,191.69. 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.
Utilities decreased by approximately ($19,593.52) during the past year. The decrease was primarily associated with the mild weather experienced in fiscal year 2006.
Under non-operating revenues (expenses) state appropriations increased by approximately $788,822.59. The increase in state appropriations was due to the growth in enrollment that Bainbridge College has experienced over the past few years.
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
Bainbridge College Annual Financial Report FY 2006 5

third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($6,015,172.32) 7,300,984.85 (705,951.70) (577,955.30) 1,905.53 1,915,043.02
$1,916,948.55

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

Capital Assets

The College had two significant capital asset additions for facilities in fiscal year 2006. The HVAC Upgrades were completed in fiscal year 2006. Construction of the Academic Classroom Annex was completed and placed into service early in fiscal year 2006.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt and Liabilities

Bainbridge College had Long-Term Debt and Liabilities of $347,292.62 of which $169,893.58 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Component Units

In compliance with GASB Statement No. 39, Bainbridge College has included the financial statements and notes for all required component units for FY2006. The Bainbridge College Foundation had endowment investments of $78,813.56 as of June 30, 2006.

Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Bainbridge College Annual Financial Report FY 2006 6

Economic Outlook The College is not aware of any currently know 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 A. Wilkerson, President Bainbridge College
Bainbridge College Annual Financial Report FY 2006 7

Statement of Net Assets

BAINBRIDGE COLLEGE STATEMENT OF NET ASSETS
June 30, 2006

Component Unit

AS S ETS Current As sets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Inventories (note 4) Prepaid items Other Assets Total Current As sets
Noncurrent Assets Investments (including Real Estate) Notes Receivable, net Capital As sets , net (note 6) Other Assets Total Noncurrent Ass ets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue (note 7) Deposits Held for Other Organizations Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Capital Ass ets, 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 AS S ETS

Bainbridge College

Bainbridge College Foundation

$1,916,948.55
366,015.97 788,695.86 415,101.91
7,499.10
3,494,261.39
612,072.70 3,846.69
5,986,633.95
6,602,553.34 10,096,814.73

$33,959.71 78,813.56
112,773.27
0.00 112,773.27

239,309.22 56,307.13 60,761.36 911,656.68 162,066.42 169,893.58 1,599,994.39
177,399.04 177,399.04 1,777,393.43
5,986,633.95
546,053.95 96,668.57
1,690,064.83 $8,319,421.30

0.00
0.00 0.00
78,813.56 33,959.71
$112,773.27

Bainbridge College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
B AINBRIDG E COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Bainbridge College

Bainbridge College Foundation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Gifts and Contributions Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Books tore Food Services Parking/Trans portation Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 Bainbridge College
Total Operating Expens es Operating Income (los s )

$3,831,960.42 2,099,991.59
5,404,263.42 543,162.55 76,156.32 246,523.16 93.10
927,241.51 37,000.01
666.00 155,410.05 9,122,484.95
4,055,281.20 3,394,731.53 1,983,898.32
104,708.28 2,938,309.76
253,083.06 2,196,468.18
384,428.40
15,310,908.73 (6,188,423.78)

$0.00 2,264.00
2,264.00
5,416.30 1,722.10 7,138.40 (4,874.40)

Bainbridge College Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
BAINBRIDGE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Bainbridge College

Bainbridge College Foundation

NONOPERATING REVENUES (EXPENSES) State Appropriations Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State 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

7,300,821.03 34,117.40 (14,026.83)
7,320,911.60 1,132,487.82
1,002,363.00
1,002,363.00 2,134,850.82
6,184,570.48 0.00
6,184,570.48 $8,319,421.30

807.49
807.49 (4,066.91)
64,248.02 64,248.02 60,181.11 52,592.16
0.00 52,592.16 $112,773.27

Bainbridge College Annual Financial Report FY 2006 10

Statement of Cash Flows
B AINBRIDG E COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation 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 Proceeds from Sale of Capital A s s ets Purchas es of Capital A s s ets Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES 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, 2006
$1,667,280.77
5,789,100.34 244,023.16
(4,519,456.94) (7,410,523.08) (2,938,309.76)
729,054.82 43,784.76
666.00 379,207.61 (6,015,172.32)
7,300,821.03 (15,694.18) 7,000.00 8,858.00
7,300,984.85
(705,951.70) (705,951.70)
34,117.40 (612,072.70) (577,955.30)
1,905.53 1,915,043.02 $1,916,948.55

Bainbridge College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
B AINBRIDG E COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items 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

June 30, 2006
($6,188,423.78)
384,428.40 35,011.65 (92,359.06) (110,828.77)
545.79 83,087.52 310,207.75 (449,419.34) 12,577.52 ($6,015,172.32)
($3,270.17) ($1,002,363.00)

Bainbridge College Annual Financial Report FY 2006 12

BAINBRIDGE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations Bainbridge College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Bainbridge College is one of thirty-five (35) 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 2005. 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 FY2006, Bainbridge College is reporting the activity for the Bainbridge 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
Bainbridge College Annual Financial Report FY 2006 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.
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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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
Bainbridge College Annual Financial Report FY 2006 14

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 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, 2006, GSFIC did not transfer any capital additions to Bainbridge 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.
Bainbridge College Annual Financial Report FY 2006 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 $334,715.10 as of 7-1-2005. For FY2006, $657,918.70 was earned in compensated absences and employees were paid $645,341.18 for a net increase of $12,577.52. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $347,292.62.
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:

Res tricted - E&G and Other Organized A ctivities Ins titutional Loans Quas i-Endowments Total Res tricted Expendable

June 30, 2006
$24,794.90 5,704.92
66,168.75 $96,668.57

Bainbridge College Annual Financial Report FY 2006 16

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, 2006
$116,857.80 1,075,054.69
14,340.32 483,812.02 $1,690,064.83

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 Bainbridge College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Bainbridge College Annual Financial Report FY 2006 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 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.
Bainbridge College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $1,914,934.71 and the bank balance was $2,164,116.29. Of the College's deposits, $2,064,116.29 were uninsured. Of these uninsured deposits, $2,064,116.29 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 2006 19

B. Investments

At June 30, 2006, the carrying value of the College's investments was $612,072.70, 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 Pools Board of Regents Balanced Income Fund Total Investment Pools

$612,072.70 $612,072.70

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 has no formal policy for managing interest rate risk.
The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the College's total investment of $612,072.70, $403,114.00 is invested in debt securities.
Credit Quality Risk The Board of Regents Investment Pool is not rated.
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 has no formal policy for managing custodial credit risk.
At June 30, 2006, $612,072.70 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.

Bainbridge College Annual Financial Report FY 2006 20

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$9,628.29 178,505.45 366,015.97 659,593.01 1,213,742.72
59,030.89
$1,154,711.83

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

June 30, 2006

Books tore Food Services Phys ical Plant
Total

$404,256.31 2,362.74 8,482.86
$415,101.91

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, 2006. At June 30, 2006, no provision has been made for uncollectible loans.

Bainbridge College Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$99,269.00
1,306,321.77 1,405,590.77

Additions
$0.00
1,550,059.99 1,550,059.99

Reductions
$0.00
1,471,410.00 1,471,410.00

Ending B al anc e 6/30/2006
$99,269.00 0.00
1,384,971.76 1,484,240.76

0.00 5,515,470.06
332,813.00 1,704,023.10
0.00 947,173.43
0.00 8,499,479.59

1,471,410.00 143,550.13 14,704.58
1,629,664.71

106,642.02 153.00
106,795.02

0.00 6,986,880.06
332,813.00 1,740,931.21
0.00 961,725.01
0.00 10,022,349.28

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

150,153.80 14,976.59
191,204.01
28,094.00
384,428.40
1,245,236.31
$2,795,296.30

76,757.17 153.00
76,910.17 29,884.85 $1,501,294.85

0.00 3,328,195.45
245,865.60 1,104,139.32
0.00 841,755.72
0.00 5,519,956.09
4,502,393.19
$5,986,633.95

Bainbridge College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $823,708.17 87,948.51 $911,656.68

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance
July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

334,715.10 334,715.10
$334,715.10

657,918.70 657,918.70
$657,918.70

645,341.18 645,341.18
$645,341.18

347,292.62 347,292.62
$347,292.62

Current Portion
$0.00
169,893.58 169,893.58 $169,893.58

Note 9. Significant Commitments
There were no significant unearned, outstanding construction or renovation contracts as of June 30, 2006.
Note 10. Lease Obligations
Bainbridge College has no lease obligations as of June 30, 2006. Bainbridge College had no expense for rental of real property and equipment under operating leases.

Bainbridge College Annual Financial Report FY 2006 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 2006, 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

2006 2005 2004

100% 100% 100%

$421,648.32 $369,396.92 $311,236.18

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 Bainbridge College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance

Bainbridge College Annual Financial Report FY 2006 24

with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $52,160.66 (9.65%) and $27,026.92(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 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 2006 amounted to $36,878.04 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.
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
Bainbridge College Annual Financial Report FY 2006 25

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.
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
Bainbridge College Annual Financial Report FY 2006 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, 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, 2006, there were 42 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Bainbridge College recognized as incurred $204,367.33 of expenditures, which was net of $91,524.18 of participant contributions.
Bainbridge College Annual Financial Report FY 2006 27

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

$4,055,281.20 955,759.29 1,105,456.00

$0.00

$0.00

$0.00 451,657.12 108,997.60

$0.00 531,352.96 139,668.95

63,945.90 6,476.04 34,316.60 608,597.92 32,888.95

4,299.44
6,088.05 208,780.83
34,933.18

14,108.83 8,204.00 9,399.85 220,583.12 10,611.79

$6,862,721.90

$0.00

$0.00

$814,756.22

$933,929.50

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2 0 0 6

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

$0.00 458,565.51 143,960.03
(6,025.27) 295.17
177,938.29 146,634.90
11,248.35

$0.00 4,954.74
2,923,629.72 8.72

$0.00 70,934.63 21,428.06
6,025.27 365.40
555.68 721,157.81
2,058.70

$0.00
12,376.00 177,442.10

$932,616.98

$2,928,593.18

$822,525.55

$189,818.10

Institutional Support
$0.00 926,462.02 459,432.94
21,693.54
24,784.59 278,328.88 115,245.33
$1,825,947.30
Total Expens es
$4,055,281.20 3,394,731.53 1,983,898.32 0.00 104,708.28 2,938,309.76 253,083.06 2,196,468.18 384,428.40
$15,310,908.73

Bainbridge College Annual Financial Report FY 2006 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, 2006, the Foundation distributed $1,722.10 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the President, PO Box 990, Bainbridge, GA 39818-0990.

Investments for Component Units:
Bainbridge College Foundation holds endowment investments in the amount of $78,813.56. 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, 2006:

Certificates of Deposit Total Investments

Cost $78,813.56 $78,813.56

Fair Value $78,813.56 $78,813.56

Bainbridge College Annual Financial Report FY 2006 29

CLAYTON STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Clayton State University Morrow, Georgia

Dr. Thomas K. Harden
President

David K. Heflin
Vice President for Business & Operations

CLAYTON STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2006
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......................................................................................... 26 Note 11 Retirement Plans .......................................................................................... 27 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 ......................................................................................... 32

CLAYTON STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Clayton State University is one of the 35 institutions of higher education of the University System of Georgia. It is located 15 miles south of Atlanta and enrolls approximately 6,000 students from 30 states and 25 foreign countries. Clayton State is adjacent to the Georgia Archives and the Southeast Region Archives of the National Archives and Records Administration the only place in the United States with co-located state and national facilities. The campus environment, 163 beautifully wooded acres with five lakes, is a hallmark of the institution and a surprising contrast to the vibrant urban life of metropolitan Atlanta. Nationally ranked Clayton State Lakers men's and women's athletic programs compete in the NCAA Division II Peach Belt Conference.

The University's first graduate level program, the Master of Arts in Liberal Studies in the School of Arts and Sciences, was approved by the Board of Regents of the University System of Georgia in November 2005. A second graduate program, the Master of Science in Nursing, was approved by the Board of Regents in June 2006. The Association to Advance Collegiate Schools of Business (AACSB International) awarded coveted accreditation status to Clayton State's School of Business in April 2006. Less than a third of all schools of business nationwide and less than fifteen percent of schools of business worldwide have been able to earn AACSB accreditation.

The James M. Baker University Center was named in honor of Clayton State alumnus James M. "Jim" Baker in November 2005. The 131,000 square foot, four-story structure provides the University with a true "Center" for campus life, containing a cafeteria, bookstore, state-of-the-art visual technology classrooms, administrative and faculty offices, and enhanced learning facilities, including wireless capabilities and more than 2,000 data ports. Clayton State currently employs 325 faculty members; of which 197 are full-time, two-thirds of which hold the highest degrees in their field. The University continues an eight-year trend of increased spring enrollment:
Students Students
Faculty (Headcount) (FTE)

FY2006

197

FY2005

140

FY2004

129

6,212 5,954 5,661

4,967 4,673 4,342

Overview of the Financial Statements and Financial Analysis

Clayton State University is proud to present its financial statements for fiscal year 2006. The emphasis of discussions about these statements will be on current year data. There are three

Clayton State University Annual Financial Report FY2006 1

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 2005 and FY 2006.

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 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, 2006
$5,956,662.84 55,050,334.28
991,334.94 61,998,332.06
3,243,951.14 1,077,953.91 4,321,905.05
54,634,412.31 983,114.54 22,262.81 741,424.99
1,295,212.36 $57,676,427.01

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 0.00 3,321,810.26
$56,988,068.24

Clayton State University Annual Financial Report FY2006 2

The total assets of the institution decreased by ($110,361.04). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease in accounts receivables and other small changes. 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 ($798,719.81) primarily due to a decrease in accounts payables. The combination of the decrease in total assets of ($110,361.04) and the decrease in total liabilities of ($798,719.81) yields an increase in total net assets of $688,358.77. 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.
Clayton State University Annual Financial Report FY2006 3

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

June 30, 2006

June 30, 2005

Operating Revenues

$33,752,841.81

$30,423,801.14

Operating Expenses Operating Loss

55,275,760.99 (21,522,919.18)

51,013,709.84 (20,589,908.70)

Nonoperating Revenues and Expenses

20,847,422.95

18,815,311.68

Income (Loss) Before other revenues, expenses, gains or losses

(675,496.23)

(1,774,597.02)

Other revenues, expenses, gains or losses

1,363,855.00

26,714,340.29

Increase in Net Assets

688,358.77

24,939,743.27

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

56,988,068.24 0.00
56,988,068.24

32,048,324.97 0.00
32,048,324.97

Net Assets at End of Year

$57,676,427.01

$56,988,068.24

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

Clayton State University Annual Financial Report FY2006 4

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$14,273,124.69
9,232,654.69 3,003,922.40 6,794,322.17
448,817.86
33,752,841.81
21,783,648.00
937,787.63 178,494.84 (2,043,673.27) 20,856,257.20
1,363,855.00
1,363,855.00 $55,972,954.01

June 30, 2005
$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

Clayton State University Annual Financial Report FY2006 5

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$20,740,686.68
838,887.13 6,630,331.50 4,530,289.20 8,547,799.29 4,528,519.48 3,947,619.20 3,651,701.20 1,859,927.31
55,275,760.99
8,834.25
$55,284,595.24

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
0.00
$51,013,709.84

Recent years of enrollment growth lead to increases in revenue in all functional areas. Tuition and fees increased by $1,923,919.83 in fiscal year 2006. Auxiliary sales activities enhanced by the addition of new bookstore and food service facilities in the University Center generated increased revenues of $645,471.03, while sales, services and other revenue increased by $624,421.59. Grants and contracts revenue increased by $135,228.22 in fiscal year 2006 primarily as a result of increases in federal scholarship funding.
The compensation and employee benefits category increased by approximately $4,001,786.89. The increase reflects faculty and staff hires in 2006 and an increase in the cost of retirement and health insurance for the employees of the institution.
Utilities increased by approximately $484,622.40 during the past year. The increase was associated with the increased energy costs experienced in the winter of fiscal year 2006 and the full year occupation of Clayton State's University Center.
The increased expense in plant operations was due to the utility increased expenses as well as completion of the renovation of the Student Center building on campus.
Under non-operating revenues (expenses) state appropriations increased by approximately $2,402,962.43.

Clayton State University Annual Financial Report FY2006 6

Statement of Cash Flows
The final statement presented by Clayton 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, 2006 and 2005, 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, 2006
($19,859,547.62) 21,805,675.56 (1,764,983.15) 178,494.84 359,639.63 4,213,932.92
$4,573,572.55

June 30, 2005
($17,673,959.56) 21,953,581.64 (1,697,084.92) 88,327.03 2,670,864.19 1,543,068.73
$4,213,932.92

Capital Assets
The University had one significant capital asset addition for facilities in fiscal year 2006. The Student Center Building renovation was completed and re-occupied during FY06. Funding for this renovation was provided by both institutional funds and 2.1 million dollars of funding from GSFIC.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Clayton State University had Long-Term Debt and Liabilities of $2,065,502.82, of which $987,548.91 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Clayton State University Annual Financial Report FY2006 7

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 FY2006. For additional information concerning component units, see 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. Even with unexpected increased cost of utilities, 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 FY2006 8

Statement of Net Assets

CLAYTON STATE UNIVERSITY STATEMENT OF NET ASSETS
June 30, 2006

AS S ETS Current As s ets Cas h and Cas h Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Due From Component Units Pledges Receivable Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other As sets Total Current As s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Capital As s ets , net (note 6) Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) 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

Clayton S tate Univers ity
$3,590,458.01
310,538.15 1,468,075.12
214,943.91
342,640.70 30,006.95
5,956,662.84
983,114.54
8,220.40 55,050,334.28 56,041,669.22 61,998,332.06
429,428.59 181,475.87 1,462,552.85
1,822.78 181,122.14
151,290.91 836,258.00 3,243,951.14
264,631.06 813,322.85 1,077,953.91 4,321,905.05
54,634,412.31
983,114.54 22,262.81
741,424.99 1,295,212.36 $57,676,427.01

Component Units

Walter & Emilie S pivey Foundation

Clayton S tate Univers ity
Foundation, Inc.

$66,465.06

$576,546.00

24,892.08 91,357.14

76,154.00
2,745.00
10,040.00 665,485.00

7,352,183.30
10,769.46 7,362,952.76 7,454,309.90

4,179,204.00
4,179,204.00 4,844,689.00

18,970.00

866.00

0.00

19,836.00

0.00 0.00 10,769.46
7,443,540.44 $7,454,309.90

0.00 19,836.00
1,396,455.00 3,343,478.00
84,920.00 $4,824,853.00

Clayton State University Annual Financial Report FY2006 9

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, 2006

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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Bo o ks to re Food Services Parkin g /Tran s p o rtatio n Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Clayton State University
Total Operating Expenses Operating Income (loss)

Clayton State Univers ity

Walter & Emilie Spivey Foundation

$16,566,298.74 2,293,174.05

$0.00

7,918,522.04 824,087.89 490,044.76
3,003,922.40 5,928.07

3,413,849.77

751,436.93

267,626.47

2,063,430.25

297,978.75

442,889.79

33,752,841.81

0.00

13,218,837.46 15,857,120.80 6,970,157.47
371,250.72 5,036,932.21 1,767,944.51 9,664,328.40 2,389,189.42
55,275,760.99 (21,522,919.18)

24,381.37
354,337.98 378,719.35 (378,719.35)

Clayton State Univers ity
Foundation, Inc.
$0.00 1,486,653.00
68,877.00
41,705.00 1,597,235.00
62,020.00
402,223.00 228,873.00 693,116.00 904,119.00

Clayton State University Annual Financial Report FY2006 10

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, 2006

Component Units

Clayton State University

Walter & Emilie Spivey
Foundation

Clayton State University
Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations 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 State 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

21,783,648.00 937,787.63 178,494.84 (8,834.25)
(2,043,673.27) 20,847,422.95
(675,496.23)
1,363,855.00
1,363,855.00 688,358.77
56,988,068.24 0.00
56,988,068.24 $57,676,427.01

192,323.83
192,323.83 (186,395.52)
0.00 (186,395.52) 7,640,705.42
0.00 7,640,705.42 $7,454,309.90

56,668.00
56,668.00 960,787.00
40,922.00 40,922.00 1,001,709.00 3,823,144.00
0.00 3,823,144.00 $4,824,853.00

Clayton State University Annual Financial Report FY2006 11

Statement of Cash Flows
CLAYTON STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 A uxiliary Enterpris e Charges : Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate A thletics 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 Net Cas h Flows Provided by Non-capital Financing A ctivities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES 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 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, 2006
$13,530,155.93
10,020,705.71 2,415,214.70
(20,363,449.33) (28,799,263.41) (4,632,437.07)
3,440.37
3,329,734.31 820,473.76 235,376.41 48,909.35
1,885,158.70 1,646,432.95 (19,859,547.62)
21,783,648.00 22,027.56
21,805,675.56
(1,588,397.87) (167,751.03) (8,834.25)
(1,764,983.15)
178,494.84 178,494.84 359,639.63 4,213,932.92 $4,573,572.55

Clayton State University Annual Financial Report FY2006 12

Statement of Cash Flows, Continued
CLAYTON STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items 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

June 30, 2006
($21,522,919.18)
2,389,189.42 347,008.68 (66,091.87) (29,520.81) (778,834.57) (535,630.96) 130,622.56 206,629.11
($19,859,547.62)
$583,673.00 ($1,363,855.00)

Clayton State University Annual Financial Report FY2006 13

CLAYTON STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Clayton State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Clayton 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 2005. 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 FY2006, Clayton State University is reporting the activity for the Walter and Emilie Spivey Foundation and the Clayton State University Foundation, Inc.
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
Clayton State University Annual Financial Report FY2006 14

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 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 FY2006 15

expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, GSFIC did not transfer any capital additions to Clayton State University.
Deposits Clayton State 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 FY2006 16

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Clayton State University had accrued liability for compensated absences in the amount of $1,442,951.74 as of 7-1-2005. For FY2006, $1,159,273.54 was earned in compensated absences and employees were paid $952,644.43, for a net increase of $206,629.11. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,649,580.85.
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.
Clayton State University Annual Financial Report FY2006 17

Expendable Restricted Net Assets include the following:

June 30, 2006

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Total Res tricted Expendable

$9,930.00 8,607.20 3,725.61 $22,262.81

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 Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$1,037,687.58 986,365.92 (728,841.14)
$1,295,212.36

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 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 FY2006 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 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 FY2006 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, 2006, the carrying value of deposits was $2,975,832.65 and the bank balance was $4,162,898.62. Of the university's deposits, $4,062,898.62 were uninsured and uncollateralized.
Clayton State University Annual Financial Report FY2006 20

B. Investments

At June 30, 2006, the carrying value of the University's investments was $1,589,009.90, 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 P ools Board of Regents Short-Term Fund Total Return Fund Sub Total
Office of Treasury and Fiscal Services Georgia Fund 1
Sub Total
Total Investment P ools

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

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 investment of $299,108.63 in the Short Term Fund, $294,035 is invested in debt securities. l 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. Participation in the Georgia Fund 1 Investment Pool is voluntary. 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 28 days.
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 the same as the Board of Regents, as we invest in their pools and follow the same guidelines.
The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the University's total investment of $299,108.63 in the Short Term Fund, $294,035.00 is invested in debt securities.
Clayton State University Annual Financial Report FY2006 21

The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $975,114.54 in the Total Return Fund, $316,718 is invested in debt securities. 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, 2006, $1,274,223 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's policy for managing interest rate risk is the same as the Board of Regents, as we invest in their pools and follow the same guidelines. As previously stated, the Board of Regents investment pools are not rated and the Georgia Fund 1 investment pool is rated AAAm by Standard and Poor's.
Clayton State University Annual Financial Report FY2006 22

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$461,747.32 57,033.25
310,538.15 214,943.91 1,042,810.78 2,087,073.41
93,516.23
$1,993,557.18

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Food Services
Total

June 30, 2006
$329,465.97 13,174.73
$342,640.70

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the University did not have an allowance for uncollectible loans.

Clayton State University Annual Financial Report FY2006 23

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction W ork-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 7/1/2005
$640,501.10 0.00 0.00
640,501.10

Additions
$0.00
57,838.25 57,838.25

Reductions $0.00
0.00

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

2,434,329.00 126,889.00 873,840.08
244,440.79
3,679,498.87

85,507.85 19,950.74 105,458.59

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

1,846,931.77 22,866.76 284,060.50
235,330.39
2,389,189.42
1,290,309.45
$1,348,147.70

1,109,202.09 56,009.77 19,950.74
1,185,162.60 (1,079,704.01) ($1,079,704.01)

Ending Balance 6/30/2006
$640,501.10 0.00
57,838.25 698,339.35
0.00 64,017,372.05
758,454.00 6,535,981.21
0.00 4,886,423.48
0.00 76,198,230.74
0.00 12,922,265.76
518,276.38 4,724,426.05
0.00 3,681,267.62
0.00 21,846,235.81
54,351,994.93
$55,050,334.28

Clayton State University Annual Financial Report FY2006 24

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $1,127,853.42
334,699.43 $1,462,552.85

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $583,673.00

Reductions

Ending Balance June 30, 2006

$167,751.03

$415,921.97

Current Portion
$151,290.91

1,442,951.74 1,442,951.74
$1,442,951.74

1,159,273.54 1,159,273.54
$1,742,946.54

952,644.43 952,644.43
$1,120,395.46

1,649,580.85 1,649,580.85
$2,065,502.82

836,258.00 836,258.00
$987,548.91

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $282,276 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.

Clayton State University Annual Financial Report FY2006 25

Note 10. Lease Obligations

CAPITAL LEASES

Clayton State University entered into a lease agreement with an unrelated party, Avaya Financial Services, for equipment. Expenditures for fiscal year 2006 were $176,585.28 of which $8,834.25 represented interest. Total principal paid on capital leases was $167,751.03 for the fiscal year ended June 30, 2006. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Equipment Total Assets Held Under Capital Lease

$583,673.00 $583,673.00

OPERATING LEASES
Clayton State University entered into a lease agreement with Avaya Financial Services for maintenance service related to the leased equipment referenced in the Capital Leases section. This lease is non-renewable and has a lease term expiring in FY2008.
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, 2006, were as follows:

Year Ending June 30: 2007 2008 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2

Capital Leas es

Real Property Operating Leas es

$169,971.07 274,874.23 444,845.30 28,923.33 0.00
$415,921.97

$72,499.00 217,498.46 $289,997.46

Clayton State University had no expense for rental of real property and equipment under operating leases.

Clayton State University Annual Financial Report FY2006 26

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 2006, 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

2006 2005 2004

100% 100% 100%

$ 1,309,322.67 $ 1,126,247.44 $ 1,205,364.77

Employees' Retirement System of Georgia

Plan Description Clayton State University does not participate in 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

Clayton State University Annual Financial Report FY2006 27

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 2006, 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 $1,005,227.30 (9.65%) and $520,695.26 (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 2006 amounted to $197,119.18 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Clayton State University Annual Financial Report FY2006 28

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.
Clayton State University Annual Financial Report FY2006 29

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 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, 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, 2006, there were 134 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Clayton State University recognized as incurred $ 374,753.28 of expenditures, which was net of $ 190,943.58 of participant contributions.
Clayton State University Annual Financial Report FY2006 30

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$12,893,587.52 2,278,543.65 3,242,050.15

$0.00

$66,529.00 580,180.80 140,987.27

$138,299.53 3,415,504.45
757,932.80

$861.74 2,648,367.12
570,720.44

$50,209.67 4,293,269.63 1,582,374.38

175,514.25 48,455.00 40,424.98 2,034,263.23 27,847.90

4,977.42
967.58 45,245.06

76,501.86 45,980.00 20,466.73 1,868,147.27 307,498.86

34,776.56 18,181.00 13,011.79 1,230,009.71 14,360.84

47,005.41 240,146.77 445,143.22 1,811,349.86 78,300.35

$20,740,686.68

$0.00

$838,887.13

$6,630,331.50

$4,530,289.20

$8,547,799.29

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xilia ry En terp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 1,339,569.11
376,711.87 (42,198.15)
1,792.28
1,237,119.64 1,600,617.02
14,907.71

$0.00 3,947,619.20

$69,350.00 1,301,686.04 299,380.56
42,198.15 30,682.94 736,550.24 10,810.57 1,074,696.25 86,346.45

$0.00 1,859,927.31

$13,218,837.46 15,857,120.80 6,970,157.47 0.00 371,250.72 5,036,932.21 1,767,944.51 9,664,328.40 2,389,189.42

$4,528,519.48

$3,947,619.20

$3,651,701.20

$1,859,927.31

$55,275,760.99

Clayton State University Annual Financial Report FY2006 31

Note 16. Component Units

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 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. Due to this different fiscal year end, the Foundation's reported payable at December 31, 2005 to the University is not in agreement with the University's reported receivable as of June 30, 2006.

During the year ended December 31, 2005, the Foundation distributed $354,338 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Clayton State University, 2000 Clayton State Blvd, Morrow, Georgia, 30260.

Investments for Component Units:

The Walter & Emilie Spivey Foundation holds investments in the amount of $7.4 million as of December 31, 2005. Investments consist of marketable securities, bonds and real property as follows:

Cost

Fair Value

Money Market Accounts Corporate Bonds/Mutual Bond Funds Equity Securities Real Estate
Total Investments

$324,527.12 4,831,407.52 1,639,000.48
277,400.16
$7,072,335.28

$324,527.12 4,974,754.19 1,775,501.83
277,400.16
$7,352,183.30

Clayton State University Annual Financial Report FY2006 32

Capital Assets for Component Units:

The Foundation holds the following Capital Assets as of December 31, 2005:

December 31, 2005

Capital Assets being Depreciated: Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$15,384.46 15,384.46 4,615.00 10,769.46
$10,769.46

Clayton State University Foundation, Inc. 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, 2006, the Foundation distributed $228,873 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Clayton State University Foundation, Inc., Alumni Affairs Office, Harry Downs Continuing Education Building, 2000 Clayton State Blvd, Morrow, Georgia, 30260.

Clayton State University Annual Financial Report FY2006 33

Investments for Component Units:

Clayton State University Foundation holds endowment investments in the amount of $2.2 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Clayton State University Foundation also holds investments in real property valued at $1,981,502.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Real Estate Georgia Investment Pools
BOR Total Return Fund
Total Investments

$1,981,502.00 2,205,425.00
$4,186,927.00

$1,981,502.00 2,197,702.00
$4,179,204.00

Clayton State University Annual Financial Report FY2006 34

COASTAL GEORGIA COMMUNITY COLLEGE
Financial Report
For the Year Ended June 30, 2006

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 2006
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

COASTAL GEORGIA COMMUNITY COLLEGE
Management's Discussion and Analysis

Introduction

Coastal Georgia Community College is one of the 35 institutions of higher education 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.
Students Students
Faculty (Headcount) (FTE)

FY2006 FY2005 FY2004

86

3,063

2,144

73

2,879

2,032

50

2,818

1,945

Overview of the Financial Statements and Financial Analysis

Coastal Georgia Community College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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

Coastal Georgia Community College Annual Financial Report FY 2006 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 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 As s ets , net of debt Res tricted - nonexpendable Res tricted - expendable Capital Projects Unres tricted Total Net As s ets

June 30, 2006
$1,801,863.26 27,652,910.28
89,383.89 29,544,157.43
1,125,377.93 133,635.69
1,259,013.62
27,652,910.28 68,879.18 44,097.79
519,256.56 $28,285,143.81

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

The total assets of the institution increased by $434,867.23. A review of the Statement of Net Assets will reveal that the increase was partially due to an increase of $201,193.71 of investment in plant, net of accumulated depreciation. Additionally, current assets increased by $233,743.88 due to normal increases in inventories, cash on hand, and 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 increased by $229,196.22. The combination of the increase in total assets of $434,867.23 and the increase in total liabilities of $229,196.22 yields an increase in total net assets of $205,671.01. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $201,193.71.

Coastal Georgia Community College Annual Financial Report FY 2006 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, 2006

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

$7,882,337.36 20,833,237.80 (12,950,900.44) 12,031,555.25
(919,345.19) 1,125,016.20
205,671.01 28,079,472.80
0.00 28,079,472.80 $28,285,143.81

$7,711,005.73 20,657,853.24 (12,946,847.51) 11,622,949.72
(1,323,897.79) 1,529,495.30
205,597.51 27,873,875.29
0.00 27,873,875.29 $28,079,472.80

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:

Coastal Georgia Community College Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$2,799,363.87
3,328,596.01 301,697.93
1,405,277.38 47,402.17
7,882,337.36
9,331,821.61 2,487,096.89
158,593.28 60,886.27 (6,842.80)
12,031,555.25
1,125,016.20
1,125,016.20
$21,038,908.81

June 30, 2005
$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

Coastal Georgia Community College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$8,610,047.16
161,594.18 1,028,183.90 1,445,016.63 2,837,744.62 2,754,110.95 1,940,532.27 1,456,074.46
599,933.63
20,833,237.80
0.00
$20,833,237.80

June 30, 2005
$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
0.00
$20,657,853.24

The decrease in grants and contracts is primarily a result of lower Pell awards and the end of the School-To-Work grant in FY05. Nonoperating Gifts decreased significantly due to reduced funding for non-capital equipment and supplies for the Camden Center. This reduction further explains the decrease in Plant Operations and Maintenance expenses in FY06. The increase in Investment Income reflects the improving interest rates available, along with the switch to a superior banking contract.
The compensation and employee benefits category increased by approximately $1,192,283.64. This increase is partially due to an increased cost of health insurance for the employees of the institution along with merit increases. Additionally, seven faculty positions were added including three nursing positions to increase the number of nursing graduates aimed at helping the shortage in Georgia in this area. Utilities increased by approximately $80,694.42 during the past year. The increase was primarily associated with the increased electrical and natural gas rates that were experienced in fiscal year 2006.
Under non-operating revenues (expenses) state appropriations increased by approximately $1,494,711.61. The increase is due to additional funding related to higher enrollment, a strategic allocation for the Camden Center, and Special Funding Initiatives for increasing nursing graduates.

Coastal Georgia Community College Annual Financial Report FY 2006 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, 2006 and 2005, Condensed

Cas h Provided (us ed) By: Operating A ctivities Non-capital Financing A ctivities Inves ting A ctivities
Net Change in Cas h Cas h, Beginning of Year
Cas h, End of Year

June 30, 2006
($11,465,181.26) 11,975,887.13 60,956.63 41,064.50 612,057.23
$653,121.73

June 30, 2005
($10,665,757.80) 11,791,422.34 2,306.89 524,354.76 87,702.47
$612,057.23

Capital Assets

The College did not have a significant capital project in fiscal year 2006; however, GSFIC funded minor renovations to two buildings and additional funding for the completion of the Camden Center was recorded. Two minor projects began in fiscal year 2006 funded by GSFIC including the renovation of the Physical Education building classrooms. The bulk of this renovation will be recognized in later years.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt and Liabilities

Coastal Georgia Community College had Long-Term Debt and Liabilities of $540,281.11 of which $406,645.42 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Coastal Georgia Community College Annual Financial Report FY 2006 6

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 FY2006. The Coastal Georgia Community College Foundation, Inc. had investments of $7.7 million as of December 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 was able to generate a modest increase in Net Assets for the year. 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. Dorothy L. Lord, President Coastal Georgia Community College
Coastal Georgia Community College Annual Financial Report FY 2006 7

Statement of Net Assets
COASTAL GEORGIA COMMUNITY COLLEGE STATEMENT OF NET ASSETS June 30, 2006

Component Unit

AS S ETS Current As sets Cash and Cash Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Pledges Receivable Inventories (note 4) Prepaid items Other Assets Total Current As sets

Coas tal Georgia Community College

Coastal Georgia Community College
Foundation, Inc.

$653,121.73
221,932.93 652,448.68
266,436.56 7,923.36
1,801,863.26

$256,651.00
45,199.00 12,500.00 314,350.00

Noncurrent Assets Investments (including Real Estate) Notes Receivable, net Pledges Receivable Capital As sets , net (note 6) Other Assets Total Noncurrent Ass ets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (note 7) Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Capital Ass ets, 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 AS S ETS

88,603.89 780.00
27,652,910.28
27,742,294.17 29,544,157.43
273,721.07 280,804.83 88,599.40 75,607.21
406,645.42 1,125,377.93
133,635.69 133,635.69 1,259,013.62
27,652,910.28
68,879.18 44,097.79
519,256.56 $28,285,143.81

7,662,389.00 17,788.00
7,680,177.00 7,994,527.00
500.00 500.00
0.00 500.00
4,282,480.00 1,745,040.00 1,966,507.00 $7,994,027.00

Coastal Georgia Community College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

COASTAL G EORG IA COMMUNITY COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006

REVENUES

Coas tal Georgia Community College

Component Unit
Coas tal Georgia Community Col l e g e
Foundation, Inc.

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) Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Books tore Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 Coas tal Georgia CC
Total Operating Expens es Operating Income (los s )

$4,336,839.84 1,537,475.97
3,328,596.01
301,697.93 24,684.82
1,188,467.40 205,082.15 11,727.83 22,717.35
7,882,337.36

$0.00 503,080.00
35,329.00
538,409.00

4,041,795.57 5,847,000.86 2,752,433.89
175,437.56 2,162,631.93
729,939.98 3,676,420.32 1,447,577.69
20,833,237.80 (12,950,900.44)

23,018.00
577,563.00 600,581.00 (62,172.00)

Coastal Georgia Community College Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
COASTAL GEORGIA COMMUNITY COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Coastal Georgia Community College

Coastal Georgia Community College
Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) 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

9,331,821.61
782,864.67 1,103,254.41
600,977.81 158,593.28
60,886.27 (6,842.80) 12,031,555.25 (919,345.19)

80,942.00
80,942.00 18,770.00

1,125,016.20
1,125,016.20 205,671.01
28,079,472.80 0.00
28,079,472.80 $28,285,143.81

1,191,662.00 1,191,662.00 1,210,432.00
6,783,595.00 0.00
6,783,595.00 $7,994,027.00

Coastal Georgia Community College Annual Financial Report FY 2006 10

Statement of Cash Flows
COASTAL G EORG IA COMMUNITY COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
CAS H FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips Collection of Loans to Students and Employees A uxiliary Enterpris e Charges : Books tore 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 Sale 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, 2006
$2,788,099.78 3,272,431.94 301,697.93 (7,172,591.50) (9,853,075.78) (2,162,631.93)
1,186,867.07 134,567.04 11,727.83 27,726.36
(11,465,181.26)
9,331,821.61 (1,624.65)
2,645,690.17 11,975,887.13
(530,598.00)
(530,598.00)
60,956.63
60,956.63 41,064.50 612,057.23 $653,121.73

Coastal Georgia Community College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
COASTAL G EORG IA COMMUNITY COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($12,950,900.44)
1,447,577.69 (134,275.57)
(68,156.45) 9,752.64
170,177.93 9,419.19
35,042.21 16,181.54 ($11,465,181.26)
($70.36) ($1,125,016.20)

Coastal Georgia Community College Annual Financial Report FY 2006 12

COASTAL GEORGIA COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Coastal Georgia Community College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Coastal Georgia Community College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Coastal Georgia Community College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
The Board of Regents of the University System of Georgia (and thus Coastal Georgia Community College) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, 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 2006 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 predominant 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Coastal Georgia Community College Annual Financial Report FY 2006 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 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, 2006, GSFIC did not transfer any capital additions to Coastal Georgia Community College.
Deposits The College does not collect deposits.
Coastal Georgia Community College Annual Financial Report FY 2006 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 $524,099.57 as of 7-1-2005. For FY2006, $445,014.58 was earned in compensated absences and employees were paid $428,833.04, for a net increase of $16,181.54. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $540,281.11.
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 2006 16

Expendable Restricted Net Assets include the following:

June 30, 2006

Res tricted - E&G and Other Organized A ctivities Ins titutional Loans Total Res tricted Expendable

$37,466.81 6,630.98
$44,097.79

Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

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, 2006
$112,037.42 299,425.95
21,000.00 86,793.19 $519,256.56

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 2006 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 2006 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, 2006, the carrying value of deposits was $649,721.73 and the bank balance was $800,806.82. Of the College's deposits, $700,806.82 were uninsured. Of these uninsured deposits, $700,806.82 were collateralized with securities held by the financial institution's trust department or agent in the College's name.
Coastal Georgia Community College Annual Financial Report FY 2006 19

B. Investments

At June 30, 2006, the carrying value of the College's investments was $ 88,603.89, 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 P ools Board of Regents Total Return Fund
Total Investment P ools

$ 8 8 ,6 0 3 .8 9 $ 8 8 ,6 0 3 .8 9

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 has no formal policy for managing interest rate risk since all investments are in the Board of Regents Investment Pool.

The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the College's total investment of $88,603.89 in the Total Return Fund, $28,779 is invested in debt securities.

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 has no formal policy for managing credit quality risk since all investments are in the Board of Regents Investment Pool. As previously stated, the Board of Regents Investment Pool is not rated.

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 has no formal policy for managing custodial credit risk since all investments are in the Board of Regents Investment Pool.

At June 30, 2006, $88,603.89 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.

Coastal Georgia Community College Annual Financial Report FY 2006 20

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$114,862.25 62,453.96
221,932.93 94,525.19
413,278.92 907,053.25
32,671.64
$874,381.61

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$241,837.09 24,599.47
$266,436.56

Note 5. Notes/Loans Receivable Institutional loans comprise all of the loans receivable at June 30, 2006.

Coastal Georgia Community College Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$1,578,016.36 0.00
231,132.00 1,809,148.36

Additions
$0.00
479,147.70 479,147.70

Reductions
$0.00
231,132.00 231,132.00

Ending B al anc e 6/30/2006
$1,578,016.36 0.00
479,147.70 2,057,164.06

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

532,074.50 205,877.00 564,737.74
104,909.26
1,407,598.50

73,669.02 16,741.00 90,410.02

998,920.00 30,671,319.94
1,256,195.00 5,195,113.61
0.00 2,073,173.28
0.00 40,194,721.83

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

30,628.11 891,940.53
24,230.76 424,573.29
76,205.00
1,447,577.69
(39,979.19)
$439,168.51

66,826.22 16,741.00 83,567.22 6,842.80 $237,974.80

672,172.88 8,568,974.94
530,348.76 3,337,913.03
0.00 1,489,566.00
0.00 14,598,975.61
25,595,746.22
$27,652,910.28

Coastal Georgia Community College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $50,845.87 37,753.53 $88,599.40

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences Total
Total Long TermObligations

524,099.57 524,099.57
$524,099.57

445,014.58 445,014.58
$445,014.58

428,833.04 428,833.04
$428,833.04

540,281.11 540,281.11
$540,281.11

406,645.42 406,645.42
$406,645.42

Note 9. Significant Commitments

The College had no significant commitments as of June 30, 2006.

Note 10. Lease Obligations

CAPITAL LEASES

The College had no capital leases.

OPERATING LEASES

The College had no operating leases.

Coastal Georgia Community College had no expense for rental of real property and equipment under operating leases.

Coastal Georgia Community College Annual Financial Report FY 2006 23

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 2006, 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

2006 2005 2004

100% 100% 100%

$520,381.78 $492,919.58 $453,937.33

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 2006 24

Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $299,085.71 (9.65%) and $154,966.73 (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 2006 amounted to $45,930.69 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.
Coastal Georgia Community College Annual Financial Report FY 2006 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. 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 2006 26

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, 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, 2006, there were 75 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Coastal Georgia Community College recognized as incurred $239,213.16 of expenditures, which was net of $85,915.68 of participant contributions.
Coastal Georgia Community College Annual Financial Report FY 2006 27

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$4,156,699.57 1,903,615.36 1,420,143.47

$0.00

($114,904.00) 179,588.63 2,342.54

$0.00 595,690.28 148,091.85

$0.00 819,047.84 228,253.33

$0.00 1,454,373.52
694,216.09

94,256.87 18,474.00 78,852.50 844,745.06 93,260.33

145.99
60,241.27 32,441.74
1,738.01

15,835.42 0.00
6,237.71 182,149.04 80,179.60

24,092.57 11,029.00 13,059.19 347,533.50 2,001.20

34,846.48 120,116.66 16,964.71 492,403.21 24,823.95

$8,610,047.16

$0.00

$161,594.18

$1,028,183.90

$1,445,016.63

$2,837,744.62

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary Enterpris es

Unallocated Exp en s es

Total Exp en s es

$0.00 704,640.19 207,784.70 (18,248.51)
1,611.46 0.00
550,581.13 672,597.80 635,144.18

$0.00 1,940,532.27

$0.00 190,045.04
51,601.91 18,248.51 4,648.77 72,480.00 4,003.47 1,104,549.97 10,496.79

$0.00 599,933.63

$4,041,795.57 5,847,000.86 2,752,433.89
0.00 175,437.56 2,162,631.93 729,939.98 3,676,420.32 1,447,577.69

$2,754,110.95

$1,940,532.27

$1,456,074.46

$599,933.63

$20,833,237.80

Coastal Georgia Community College Annual Financial Report FY 2006 28

Note 16. Component Units

Coastal Georgia Community College Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Coastal Georgia Community College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The seven-member board of the Foundation is selfperpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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. Due to the different fiscal years of the College and foundation, the due to's and due from's do not agree on the financial statements.

During the year ended December 31, 2005, the Foundation distributed $577,563 to the College 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, Inc. holds endowment and other investments in the amount of $7.7 million. The $4.3 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Coastal Georgia Community College Foundation, Inc. investments are comprised of the following amounts at December 31, 2005:

Cost

Fair Value

Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds
Total Investments

$1,489,707.02 297,253.78
2,756,682.25 2,742.00
3,086,667.84
$7,633,052.89

$1,467,062.00 296,594.00
2,713,908.00 2,690.00
3,182,135.00
$7,662,389.00

Coastal Georgia Community College Annual Financial Report FY 2006 29

COLUMBUS STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Columbus State University Columbus, Georgia

Dr. Frank D. Brown President

Charles D. Pattillo Vice President for Business & Finance

COLUMBUS STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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............................................................................................ 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 ................................................................................................. 29 Note 12 Risk Management................................................................................................ 32 Note 13 Contingencies...................................................................................................... 33 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 33 Note 15 Natural Classifications With Functional Classifications..................................... 34 Note 16 Component Units ........................................................................ 35

COLUMBUS STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Columbus State University is one of the 35 institutions of higher education 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 nearly 7,500 students each year. The institution continues to grow as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
171 184 192

Students (Headcount)
7,475 7,224 6,937

Students (FTE)
6,240 6,025 5,737

Overview of the Financial Statements and Financial Analysis

Columbus State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006
$16,494,951.24 52,152,069.78 3,254,959.07 71,901,980.09
5,876,356.73 882,069.90
6,758,426.63
52,152,069.78 1,603,861.94 2,669,831.27
8,717,790.47 $65,143,553.46

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

The total assets of the institution increased by $1,694,927.31. 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 $773,694.72. The combination of the increase in total assets of $1,694,927.31 and the increase in total liabilities of $773,694.72 yields an increase in total net assets of $921,232.59.

Columbus State University Annual Financial Report FY 2006 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, 2006

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

$32,446,055.42 69,444,986.29 (36,998,930.87) 37,863,383.46
864,452.59 56,780.00
921,232.59 64,222,320.87
0.00 64,222,320.87 $65,143,553.46

$29,974,730.48 62,803,487.13 (32,828,756.65) 34,016,578.80
1,187,822.15 17,001,656.38 18,189,478.53 46,032,842.34
0.00 46,032,842.34 $64,222,320.87

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

Columbus State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$16,051,575.89
8,389,200.75 1,768,546.68 6,015,189.71
221,542.39
32,446,055.42
31,593,294.58 4,078,796.32 1,395,329.27
867,701.54 (71,738.25) 37,863,383.46
56,780.00
56,780.00
$70,366,218.88

June 30, 2005
$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

Columbus State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$27,447,172.96
6,275,075.53 4,378,107.64 9,428,315.77 9,965,246.61 4,656,213.81 5,227,799.16 2,067,054.81
69,444,986.29
0.00 $69,444,986.29

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

Revenues associated with tuition and fees, net of sponsored and unsponsored scholarships increased approximately $1,570,681.03 during the year. This increase reflects a moderate increase in fees per semester and well as an increase in enrollment.
The increase of $294,491.20 in Sales and Services is attributed in part to the success of the new Cunningham Center for Leadership and Development. Revenues also increased as a result of a prosperous year at the Coca Cola Space Science Center.
The compensation and employee benefits category increased by approximately $4,490,350.69 partly due to increased cost of health insurance for the employees of the institution as well as an increase of 26 new faculty members. The new faculty members were needed as a result of the continuing escalation in student enrollment
Utilities increased by approximately $426,262.05 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 $2,945,779.81 based on formula funding and other such factors such as additional square footage.

Columbus State University Annual Financial Report FY 2006 5

Statement of Cash Flows
The final statement presented by 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, 2006 and 2005, 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, 2006
($33,618,890.10) 37,175,658.35 (1,678,264.21) 879,041.67 2,757,545.71 11,374,365.46
$14,131,911.17

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

Capital Assets
The University had one significant capital asset addition of infrastructure. The institution added fiber optic cable in the amount of $417,917 to link the main campus with the new RiverPark campus located in downtown Columbus.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Columbus State University had Long-Term Debt and Liabilities of $1,815,943.60 of which $933,873.70 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Columbus State University Annual Financial Report FY 2006 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 FY2006. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University has significant economic concerns regarding the lack of funding for continued support of the RiverPark campus which will be fully operational Fall 2007. The RiverPark campus, consisting of the Schwob School of Music, as well as the Art and Theatre instructional facilities, is located in downtown Columbus. The Columbus State University Foundation has made the financial commitment to support the downtown campus for one year. Dr. Frank D. Brown, President Columbus State University
Columbus State University Annual Financial Report FY 2006 7

Statement of Net Assets

COLUMBUS STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

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 - Other Due From Component Units Pledges Receivable Inventories (note 4) Prepaid items 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 Pledges Receivable Capital A s s ets , net (note 6) Other As s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Depos its Liabilities under Split-Interes t A greements 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

Columbus S tate Univers ity
$13,730,543.86
557,663.52 1,624,193.49
272,944.44
309,605.93 16,494,951.24
401,367.31 1,966,726.72
886,865.04 52,152,069.78 55,407,028.85 71,901,980.09
502,772.29 191,514.13 212,685.00 3,385,446.85
2,059.41 648,005.35 933,873.70
5,876,356.73 882,069.90
882,069.90 6,758,426.63
52,152,069.78 1,603,861.94 2,669,831.27 8,717,790.47
$65,143,553.46

Component Units Columbus S tate Univeris ty Foundation,
Inc.
$5,700,585.00
72,430.00 2,390,285.00 12,091,516.00
731.72 13,287.50 150,930.78 20,419,766.00
28,114,178.00 23,208,664.00
51,322,842.00 71,742,608.00
217,806.00
14,132.00
20,996,341.00
13,825.00 21,242,104.00
1,208,920.00 1,208,920.00 22,451,024.00
25,365,577.00 11,941,073.00
9,128,130.00 2,856,804.00 $49,291,584.00

Columbus State University Annual Financial Report FY 2006 8

Statement of Net Assets, Continued
COLUMBUS STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

Component Units

Foundation Properties , Inc.

Columbus S tate Univeris ty Athletic
Fund, Inc.

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 - Other Due From Component Units Pledges Receivable Inventories (note 4) Prepaid items Other As s ets Total Current A s s ets

$2,647,126.00 187,188.00 365,462.00
3,199,776.00

$458,051.00
41,752.00 6,965.00
26,763.00 3,745.00 2,083.00
539,359.00

Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Pledges Receivable Capital A s s ets , net (note 6) Other As s ets Total Noncurrent A s s ets
TOTAL AS S ETS

6,149,745.00
69,817,981.00 592,270.00
76,559,996.00 79,759,772.00

1,386,343.00
60,808.00 354.00
1,447,505.00 1,986,864.00

LIABILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Depos its Liabilities under Split-Interes t A greements Total Noncurrent Liabilities TOTAL LIABILITIES

2,400,035.00
9,331,689.00 870,450.00
2,390,285.00 4,584,895.00 19,577,354.00
41,472,250.00 52,424.00
41,524,674.00 61,102,028.00

59,242.00 33,564.00 18,756.00
111,562.00
0.00 111,562.00

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

22,890,386.00
(4,232,642.00) $18,657,744.00

354.00
1,269,915.00 645,791.00
(40,758.00) $1,875,302.00

Columbus S tate Univers ity Alumni
As s oc., Inc.
$106,453.00 7,830.00
117.00 6,860.00 1,260.00
229.00 122,749.00
116,590.00
3,804.00 120,394.00 243,143.00
7,424.00
4,940.00
13,795.00
26,159.00
0.00 26,159.00
3,804.00 82,416.00 97,093.00 33,671.00 $216,984.00

Columbus State University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets

Columbus State Uni versi ty STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2006

REVENUES

Columbus State Univers ity

Component Units
Columbus State Univeris ty Foundation,
Inc.

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Books tore Food Services Parkin g / Tra n s p o rt a tio n Health Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits 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 other Component Units Payments to or on behalf of Columbus State Univ.
Total Operating Expenses Operating Income (los s)

$19,124,768.23 3,073,192.34
7,692,038.18 619,064.50 78,098.07
1,768,546.68 44,511.00
2,781,508.49 262,047.35 208,991.07 427,109.72 425,237.35
1,827,766.36 82,529.37 177,031.39
32,446,055.42
16,107,406.50 17,717,874.27 9,002,903.65
15,105.00 423,686.78 5,543,766.31 2,770,623.13 15,960,982.51 1,902,638.14
69,444,986.29 (36,998,930.87)

$0.00 7,870,563.00
417,525.00
238,620.00 8,526,708.00
706,407.00 78,190.00
1,229,100.00 (3,642,002.00) 32,715,023.00 31,086,718.00 (22,560,010.00)

Columbus State University Annual Financial Report FY 2006 10

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

Columbus State Uni versi ty STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2006

Columbus State Univers ity

Component Units
Columbus State Univeris ty Foundation,
Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e 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

31,593,294.58
144,467.14 3,934,329.18 1,395,329.27
867,701.54
(71,738.25) 37,863,383.46
864,452.59
56,780.00
56,780.00 921,232.59
64,222,320.87 0.00
64,222,320.87 $65,143,553.46

1,817,337.00
1,817,337.00 (20,742,673.00)
12,646,602.00 12,646,602.00 (8,096,071.00) 57,387,655.00
0.00 57,387,655.00 $49,291,584.00

Columbus State University Annual Financial Report FY 2006 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, 2006

REVENUES

Foundation Properties, Inc.

Component Units
Columbus State Univeristy Athletic
Fund, Inc.

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) 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
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to other Component Units Payments to or on behalf of Columbus State Univ.
Total Operating Expens es Operating Income (loss)

$0.00 523,703.00
2,004,763.00 2,139,546.00
4,668,012.00
297,010.00 51,767.00
330,315.00 1,159,472.00 1,483,872.00 3,645,814.00 2,876,963.00 9,845,213.00 (5,177,201.00)

$0.00 183,050.00 387,166.00
225,139.00 795,355.00
992.00 721.00
165,851.00 354.00
(15,065.00) 354,139.00 506,992.00 288,363.00

Columbus State University Alumni
Assoc., Inc.
$0.00 63,557.00 7,068.00
33,695.00 104,320.00
60,404.00 15,005.00
44,719.00 660.00
11,253.00 9,500.00 141,541.00 (37,221.00)

Columbus State University Annual Financial Report FY 2006 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, 2006

Foundation Properties, Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e 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

679,052.00
(1,344,851.00)
(665,799.00) (5,843,000.00)
0.00 (5,843,000.00) 24,500,744.00
0.00 24,500,744.00 $18,657,744.00

Component Units Columbus State Univeristy Athletic
Fund, Inc.
1,782.00
1,782.00 290,145.00
32,944.00 32,944.00 323,089.00 1,552,213.00
0.00 1,552,213.00 $1,875,302.00

Columbus State University Alumni
Assoc., Inc.
977.00
977.00 (36,244.00)
0.00 (36,244.00) 253,228.00
0.00 253,228.00 $216,984.00

Columbus State University Annual Financial Report FY 2006 13

Statement of Cash Flows
Columbus State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Sale 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 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, 2006
$16,836,965.72
8,440,500.17 1,745,676.68 (27,912,631.11) (33,706,359.48) (5,543,766.31) (1,469,975.00) 1,415,077.88
2,781,642.40 262,047.35 208,991.07 428,063.73 428,795.60
1,828,052.36 104,840.49 533,188.35
(33,618,890.10)
31,593,294.58 108,238.18
5,474,125.59 37,175,658.35
(1,678,264.21)
(1,678,264.21)
68,098.53 810,943.14 879,041.67 2,757,545.71 11,374,365.46 $14,131,911.17

Columbus State University Annual Financial Report FY 2006 14

Statement of Cash Flows, Continued
Columbus State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Other Assets Prepaid Items Notes Receivable, Net 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

June 30, 2006
($36,998,930.87)
1,902,638.14 938,592.09 (69,071.48) (54,897.12) 385,312.13 218,636.97 (33,402.46) 92,232.50
($33,618,890.10)
$56,758.40 ($56,780.00)

Columbus State University Annual Financial Report FY 2006 15

COLUMBUS STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Columbus State University is reporting the activity for the Columbus State University Foundation, Inc., Foundation Properties, Inc., the Columbus State University Athletic Fund, Inc. and the Columbus State University Alumni 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
Columbus State University Annual Financial Report FY 2006 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 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
Columbus State University Annual Financial Report FY 2006 17

Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 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 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, 2006, GSFIC did not transfer any capital additions to Columbus State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Columbus State University Annual Financial Report FY 2006 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 $1,723,711.10 as of 7-1-2005. For FY2006, $3,084,248.73 was earned in compensated absences and employees were paid $2,992,016.23, for a net increase of $92,232.50. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,815,943.60.
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 2006 19

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Quas i-Endowments Total Res tricted Expendable

June 30, 2006
$985,477.37 595,983.47 922,903.23 165,467.20 $2,669,831.27

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, 2006
$67,334.80 6,583,328.43
214,959.68 1,852,167.56 $8,717,790.47

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 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 2006 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 2006 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, 2006, the carrying value of deposits was $13,219,792.18 and the bank balance was $15,318,771.09. Of the university's deposits, $15,218,771.09 were uninsured. Of these uninsured deposits, $15,218,771.09 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name.
Columbus State University Annual Financial Report FY 2006 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 of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

INVESTMENTS
Interest Rate Risk
Investment type Debt Securities
U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed
Corporate Debt Municipal Obligation
Other Investments Equity Securities - Domestic
Investment Pools Board of Regents Short-Term Fund Balanced Income Fund
Total Investments

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$386.55 11,382.80 5,000.00 $16,769.35
339,078.74
903,598.99 1,610,878.63 $2,870,325.71

$386.55
11,382.80 5,000.00 $16,769.35

$0.00 $0.00

$0.00 $0.00

$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 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 2006 23

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.
The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the University's total investment of $903,598.99 in the Short Term Fund, $888,272 is invested in debt securities.
The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the University's total investment of $1,610,878.63 in the Balanced Income Fund, $1,060,931 is invested in debt securities.
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, 2006, $2,719,997 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.
Credi t Quali ty Risk

Related Debt Investments U. S. Agencies Corporate Debt Municipal Obligation

Fair Value

AAA

AA

$386.55 11,382.80 5,000.00
$16,769.35

$386.55 5,000.00 $5,386.55

$0.00 $0.00

A $0.00 $0.00

Un ra t e d
$0.00 11,382.80
$11,382.80

Columbus State University Annual Financial Report FY 2006 24

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$353,401.05 17,853.83
557,663.52 272,944.44 1,254,726.70 2,456,589.54
1,788.09
$2,454,801.45

Note 4. Inventories Columbus State University had no inventories on June 30, 2006.

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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. As of June 30, 2006, Notes Receivable contained $0.00 in allowance for uncollectible accounts.

Columbus State University Annual Financial Report FY 2006 25

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$1,821,881.30 0.00 0.00
1,821,881.30

Additions $0.00

Reductions $0.00

0.00

0.00

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

417,917.00
1,197,446.23 208,963.72
1,824,326.95

413,145.98 413,145.98

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

74,711.08 1,492,805.27
92,617.52 679,040.27
(436,536.00)
1,902,638.14
(78,311.19)
($78,311.19)

253,452.59
253,452.59 159,693.39 $159,693.39

Ending B al anc e 6/30/2006
$1,821,881.30 0.00 0.00
1,821,881.30
2,309,513.00 66,391,680.07
2,584,312.00 8,700,323.50
0.00 7,178,740.80
22,000.00 87,186,569.37
1,192,085.95 21,155,290.48
1,789,888.89 6,015,975.57
0.00 6,703,140.00
0.00 36,856,380.89
50,330,188.48
$52,152,069.78

Columbus State University Annual Financial Report FY 2006 26

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $3,207,205.83
178,241.02 $3,385,446.85

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

1,723,711.10 1,723,711.10
$1,723,711.10

3,084,248.73 3,084,248.73
$3,084,248.73

2,992,016.23 2,992,016.23
$2,992,016.23

1,815,943.60 1,815,943.60
$1,815,943.60

933,873.70 933,873.70
$933,873.70

Note 9. Significant Commitments Columbus State University had no significant commitments on June 30, 2006 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, 2006.

Columbus State University Annual Financial Report FY 2006 27

OPERATING LEASES
Columbus State University's noncancellable operating leases having remaining terms of more than one year expire in fiscal year 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.
Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30: 2007 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1

Real Property and Eq u ip me n t
Operating Leas es
$9,397.00 $9,397.00

Columbus State University's FY2006 expense for rental of real property and equipment under operating leases was $85,000.81.

Columbus State University Annual Financial Report FY 2006 28

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,898,175.28 $1,770,292.31 $1,762,210.92

Employees' Retirement System of Georgia

Plan Description Columbus 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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Columbus State University Annual Financial Report FY 2006 29

Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2006, for employees covered by ERS was $11,250.00. The University's total payroll for all employees was $33,825,280.77.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $1,339.89, of which $1,171.14 was made by the University and $168.75 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, 2006, financial report, which may be obtained through ERS.
Columbus State University Annual Financial Report FY 2006 30

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 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 2006, 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 $838,711.34 (9.65%) and $434,613.19 (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.
Columbus State University Annual Financial Report FY 2006 31

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 2006 amounted to $146,719.08 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. 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
Columbus State University Annual Financial Report FY 2006 32

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.
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, 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, 2006, there were 240 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Columbus State University recognized as incurred $950,805.82 of expenditures, which was net of $416,194.28 of participant contributions.
Columbus State University Annual Financial Report FY 2006 33

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$15,841,594.29 3,744,379.14 4,294,297.94
192,430.45
196,812.65 3,101,389.67
76,268.82

$0.00

$0.00

$260,162.21 3,509,791.84
835,913.28
107,566.43
91,870.84 1,789,375.96 (319,605.03)

$1,300.00 2,513,786.49
608,517.12
40,270.54 500.00
86,539.57 1,122,130.99
5,062.93

$1,550.00 4,831,631.15 2,432,010.46
15,105.00 20,515.43 176,823.76 276,889.01 1,547,601.83 126,189.13

$27,447,172.96

$0.00

$0.00

$6,275,075.53

$4,378,107.64

$9,428,315.77

Plant Op e ra t io n s & Maintenance

Functional Classification FY2006

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 2,275,529.05
627,760.00
6,709.52
2,065,296.17 5,072,105.86
(82,153.99)

$0.00 4,656,213.81

$2,800.00 842,756.60 204,404.85
56,194.41 710,228.74
53,214.89 3,328,378.20
29,821.47

$0.00 2,067,054.81

$16,107,406.50 17,717,874.27 9,002,903.65 15,105.00 423,686.78 5,543,766.31 2,770,623.13 15,960,982.51 1,902,638.14

$9,965,246.61

$4,656,213.81

$5,227,799.16

$2,067,054.81

$69,444,986.29

Columbus State University Annual Financial Report FY 2006 34

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 year ended July 31, 2005. The amount due to Columbus State University, $20,996,341, results primarily from funds that are designated for payments on the construction of the RiverPark Campus. It is the intent of the Foundation that the facility be transferred to the University upon completion. The due from amount on the University's Statement of Net Assets does not agree due to the difference in fiscal year ends.
During the year ended July 31, 2005, the Foundation distributed $32,715,023 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.
Investments for Component Units:
Columbus State University Foundation, Inc. holds endowment investments in the amount of $28,114,178. 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 of 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 2006 35

Investments are comprised of the following amounts at July 31, 2005:

Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Board of Regents Pooled Funds
Total Investments

Cost
$326,254.00 7,103,936.00 3,239,396.00 9,460,146.00 1,252,910.00 5,304,792.00
$26,687,434.00

Fair Value
$326,254.00 7,076,839.00 2,931,282.00 10,589,281.00 1,260,300.00 5,930,222.00
$28,114,178.00

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 of 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 year ended July 31, 2005. The amount due to Columbus State University, $9,331,689, results primarily from funds that have been transferred from the Foundation which are designated for payments on the construction of the RiverPark Campus. It is the intent of Foundation Properties that the facility be transferred to the University upon completion. There is no corresponding due from amount on the University's Statement of Net Assets due to the difference in fiscal year ends.
During the year ended July 31, 2005, Foundation Properties, Inc. distributed $2,876,963 to the University. Complete financial statements for Foundation Properties, Inc. can be obtained from Foundation Properties, Inc. at 4225 University Avenue, Columbus, Georgia 31907.

Columbus State University Annual Financial Report FY 2006 36

Investments in Component Units:

Foundation Properties, Inc. holds investments as of July 31, 2005 in the amount of $6,149,745. Investments consist of marketable securities and bonds as follows:

Government and Agency Securities Corporate Bonds Equity Securities
Total Investments

Cost
$704,922.00 1,735,149.00 3,191,975.00
$5,632,046.00

Fair Value
$696,396.00 1,761,318.00 3,692,031.00
$6,149,745.00

Capital Assets for Component Units:

Foundation Properties, Inc. held the following Capital Assets as of July 31, 2005:

July 31, 2005

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Infrastructure Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$10,915,291.00 13,154,551.00 24,069,842.00
48,916,453.00
1,616,375.00 50,532,828.00
4,784,689.00 45,748,139.00 $69,817,981.00

Long-term Liabilities for Component Units:
Student Housing Bonds are issued by the 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 2006 37

Changes in long-term liabilities for component units for the fiscal year ended July 31, 2005 are shown below:

Beginning Balance August 1, 2004

Additions

Reductions

Ending Balance July 31, 2005

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$27,380,000.00 $27,380,000.00

$15,614,724.00 $15,614,724.00

$652,024.00 $652,024.00

$42,342,700.00 $42,342,700.00

$870,450.00 $870,450.00

Annual debt service requirements to maturity for Student Housing and Educational Programming revenue bonds payable are as follows:

Year ending July 31:

2006

1

2007

2

2008

3

2009

4

2010

5

2011-2015

6-10

Principal

Bonds Payable Interest

$870,450.00 12,297,250.00
945,000.00 14,830,000.00
3,960,000.00 9,440,000.00

$1,312,001.00 936,043.00 667,228.00 620,968.00 99,823.00 361,678.00

Total
$2,182,451.00 13,233,293.00
1,612,228.00 15,450,968.00
4,059,823.00 9,801,678.00

$42,342,700.00

$3,997,741.00

$46,340,441.00

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 year ended July 31, 2005

Columbus State University Annual Financial Report FY 2006 38

During the year ended July 31, 2005 the Athletic Fund distributed $354,139 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 Athletic Fund, the amount due to Columbus State University, $18,756, 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 of June 30, 2006.

Investments for Component Units:

Columbus State University Athletic Fund, Inc. holds endowment investments in the amount of $1,386,343. 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 of 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 are comprised of the following amounts at July 31, 2005:

Equity Securities Total Investments

Cost $1,000,078.00 $1,000,078.00

Fair Value $1,386,343.00 $1,386,343.00

Capital Assets for Component Units:
Columbus State University Athletic Fund, Inc. held the following Capital Assets at July 31, 2005:

July 31, 2005

Capital Ass ets being Depreciated: Machinery and Equipment
Total Capital Ass ets being Depreciated
Less Total Accumulated Depreciation
Total Capital Ass ets being Depreciated, Net Capital Assets, Net

$2,628.00 2,628.00 2,274.00
354.00 $354.00

Columbus State University Annual Financial Report FY 2006 39

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 year ended July 31, 2005.
During the year ended July 31, 2005, the Association distributed $9,500 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 to Columbus State University, $13,795, 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 of June 30, 2006.
Investments for Component Units:
Columbus State University Alumni Association, Inc. holds endowment investments in the amount of $124,420. 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 of 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 2006 40

Investments are comprised of the following amounts at July 31, 2005:

Certificates of Deposit Equity Mutual Funds
Total Investments

Cost
$78,989.00 70,087.00
$149,076.00

Fair Value
$78,989.00 45,431.00
$124,420.00

Capital Assets for Component Units:
Columbus State University Alumni Association, Inc. held Capital Assets as of July 31, 2005 as follows:

July 31, 2005

Capital As sets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Ass ets being Depreciated
Les s Total A ccumulated Depreciation
Total Capital Ass ets being Depreciated, Net Capital As s ets , Net

$9,900.00 400.00
10,300.00
6,496.00
3,804.00 $3,804.00

Columbus State University Annual Financial Report FY 2006 41

DALTON STATE COLLEGE
Financial Report
For the Year Ended June 30, 2006

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 2006
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 ................................................................................................. 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

DALTON STATE COLLEGE
Management's Discussion and Analysis

Introduction

Dalton State College is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
121 113 109

Students (Headcount)
4,267 4,252 4,201

Students (FTE)
3,122 2,997 2,991

Overview of the Financial Statements and Financial Analysis

Dalton State College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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.

Dalton State College Annual Financial Report FY 2006) 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, 2006 $4,308,838.13 23,394,237.72 27,703,075.85
1,888,485.59 155,157.86
2,043,643.45
23,394,237.72 1,960.89
2,263,233.79 $25,659,432.40

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

The total assets of the institution increased by $3,523,302.16. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,084,708.47 of Invested in Capital Assets, net. The increase was due to construction of the new Continuing Education building in which the College received $4,492,277.93 during the year from GSFIC.
The total liabilities for the year increased by $619,951.78, which can be largely attributed to the timing in which some of the off setting journal entries for health benefits and retirement plans were posted year over year. The combination of the increase in total assets of $3,523,302.16 and the increase in total liabilities of $619,951.78 yields an increase in total net assets of $2,903,350.38. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $4,084,708.47, due to the construction of the new Continuing Education Building.

Dalton State College Annual Financial Report FY 2006) 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, 2006

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

$13,854,719.97 27,839,636.94 (13,984,916.97) 12,389,476.56
(1,595,440.41) 4,498,790.79 2,903,350.38 22,756,082.02
0.00 22,756,082.02 $25,659,432.40

$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
0.00 22,769,831.37 $22,756,082.02

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

Dalton State College Annual Financial Report FY 2006) 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$4,674,190.57
6,970,897.56 388,286.83
1,702,836.92 118,508.09
13,854,719.97
12,048,720.73
192,886.61 159,174.45 (11,305.23) 12,389,476.56
4,492,277.93 6,512.86
4,498,790.79
$30,742,987.32

June 30, 2005
$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

Dalton State College Annual Financial Report FY 2006) 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$13,423,985.02
(43.10) 2,302,083.82 2,012,299.73 3,196,979.02 2,752,671.89 1,882,315.21 1,616,398.99
652,946.36
27,839,636.94
0.00
$27,839,636.94

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
0.00
$25,508,137.22

Under non-operating revenues (expenses) state appropriations increased by approximately $747,680.97. The increase was primarily due to the continued growth of the student body and other academic programs at Dalton State College.
The increase in the category of "Capital Gifts and GrantsState" of $3,868,393.32 can be attributed to the construction of the new Continuing Education building.
The increase in Operating Expenses of $ $2,331,499.72 is primarily due to an increase in Salaries and Benefits of $1,839,720.42 and affects almost all functional categories of expenses. This increase in Salaries and Benefits is directly related to the addition of the new Teachers Education program and the expansion of the Business Administration program. Additionally, expenses for Institutional Support increased by $573,284.50 due to non-capitalized furniture and equipment purchases for the new Continuing Education building.
Statement of Cash Flows
The final statement presented by 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
Dalton State College Annual Financial Report FY 2006) 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, 2006 and 2005, 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, 2006
($12,377,050.58) 12,285,278.90 (785,277.79) 159,174.45 (717,875.02) 3,305,906.70
$2,588,031.68

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

Capital Assets

The College had one significant capital asset addition for facilities in fiscal year 2006. The construction of the new continuing education center continued during the fiscal year and the building is slated to open in August 2006. Costs related to the new facility totaled nearly $5.3 million, which included construction, equipment and furnishings.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt and Liabilities

Dalton State College had Long-Term Debt and Liabilities of $488,119.18 of which $332,961.32 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. Dalton State College Foundation, Inc. had endowment investments of $10.2 million as of March 31, 2006. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Dalton State College Annual Financial Report FY 2006) 6

Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.

James A. Burran, Ph.D., President

Scott Bailey, VP of Fiscal Affairs

Dalton State College Annual Financial Report FY 2006) 7

Statement of Net Assets

DALTON STATE COLLEG E STATEMENT OF NET ASSETS
June 30, 2006

AS SETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial As s is tance Receivables - Other Due From Component Units Pledges Receivable Inventories (note 4) Prepaid items Other Ass ets Total Current As s ets
Noncurrent As s ets Inves tments (including Real Es tate) Pledges Receivable Capital A s s ets , net (note 6) Other Ass ets Total Noncurrent As s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Compens ated A bs ences (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS SETS 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

Dalton S tate College
$2,588,031.68 321,688.86 822,023.08 285,008.11 276,180.20 15,906.20
4,308,838.13
23,394,237.72 23,394,237.72 27,703,075.85
750,204.02 420,415.51 249,846.56
35.00 135,023.18 332,961.32 1,888,485.59 155,157.86 155,157.86 2,043,643.45
23,394,237.72
1,960.89 2,263,233.79 $25,659,432.40

Component Unit Dalton S tate College
Foundation, Inc.
$1,460,205.00
500,908.00 180,329.00 2,141,442.00
10,189,382.00 1,789,288.00 3,701,535.00 38,366.00
15,718,571.00 17,860,013.00
74,571.59 16,555.00
33,245.41 45,462.00 169,834.00
2,424,945.00 2,424,945.00 2,594,779.00
1,231,128.00 8,576,180.00 4,182,011.00 1,275,915.00 $15,265,234.00

Dalton State College Annual Financial Report FY 2006) 8

Statement of Revenues, Expenses and Changes in Net Assets

DALTON STATE COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006

Component Unit

Dalton S tate College

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) Grants and Contracts
Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es
Books tore Food Services Other Operating Revenues Total Operating Revenues EXPENS ES Operating Expens es Salaries : Fa c u lt y Staff Employee Benefits 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 Peachtree State Univers ity Total Operating Expens es Operating Income (los s )

$5,902,733.97 1,228,543.40
4,331,859.44 1,426,467.31 1,212,570.81
388,286.83 3,350.16
1,409,638.31 293,198.61 115,157.93
13,854,719.97
7,481,041.10 5,613,661.79 3,697,916.09
146,259.75 2,097,692.64
831,466.32 6,795,526.30 1,176,072.95
27,839,636.94 (13,984,916.97)

Dalton S tate College Foundation, Inc.
$0.00 2,632,490.00
762,019.00
364,430.00
3,758,939.00
82,210.00 3,361.00 1,024.00 16,209.00 224,705.00 38,567.00 6,379.00 375,243.00 747,698.00 3,011,241.00

Dalton State College Annual Financial Report FY 2006) 9

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

DALTON STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Component Unit

Dalton State College

Dalton State College Foundation, Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 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

12,048,720.73 192,886.61 159,174.45
(11,305.23) 12,389,476.56 (1,595,440.41)
4,492,277.93 6,512.86
4,498,790.79 2,903,350.38
22,756,082.02 0.00
22,756,082.02 $25,659,432.40

(69,306.00)
(69,306.00) 2,941,935.00
1,280,636.00 1,280,636.00 4,222,571.00
11,042,663.00 0.00
11,042,663.00 $15,265,234.00

Dalton State College Annual Financial Report FY 2006) 10

Statement of Cash Flows
DALTON STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
CASHFLOWS FROMOPERATINGACTIVITIES 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 Auxiliary Enterprise Charges: Bookstore Food Services Other Receipts (payments) Net Cash Provided (used) by Operating Activities
CASHFLOWS FROMNON-CAPITALFINANCINGACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities
CASHFLOWS FROMCAPITALAND RELATED FINANCINGACTIVITIES Purchases of Capital Assets Net Cash used by Capital and Related Financing Activities
CASHFLOWS FROMINVESTINGACTIVITIES Interest on 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, 2006
$4,489,865.56
7,144,551.57 388,286.83
(11,358,258.13) (12,628,708.71) (1,847,154.54)
1,302,911.82 293,782.84 (162,327.82)
(12,377,050.58)
12,048,720.73 31,689.63 204,868.54
12,285,278.90
(785,277.79) (785,277.79)
159,174.45 159,174.45 (717,875.02) 3,305,906.70 $2,588,031.68

Dalton State College Annual Financial Report FY 2006) 11

Statement of Cash Flows, Continued
DALTON STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
RECONCILIATION OF OPERATINGLOSS 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 Prepaid Items 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
Gift of capital assets reducing proceeds of capital grants and gifts

June 30, 2006
($13,984,916.97)
1,176,072.95 (24,025.50) 51,251.51 (183,694.72) 559,598.41 (26,388.68) 16,387.69 38,664.73
($12,377,050.58)
($4,492,277.93)

Dalton State College Annual Financial Report FY 2006) 12

DALTON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Dalton State College is reporting the activity for the Dalton State 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
Dalton State College Annual Financial Report FY 2006) 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 predominant 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Dalton State College Annual Financial Report FY 2006) 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 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, 2006, GSFIC did not transfer any capital additions to Dalton State College.
Deposits Dalton State College does not maintain any deposits.
Dalton State College Annual Financial Report FY 2006) 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. Dalton State College had accrued liability for compensated absences in the amount of $449,454.45 as of 7-1-2005. For FY2006, $396,903.32 was earned in compensated absences and employees were paid $358,238.59, for a net increase of $38,664.73. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $488,119.18.
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 2006) 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Total Res tricted Expendable

June 30, 2006
$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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$574,437.42 416,469.95
8,904.90 1,263,421.52 $2,263,233.79

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 2006) 17

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 2006) 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, 2006, $2,084,940.29 of the college's deposits were uninsured. Of these uninsured deposits, $2,084,940.29 were uncollateralized.
Dalton State College Annual Financial Report FY 2006) 19

B. Investments
At June 30, 2006, the carrying value of the college's investments was $1,008,549.84, 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 Pools Office of Treasury and Fiscal Services Georgia Fund 1
Total Investment Pools

$1,008,549.84 $1,008,549.84

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. Participation in the Georgia Fund 1 Investment Pool is voluntary. 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 28 days.
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.
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 interest rate risk.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$232,390.47 192,775.38 321,688.86 285,008.11 526,263.94 1,558,126.76 129,406.71
$1,428,720.05

Dalton State College Annual Financial Report FY 2006) 20

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2006
$258,564.67 11,222.21 4,276.88 2,116.44
$276,180.20

Note 5. Notes/Loans Receivable Dalton State College does not have any notes/loans receivables.

Dalton State College Annual Financial Report FY 2006) 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 7/1/2005
$435,065.30 0.00
449,417.03 884,482.33

Additions
$0.00
4,492,277.93 4,492,277.93

Reductions
$0.00
0.00 0.00

Ending Balance 6/30/2006
$435,065.30 0.00
4,941,694.96 5,376,760.26

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

513,262.79 281,770.89 795,033.68

266,321.10 4,597.00
270,918.10

1,346,095.00 22,437,770.52 1,172,871.00 3,837,358.60
0.00 4,944,010.73
0.00 33,738,105.85

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

19,586.77 475,202.07 25,933.11 429,956.00
225,395.00
1,176,072.95
(381,039.27)
$4,111,238.66

239,790.91 4,597.00
244,387.91 26,530.19 $26,530.19

974,869.66 8,035,759.15
917,744.78 2,072,993.80
0.00 3,719,261.00
0.00 15,720,628.39
18,017,477.46
$23,394,237.72

Dalton State College Annual Financial Report FY 2006) 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $0.00
249,846.56 $249,846.56

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

449,454.45 449,454.45
$449,454.45

396,903.32 396,903.32
$396,903.32

358,238.59 358,238.59
$358,238.59

488,119.18 488,119.18
$488,119.18

332,961.32 332,961.32
$332,961.32

Note 9. Significant Commitments Dalton State College had no significant commitments as of June 30, 2006.

Note 10. Lease Obligations
Dalton State College is obligated under one operating lease for the use of real property (land, buildings, and office facilities).

Dalton State College Annual Financial Report FY 2006) 23

CAPITAL LEASES

Dalton State College had no capital leases for FY2006.

OPERATING LEASES

Dalton State College had only one lease for FY2006. This facility was leased for instructional classes at the following cost: $2,914.50/month, year by year lease, $34,974.00 annual lease.

Future commitments for capital leases and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30: 2007 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1

Real Property Operating Leas es
$35,916.00 $35,916.00

Dalton State College's FY2006 expense for rental of real property under operating leases was $34,974.00.

Dalton State College Annual Financial Report FY 2006) 24

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.

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 2006, 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

2006 2005 2004

100% 100% 100%

$728,883.91 $717,455.73 $688,914.87

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

Dalton State College Annual Financial Report FY 2006) 25

with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $344,288.75 (9.65%) and $178,388.44 (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 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 2006 amounted to $45,229.80 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
Dalton State College Annual Financial Report FY 2006) 26

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.
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
Dalton State College Annual Financial Report FY 2006) 27

pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 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, 2006, there were 86 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Dalton State College recognized as incurred $315,079.71 of expenditures, which was net of $139,915.02 of participant contributions.
Dalton State College Annual Financial Report FY 2006) 28

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$7,481,041.10 1,465,778.52 2,170,588.44

$0.00

$0.00

$0.00 857,893.24 243,929.87

$0.00 866,470.35 272,352.62

$0.00 1,608,025.71
764,913.70

90,710.64 97,600.43 98,640.31 1,935,347.05 84,278.53

(43.10)

8,167.12
16,362.18 892,279.54 283,451.87

26,194.02
20,014.33 816,513.61 10,754.80

17,464.40 117,777.00 26,633.46 624,680.77 37,483.98

$13,423,985.02

$0.00

($43.10)

$2,302,083.82

$2,012,299.73

$3,196,979.02

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary Enterpris es

Unallocated Exp en s es

Total Exp en s es

$0.00 642,393.08 204,120.99
(8,895.93) 3,628.34
665,894.26 1,146,353.83
99,177.32

$0.00 1,882,315.21

$0.00 173,100.89 42,010.47
8,895.93 95.23
3,921.78 1,380,394.60
7,980.09

$0.00 652,946.36

$7,481,041.10 5,613,661.79 3,697,916.09
0.00 146,259.75 2,097,692.64 831,466.32 6,795,526.30 1,176,072.95

$2,752,671.89

$1,882,315.21

$1,616,398.99

$652,946.36

$27,839,636.94

Dalton State College Annual Financial Report FY 2006) 29

Note 16. Component Units

Dalton State College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Dalton State College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The forty 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 April 1 through March 31. Amounts reported due to or due from the College do not agree because of the different fiscal year ends.

During the year ended March 31, 2006, the Foundation distributed $375,243 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:

Investments are comprised of the following amounts at March 31, 2006:

Cost

Fair Value

Cash held by investment organization Certificate of Deposit Corporate Bonds Equity Securities
Total Investments

$346,209.40 362,867.00
2,436,566.00 5,795,926.00
$8,941,568.40

$405,457.00 388,206.00
2,537,723.00 6,857,996.00
$10,189,382.00

Dalton State College Annual Financial Report FY 2006) 30

Capital Assets for Component Units:

Dalton State College Foundation, Inc. held the following Capital Assets as of March 31, 2006:

March 31, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$925,000.00 925,000.00
2,807,198.00 5,527.00
2,812,725.00 36,190.00
2,776,535.00 $3,701,535.00

Long-term Liabilities for Component Units:

On September 30, 2005, the Foundation assumed an outstanding note payable related to the purchase of the Wood Valley Apartment complex. The principal balance of the note at the time of assumption was $2,475,000 and accrued interest at an annual rate of 5.54%. The note matures on March 11, 2015.

Changes in long-term liabilities for component units for the fiscal year ended March 31, 2006 are shown below:

Beginning Balance April 1, 2005

Additions

Reductions

Ending

Amounts due

Balance

within

March 31, 2006 One Year

Notes and Loans Payable Total Long Term Debt

$0.00

$2,475,000.00

$0.00

$2,475,000.00

$4,593.00 $4,593.00

$2,470,407.00 $2,470,407.00

$45,462.00 $45,462.00

Dalton State College Annual Financial Report FY 2006) 31

Debt Service Obligations

Annual debt service requirements to maturity for Dalton State College Foundation notes payable are as follows:

Year Ending March 31: Year

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

Notes Payable

Principal

Interest

Total

$45,462.00 47,716.00 50,833.00 53,763.00 56,862.00 2,215,771.00

$137,634.00 135,380.00 132,263.00 129,333.00 126,234.00 485,869.00

$183,096.00 183,096.00 183,096.00 183,096.00 183,096.00 2,701,640.00

$2,470,407.00

$1,146,713.00

$3,617,120.00

Dalton State College Annual Financial Report FY 2006) 32

DARTON COLLEGE
Financial Report
For the Year Ended June 30, 2006

Dr. Peter J. Sireno President

Darton College Albany, Georgia
Mr. Ronnie A. Henry Vice President For Business and Financial Services

DARTON COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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....................................................................................................... 21 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 ................................................................................................. 25 Note 12 Risk Management................................................................................................ 28 Note 13 Contingencies...................................................................................................... 29 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 15 Natural Classifications With Functional Classifications..................................... 30 Note 16 Component Units ........................................................................ 31

DARTON COLLEGE
Management's Discussion and Analysis

Introduction
Darton College is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Albany, Georgia, was founded in 1963 and has become known for its state-of-the-art technology and allied health programs. The College offers associates degrees in numerous subjects, and this wide range of educational opportunities attracts highly qualified faculty and a student body of more than 4,500 students each year. The institution continues to grow as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
98 92 87

Students (Headcount)
4,578 4,126 3,811

Students (FTE)
3,408 3,088 2,915

Overview of the Financial Statements and Financial Analysis

Darton College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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.

Darton College Annual Financial Report FY 2006 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, 2006 $5,256,421.21 30,313,903.55 35,570,324.76
2,307,597.07 946,605.98
3,254,203.05
29,577,639.10
2,738,482.61 $32,316,121.71

June 30, 2005 $5,005,486.63 30,038,772.31 35,044,258.94
2,110,034.92 348,394.88
2,458,429.80
30,038,772.31
2,547,056.83 $32,585,829.14

The total assets of the institution increased by $526,065.82. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $275,131.24 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 $795,773.25. The combination of the increase in total assets of $526,065.82 and the increase in total liabilities of $795,773.25 yields a decrease in total net assets of ($269,707.43).

Darton College Annual Financial Report FY 2006 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, 2006

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

$16,641,883.58 31,378,145.38 (14,736,261.80) 14,327,892.94
(408,368.86) 138,661.43 (269,707.43) 32,585,829.14
0.00 32,585,829.14 $32,316,121.71

$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
0.00 14,498,849.10 $32,585,829.14

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

Darton College Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$5,253,380.29
8,303,832.12 282,340.40
2,702,011.33 100,319.44
16,641,883.58
13,845,043.51
413,015.23 74,687.00 (1,316.71)
14,331,429.03
138,661.43
138,661.43 $31,111,974.04

June 30, 2005
$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

Darton College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$12,487,738.64
316,662.24 1,971,578.71 2,262,097.53 3,452,750.03 3,352,269.44 4,110,679.49 2,609,908.22
814,461.08
31,378,145.38
3,536.09
$31,381,681.47

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
0.00
$28,421,814.03

Total Operating Revenue increased by $941,746.48 over FY 2005. The primary cause for this increase was the increase in Tuition and Fees revenue which increased by $858,201.62. Total Revenues for the year, however, decreased by ($15,396,820.03). This large decrease in revenue can be attributed to the gift of the Physical Education Complex to the College in FY 2005.
The compensation and employee benefits category increased by $2,127,933.58. The increase reflects an increased cost of health insurance for the employees of the institution and the increase of twelve faculty members. Utilities increased by $32,688.67 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006.
Under non-operating revenues (expenses) state appropriations increased by $1,795,428.89. The increase of state appropriations to Darton College reflects the continued growth for the College and the funding being received under the funding formula established by the Georgia Legislature. We are optimistic that the economy will continue to improve and the number of students attending Darton College will increase as well.

Darton College Annual Financial Report FY 2006 5

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, 2006 and 2005, 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, 2006
($13,744,818.56) 14,435,210.07 (625,547.83) 74,687.00 139,530.68 2,939,985.33
$3,079,516.01

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

Capital Assets
Darton College began construction of the new Academic Services Building in FY2006. The small increase in Construction Work in Process is reflected in Note 6. This new building is scheduled to be completed by July 2007. Approximately $5,000,000 of funding for this project is being provided by the Georgia State Finance and Investment Commission (GSFIC). The remainder will be provided by the College in Fiscal Years 2006 and 2007 with $550,000 having been encumbered in 2006 and $350,000 expected to be expended in 2007.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Darton College had Long-Term Debt and Liabilities of $1,404,184.65 of which $457,578.67 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Darton College Annual Financial Report FY 2006 6

Component Units In compliance with GASB Statement No. 39, Darton College has included the financial statements and notes for all required component units for FY2006. The Darton College Foundation had endowment investments of approximately $833,000 as of June 30, 2006. 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 anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Peter J. Sireno President
Darton College Annual Financial Report FY 2006 7

Statement of Net Assets

DARTON COLLEGE STATEMENT OF NET ASSETS
June 30, 2006

ASS ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net (note 3) Receivables - Federal Financial As s is tance Receivables - Other Pledges Receivable Inventories (note 4) Total Current As s ets
Noncurrent As s ets Noncurrent Cas h Pledges Receivable Capital As s ets , net (note 6) Other Assets Total Noncurrent As s ets
TOTAL AS S ETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (note 7) Depos its Held for Other Organizations Leas e Purchas e Obligations (current portion) Compens ated Abs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Compens ated Abs ences (noncurrent) 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

Darton College
$3,079,516.01
759,275.87 1,092,709.29
324,920.04 5,256,421.21
30,313,903.55 30,313,903.55 35,570,324.76
275,274.54 682,625.63 507,798.41 384,319.82 133,605.22 323,973.45 2,307,597.07 602,659.23 343,946.75 946,605.98 3,254,203.05
29,577,639.10
2,738,482.61 $32,316,121.71

Component Unit Darton College Foundation, Inc.
$307,876.00 510,000.00
91,843.00 909,719.00 832,805.00 292,803.00 428,706.00 1,554,314.00 2,464,033.00
0.00
0.00 0.00 428,706.00 1,094,832.00 287,360.00 617,395.00 35,740.00 $2,464,033.00

Darton College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
DARTON COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Darton College

Darton College Foundation, Inc.

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) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Books tore Food Services Parking/Trans portation Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits 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 Darton College
Total Operating Expenses Operating Income (los s)

$7,535,559.32 2,282,179.03
6,990,645.73 549,812.15 763,374.24 282,340.40 29,855.64
1,959,398.42 106,591.08 2,564.03 591,753.21 41,704.59 70,463.80
16,641,883.58

$0.00 848,748.00 24,790.00
873,538.00

7,569,561.16 6,879,149.33 3,639,629.53
159,104.27 4,543,925.37
969,779.89 6,396,506.16 1,220,489.67
31,378,145.38 (14,736,261.80)

172,030.00 3,444.00
212,110.00 387,584.00 485,954.00

Darton College Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
DARTON COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Darton College

Darton College Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Gifts Investment 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 State Total Other Revenues Increase in Net Assets
NET ASSETS Net Ass ets-beginning of year, as originally reported Prior Year A djus tments Net Ass ets-beginning of year, restated Net Ass ets-End of Year

13,845,043.51 413,015.23 74,687.00 (3,536.09) (1,316.71)
14,327,892.94 (408,368.86)
138,661.43 138,661.43 (269,707.43)
32,585,829.14 0.00
32,585,829.14 $32,316,121.71

12,285.00
12,285.00 498,239.00
0.00 498,239.00
1,965,794.00 0.00
1,965,794.00 $2,464,033.00

Darton College Annual Financial Report FY 2006 10

Statement of Cash Flows
DARTON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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 Proceeds from Sale of Capital Assets 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, 2006
$5,083,828.58
8,402,493.69 281,624.90
(11,113,574.05) (14,321,023.33)
(4,543,925.37)
1,835,566.46 17,279.52 2,564.03
595,244.63 42,740.54 (27,638.16) (13,744,818.56)
13,845,043.51 177,151.33 413,015.23
14,435,210.07
(611,215.96) (10,795.78) (3,536.09) (625,547.83)
74,687.00
74,687.00 139,530.68 2,939,985.33 $3,079,516.01

Darton College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
DARTON COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
RECONCILIATION OF OPERATING LOSS TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities
De p re c ia t io n Change in As sets and Liabilities :
Receivables, net In v e n t o rie s Other Assets Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cas h Provided (used) by Operating Activities
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL A ND RELA TED FINA NCING TRA NSA CTIONS
Fixed assets acquired by incurring capital lease obligations
Gift of capital ass ets reducing proceeds of capital grants and gifts

June 30, 2006
($14,736,261.80) 1,220,489.67 (3,587.66) (107,816.24)
34,290.54 (141,126.90)
505.53 (11,311.70) ($13,744,818.56)
$747,060.23 ($138,661.43)

Darton College Annual Financial Report FY 2006 12

DARTON COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, 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 2006 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 predominant 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 2006 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 valued at cost using the weighted average method. Resale Inventories are also 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 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, 2006, GSFIC did not transfer any capital additions to Darton College.
Darton College Annual Financial Report FY 2006 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. Darton College had accrued liability for compensated absences in the amount of $679,231.90 as of 7-1-2005. For FY2006, $499,092.97 was earned in compensated absences and employees were paid $510,404.67, for a net decrease of $(11,311.70). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $667,920.20.
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 2006 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.

Darton College had no Expendable Restricted Net Assets as of June 30, 2006.

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, 2006
$514,689.50 1,317,639.60
45,308.15 860,845.36 $2,738,482.61

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 2006 17

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 2006 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, 2006, the carrying value of deposits was $3,022,276.76 and the bank balance was $4,152,867.73. Of the College's deposits, $3,567,744.34 were uninsured. Of these uninsured deposits, $3,567,744.34 were collateralized with securities held by the financial institution's trust department or agent in the College's name. There were no uncollateralized deposits.
B. Investments
As of June 30, 2006 the College had no investments.
Darton College Annual Financial Report FY 2006 19

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$244,950.61 233,989.76 759,275.87 930,421.79 2,168,638.03 316,652.87
$1,851,985.16

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$283,485.56 41,434.48
$324,920.04

Note 5. Notes/Loans Receivable
As of June 30, 2006 Darton College had no Federal Perkins Loans outstanding, therefore, the College has no balance in reserve for uncollectible loans.

Darton College Annual Financial Report FY 2006 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A ssets , Not Being Depreciated: La n d Capitalized Collections Construction W ork-in-Progres s
Total Capital As sets Not Being Depreciated
Capital A ssets , Being Depreciated: In fra s t ru c tu re Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated

Beginning Balances 7/1/2005
$989,112.76
296,055.31 1,285,168.07

Additions
$0.00
84,805.54 84,805.54

Reductions $0.00
0.00

34,426,101.00 1,490,909.28 2,737,287.37
216,751.12 3,011,206.00
41,882,254.77

101,180.89 60,215.43
395,324.73 747,060.23 108,350.80
1,412,132.08

13,651.92
5,079.00 18,730.92

Les s: A ccumulated Depreciation In fra s t ru c tu re Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

7,329,979.53 943,859.37
2,134,242.16 191,463.47
2,529,106.00
13,128,650.53

795,585.59 68,218.95
219,066.48 37,738.65 99,880.00
1,220,489.67

12,335.21
5,079.00 17,414.21

Total Capital As sets, Being Depreciated, Net Capital A ssets , net

28,753,604.24 $30,038,772.31

191,642.41 $276,447.95

1,316.71 $1,316.71

Ending Balance 6/30/2006
$989,112.76 0.00
380,860.85 1,369,973.61
0.00 34,527,281.89
1,537,472.79 3,132,612.10
963,811.35 3,114,477.80
0.00 43,275,655.93
0.00 8,125,565.12
999,743.11 2,353,308.64
229,202.12 2,623,907.00
0.00 14,331,725.99
28,943,929.94
$30,313,903.55

Darton College Annual Financial Report FY 2006 21

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Other Deferred Revenue T o t a ls

June 30, 2006 $507,798.41 $507,798.41

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $747,060.23

Reductions

Ending Balance June 30, 2006

$10,795.78

$736,264.45

Current Portion
$133,605.22

679,231.90 679,231.90
$679,231.90

499,092.97 499,092.97
$1,246,153.20

510,404.67 510,404.67
$521,200.45

667,920.20 667,920.20
$1,404,184.65

323,973.45 323,973.45
$457,578.67

Note 9. Significant Commitments
As of June 30, 2006 the College had significant unearned, outstanding, construction contracts executed in the amount of $350,000, which represented the College's remaining portion of the new Academic Services building. This amount is not reflected in the accompanying basic financial statements.

Darton College Annual Financial Report FY 2006 22

Note 10. Lease Obligations
Darton College is obligated under various operating leases for the use of equipment, and also is obligated under a capital lease for the purchase of telephone equipment.
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. 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.
Expenditures for fiscal year 2006 were $14,331.87 of which $3,536.09 represented interest. Total principal paid on capital leases was $10,795.78 for the fiscal year ended June 30, 2006. The interest rate charged on the lease at Darton College is 5.68 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Equipment Total Assets Held Under Capital Lease

$734,609.23 $734,609.23

Darton College has one capital lease executed for the purchase of telephone equipment in the amount of $747,060.23. The lease is financed through SunTrust Bank and carries an interest rate of 5.68 percent. The term of the lease will extend until June 2011, and the outstanding liability on this lease at June 30, 2006 was $736,264.45.
OPERATING LEASES
Darton College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2007 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.

Darton College Annual Financial Report FY 2006 23

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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 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

Real Property and Equipment

Capital Leas es

Operating Leas es

$171,982.44 171,982.44 171,982.44 171,982.44 157,650.57 845,580.33 109,315.88 0.00
$736,264.45

$87,970.64 36,629.12 29,794.18 28,328.04 4,978.67
$187,700.65

Darton College's FY2006 expense for rental of real property and equipment under operating leases was $107,071.37.

Darton College Annual Financial Report FY 2006 24

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 2006, 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

2006 2005 2004

100% 100% 100%

$754,167.19 $692,494.74 $673,712.33

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Darton College Annual Financial Report FY 2006 25

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, 2006, for employees covered by ERS was $33,072.48. The College's total payroll for all employees was $14,448,710.49.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the College amounted 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 2006 amounted to $3,938.88, of which $3,442.80 was made by the College and $496.08 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, 2006, financial report, which may be obtained through ERS.
Darton College Annual Financial Report FY 2006 26

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $234,895.79 (9.65%) and $121,707.74 (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 2006 27

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 2006 amounted to $159,579.05 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. 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 2006 28

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, 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, 2006, there were 97 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Darton College recognized as incurred $369,986.76 of expenditures, which was net of $114,915.28 of participant contributions.
Darton College Annual Financial Report FY 2006 29

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$7,548,061.16 1,719,879.55 2,006,227.01

$0.00

$0.00 145,066.88 37,900.95

$0.00 1,239,848.33
317,380.49

$11,500.00 1,289,741.04 324,674.96

$0.00 1,403,549.74
766,951.65

70,770.31 25,484.18
851.67 1,062,667.56
53,797.20

12,418.31
2,549.88 118,726.22

20,873.23
11,711.39 251,692.24 130,073.03

29,722.68 91,536.40
514,922.45

18,087.06 100,518.28 130,666.51 1,080,904.38 (47,927.59)

$12,487,738.64

$0.00

$316,662.24

$1,971,578.71

$2,262,097.53

$3,452,750.03

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2 0 0 6

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 744,664.57 116,867.47 (18,578.35)
1,168.11
824,000.44 1,418,662.50 265,484.70

$0.00 4,110,679.49

$10,000.00 336,399.22
69,627.00 18,578.35 6,064.57 215,707.02
1,948,930.81 4,601.25

$0.00 814,461.08

$7,569,561.16 6,879,149.33 3,639,629.53
0.00 159,104.27 4,543,925.37 969,779.89 6,396,506.16 1,220,489.67

$3,352,269.44

$4,110,679.49

$2,609,908.22

$814,461.08

$31,378,145.38

Darton College Annual Financial Report FY 2006 30

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 fiftymember 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 College 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, 2006, the Foundation distributed $212,110.00 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Darton College Business Office at 2400 Gillionville Road, Albany, GA 31707.

Investments for Component Units:

Darton College Foundation Investments are comprised of the following amounts at June 30, 2006:

Co s t

Fair Value

Cash held by investment organization Certificate of Deposit, maturities longer than 3 months Fixed Income Funds Equity Securities

$113,639.00 766,961.00 288,229.00 151,087.00

$113,639.00 766,961.00 279,110.00 183,095.00

Total Inves tments

$1,319,916.00

$1,342,805.00

Darton College Annual Financial Report FY 2006 31

Capital Assets for Component Units:
Capital Assets Disclosure
Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated Capital Assets being Depreciated:
Buildings and Improvements Infras tructure Machinery and Equipment Total Capital Assets being Depreciated Les s Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net

June 30, 2006
$308,826.00 308,826.00 123,324.00
123,324.00 3,444.00
119,880.00 $428,706.00

Darton College Annual Financial Report FY 2006 32

EAST GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2006

Dr. John B. Black
President

East Georgia College Swainsboro, Georgia
Adriance M. Galloway
Vice President for Fiscal Affairs

EAST GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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 ................................................................................................. 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

EAST GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

East Georgia College is one of the 35 institutions of higher education 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 1,500 students. The institution's headcount enrollment increased by 14.6 percent in the Fall Semester 2005 and by 11.7 percent in the Spring Semester 2006. The institution's historical data follows:

FY2006 FY2005 FY2004

Faculty
39 26 24

Students (Headcount)
1,511 1,318 1,420

Students (FTE)
1,338 1,142 1,155

Overview of the Financial Statements and Financial Analysis

East Georgia College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006
$1,292,245.99 12,746,719.80
447,786.30 14,486,752.09
807,298.34 264,244.43 1,071,542.77
12,594,503.83 37,100.00 8,892.89
774,712.60 $13,415,209.32

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

The total assets of the institution increased by $916,000.96. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $803,909.02 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 and public service missions of the institution.
The total liabilities for the year increased by $333,349.69. The combination of the increase in total assets of $916,000.96 and the increase in total liabilities of $333,349.69 yields a net increase in total net assets of $582,651.27. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $661,387.51.

East Georgia College Annual Financial Report FY 2006 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, 2006

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

$3,884,762.81 10,066,887.24 (6,182,124.43)
5,565,539.60
(616,584.83) 1,199,236.10
582,651.27 12,832,558.05
0.00 12,832,558.05 $13,415,209.32

$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
0.00 12,185,296.10 $12,832,558.05

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$1,341,518.44
2,350,508.52 51,509.70 39,377.89
101,848.26
3,884,762.81
5,117,150.34 95,347.81 290,479.22 82,611.14 (2,250.65)
5,583,337.86
1,199,236.10
1,199,236.10
$10,667,336.77

June 30, 2005
$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

East Georgia College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$3,022,091.48
618,271.19 890,414.52 705,367.98 1,595,432.28 1,934,783.15 1,285,526.58
15,000.06
10,066,887.24
17,798.26 $10,084,685.50

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

Operating revenues increased by $630,545.13 which included an increase in student tuition and fees of $238,670.64 due to increased student headcount and increased full-time equivalents (FTE). Operating expenses increased overall by $1,312,127.76 which included an increase of $82,943.64 for scholarships.
East Georgia College is a commuter institution without a residential population. Revenues associated with auxiliary services increased by $13,285.89 during the year due primarily to an increase in commission revenues from privatized operations that include the snack bar, the bookstore, and vending operations.
The compensation and employee benefits category increased by $681,530.16. The increase reflects an increase in faculty and staff positions as well as increased cost of health insurance for the employees of the institution.
Utilities decreased by ($10,937.71) during the past year. The decrease was primarily associated with the cooler than average summer temperatures and decreased need for landscaping irrigation because of more rainfall during the late summer and early fall.
Under non-operating revenues (expenses) state appropriations increased by $185,952.97. In addition, there was an increase of $153,376.82 in state capital gifts related to MRR and capital projects.
East Georgia College Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($5,004,297.04) 5,539,438.66 (203,044.15) (224,493.98) 107,603.49 967,683.19
$1,075,286.68

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

Capital Assets
The College did not complete any significant capital asset additions for facilities in fiscal year 2006. The Student Services Building Expansion and Renovation project (minor capital project) is still under construction and there was a corresponding increase of $1,264,728.60 in construction work in progress as of June 30, 2006. This project is being funded with bond funds provided by the Georgia State Finance and Investment Commission (GSFIC).
East Georgia College also completed two major repair and renovation projects (MRR) in FY2006. $145,960.00 was expended for a Water System Improvement project and $101,918.00 was expended for an Electrical System Improvement at the Academic Building. Both projects were funded by the Georgia State Finance and Investment Commission (GSFIC). FY2007 MRR funding is expected to be approximately the same as FY2006.
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 2006 6

Long Term Debt and Liabilities East Georgia College had Long-Term Debt and Liabilities of $420,251.98 of which $156,007.55 was reflected as current liability at June 30, 2006. For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. The East Georgia College Foundation, Inc. had total net assets of $1.1 million as of June 30, 2006. 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 B. Black, President East Georgia College
East Georgia College Annual Financial Report FY 2006 7

Statement of Net Assets

EAST G EORG IA COLLEG E STATEMENT OF NET ASSETS
June 30, 2006

AS S ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Due From Component Units Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items 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 Capital A s s ets , net (note 6) Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Due to Component Units Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) 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

Eas t Georgia Col l e g e
$1,041,286.68
6,513.78 106,020.38
33.19
1,329.24 137,062.72
1,292,245.99
34,000.00 413,573.80
212.50 12,746,719.80
13,194,506.10 14,486,752.09
33,838.66 26,236.97 112,369.50
1,820.00 336,449.79
58,648.87 81,893.81
34,088.40 121,919.15
33.19 807,298.34
118,127.57 146,116.86 264,244.43 1,071,542.77
12,594,503.83
37,100.00 8,892.89
774,712.60 $13,415,209.32

Component Unit Eas t Georgia College
Foundation, Inc.
$117,337.00
2,198.81 31,004.00
33.19
150,573.00
704,885.00 153,600.00 112,981.00 971,466.00 1,122,039.00
318.81
33.19
352.00
0.00 352.00 153,600.00
721,805.00 130,262.00 116,020.00 $1,121,687.00

East Georgia College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
EAST G EORG IA COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Eas t Georgia College

Eas t Georgia College Foundation, Inc.

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) Grants and Contracts Fe d e ra l Sales and Services A uxiliary Enterpris es Books tore Food Services Parking/Trans portation Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 Eas t Georgia College
Total Operating Expens es Operating Income (los s )

$2,365,677.86 1,024,159.42
2,350,508.52 51,509.70
24,360.33 752.10
13,266.42 999.04
101,848.26 3,884,762.81
2,047,294.82 2,100,368.92 1,265,811.39
64,033.20 1,356,812.48
384,126.27 1,967,791.28
880,648.88
10,066,887.24 (6,182,124.43)

$0.00 178,285.00
20,076.00 9,123.00
6,641.00 214,125.00
20,193.00 115,106.00 135,299.00 78,826.00

East Georgia College Annual Financial Report FY 2006 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, 2006
Component Unit

East Georgia College

East Georgia College Foundation,
Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts 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 State 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

5,117,150.34
76,159.22 19,188.59 290,479.22 82,611.14 (17,798.26) (2,250.65) 5,565,539.60 (616,584.83)
1,199,236.10
1,199,236.10 582,651.27
12,832,558.05 0.00
12,832,558.05 $13,415,209.32

7,384.00
7,384.00 86,210.00
0.00 86,210.00 1,035,477.00
0.00 1,035,477.00 $1,121,687.00

East Georgia College Annual Financial Report FY 2006 10

Statement of Cash Flows

EAST G EORG IA COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006

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 : Books tore Food Services Parking/Trans portation 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 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 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, 2006
$1,546,241.28
2,379,051.85 47,616.50
(3,560,636.15) (4,115,359.96) (1,356,812.48)
(212.50)
7,084.95 752.10
13,827.42 999.04
33,150.91 (5,004,297.04)
5,117,150.34 34,872.95
385,827.03 1,588.34
5,539,438.66
(149,395.79) (35,850.10) (17,798.26) (203,044.15)
(310,747.04) 86,253.06
(224,493.98) 107,603.49 967,683.19 $1,075,286.68

East Georgia College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
EAST G EORG IA COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($6,182,124.43)
880,648.88 78,053.94
(206.88) 0.00
(6,849.35) (212.50)
124,345.67 215,622.63 (147,017.33) 33,442.33 ($5,004,297.04)
($178,371.61) ($17,370.31)
($1,199,236.10)

East Georgia College Annual Financial Report FY 2006 12

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, East Georgia College is reporting the activity for the East Georgia College Foundation, Inc.
See Note 16, Component Units, for foundation notes.
East Georgia College Annual Financial Report FY 2006 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 predominant activity takes place.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a
East Georgia College Annual Financial Report FY 2006 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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. East Georgia College does not maintain any 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 College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, GSFIC did not transfer any capital additions to East Georgia College.
East Georgia College Annual Financial Report FY 2006 15

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 facilities after June 30, 2006.
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 $234,593.68 as of 7-1-2005. For FY2006, $168,154.00 was earned in compensated absences and employees were paid $134,711.67, for a net increase of $33,442.33. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $268,036.01.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The 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.
East Georgia College Annual Financial Report FY 2006 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:

Res tricted - E&G and Other Organized A ctivities Ins titutional Loans Total Res tricted Expendable

June 30, 2006
$3,551.89 5,341.00
$8,892.89

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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$42,926.87 838,451.13
350.00 (107,015.40) $774,712.60

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

East Georgia College Annual Financial Report FY 2006 17

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: 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.
East Georgia College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $579,366.26 and the bank balance was $796,150.39. Of the college's deposits, $696,150.39 were uninsured. $696,150.39 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 2006 19

B. Investments

At June 30, 2006, the carrying value of the College's investments was $909,035.22, 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 Pools Board of Regents Short-Term Fund Balanced Income Fund Total Return Fund Diversified Fund Total

$495,461.42 327,680.73 17,451.39 68,441.68
$909,035.22

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.
The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the College's total investment of $495,461.42 in the Short Term Fund, $487,057.00 is invested in debt securities.
The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the College's total investment of $327,680.73 in the Balanced Income Fund, $215,812.00 is invested in debt securities.
The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the College's total investment of $17,451.39 in the Total Return Fund, 5,668.00 is invested in debt securities.
The Weighted Average Maturity of the Diversified Fund is 8.2 years. Of the College's total investment of $68,441.68 in the Diversified Fund, $20,094.00 is invested in debt securities.
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.
East Georgia College Annual Financial Report FY 2006 20

The Board of Regents Investment Pool is not rated.

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, 2006, $909,035.22 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.

Note 3. Accounts Receivable

Accounts Receivable consisted of the following at June 30, 2006.
June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$15,237.73 3,845.58 6,513.78 33.19
91,614.73 117,245.01
4,677.66
$112,567.35

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Other Total

June 30, 2006 $1,329.24 $1,329.24

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, 2006. The use of this small loan fund has decreased as students have increased their participation in federal and state loan programs such as subsidized and unsubsidized Stafford Loans to finance their education. In fiscal year 2006, no new loans were made to students. As of June 30, 2006, the outstanding notes receivable was $212.50. There was no allowance for uncollectible loans as of year end.

East Georgia College Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$221,959.45 0.00
185,511.00 407,470.45

Additions
$0.00
1,264,728.60 1,264,728.60

Reductions
$0.00
0.00 0.00

Ending B al anc e 6/30/2006
$221,959.45 0.00
1,450,239.60 1,672,199.05

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

101,918.00
152,286.50 179,396.89
4,080.41
437,681.80

856,090.50
155,355.13 1,025.28 356.00
1,012,826.91

860,105.00 13,442,105.74
421,017.00 1,449,979.51
195,464.07 1,098,175.80
0.00 17,466,847.12

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

294,816.08 393,592.28
124,301.51 33,177.01 34,762.00
880,648.88
(442,967.08)
$821,761.52

856,090.50
138,527.91 356.00
994,974.41 17,852.50
$17,852.50

605,047.42 3,271,062.14
381,404.57 1,113,542.10
37,463.83 983,806.31
0.00 6,392,326.37
11,074,520.75
$12,746,719.80

East Georgia College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $314,712.56 21,737.23 $336,449.79

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$9,694.46

Additions $178,371.61

Reductions

Ending Balance June 30, 2006

$35,850.10

$152,215.97

Current Portion
$34,088.40

234,593.68 234,593.68
$244,288.14

168,154.00 168,154.00
$346,525.61

134,711.67 134,711.67
$170,561.77

268,036.01 268,036.01
$420,251.98

121,919.15 121,919.15
$156,007.55

Note 9. Significant Commitments
The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $113,298.00 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
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 two capital leases for equipment with an outstanding balance at June 30, 2006 in the amount of $152,215.97.
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.

East Georgia College Annual Financial Report FY 2006 23

OPERATING LEASES
East Georgia College's noncancellable operating lease expired at the end of FY2006 and has been renewed for another three year term that will expire at the end of FY2009. 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. This operating lease is payable on a monthly basis.
In 2004, East Georgia College entered into a real property operating lease with Statesboro Partners, Inc. for office space for faculty and staff at the Statesboro instructional site located near the Georgia Southern University campus. In FY2004, the annual lease payment was $36,000.00, and the annual lease payment has increased by $1,200 each year since the first year. East Georgia College's FY2006 expense for rental of real property under operating leases was $38,400.00.
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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3 4

Capital Leas es

Real Property Operating Leas es

$47,802.78 47,802.71 45,643.02 45,643.02 186,891.53 34,675.56

$39,600.00 40,800.00 42,000.00
$122,400.00

$152,215.97

East Georgia College Annual Financial Report FY 2006 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 2006, 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

2006 2005 2004

100% 100% 100%

$302,017.82 $231,234.41 $231,409.51

Employees' Retirement System of Georgia

Plan Description East Georgia College does not participate 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.

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,

East Georgia College Annual Financial Report FY 2006 25

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 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 2006, 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 $111,097.40 (9.65%) and $57,572.83 (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 2006 amounted to $6,303.84 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
East Georgia College Annual Financial Report FY 2006 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. 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
East Georgia College Annual Financial Report FY 2006 27

grantor cannot be determined at this time although East Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against East Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 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, 2006, there were 29 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, East Georgia College recognized as incurred $138,263.44 of expenditures, which was net of $50,957.06 of participant contributions.
East Georgia College Annual Financial Report FY 2006 28

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$2,022,124.16 138,058.99 559,019.96

$0.00

$6,020.00 124,908.43 40,589.25

$19,150.66 398,659.72 100,443.78

$0.00 362,391.66 108,435.33

$0.00 788,997.96 350,175.65

4,801.61 7,793.42 34,847.02 220,068.82 35,377.50

16,783.55
2,064.85 427,738.50
166.61

19,537.49 2,462.34 9,543.87 231,922.12 108,694.54

7,559.45 5,300.35 8,752.90 209,131.43 3,796.86

14,645.89 55,729.79 17,854.48 402,491.77 (34,463.26)

$3,022,091.48

$0.00

$618,271.19

$890,414.52

$705,367.98

$1,595,432.28

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xilia ry En t erp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 287,352.16 107,117.42
705.21
309,903.15 470,871.30 758,833.91

$0.00 1,285,526.58

$0.00 30.00
1,160.00 5,567.34 8,242.72

$0.00

$2,047,294.82 2,100,368.92 1,265,811.39 0.00 64,033.20 1,356,812.48 384,126.27 1,967,791.28 880,648.88

$1,934,783.15

$1,285,526.58

$15,000.06

$0.00

$10,066,887.24

East Georgia College Annual Financial Report FY 2006 29

Note 16. Component Units

East Georgia College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of East Georgia College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The 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 July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $115,106 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 of Fiscal Affairs, 131 College Circle, Swainsboro, GA 30401.

Investments for Component Units:

East Georgia College Foundation holds investments in the amount of $704,885.00, and those investments are classified as either temporarily restricted or unrestricted. Typically, the net assets of the restricted funds are not expended and earnings on the investment may be expended as restricted by the donors. Some of the restricted net assets are defined as fully expendable by the donor for the purpose specified by the donor.

Investments are comprised of the following amounts at June 30, 2006:

Cash held by investment organization Money Market Accounts Equity Securities Georgia Investment Pools
BOR Diversifed Fund BOR Balanced Income Fund BOR Total Return Fund
Total Investments

Fair Value
$4.00 4,852.00 37,174.00
291,097.00 328,667.00
43,091.00
$704,885.00

East Georgia College Annual Financial Report FY 2006 30

Capital Assets for Component Units:

East Georgia College Foundation, Inc. held the following Capital Assets at June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Total Capital Assets being Depreciated, Net Capital Assets, Net

$153,600.00 0.00
153,600.00
0.00 $153,600.00

East Georgia College Annual Financial Report FY 2006 31

FORT VALLEY STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

FORT VALLEY STATE UNIVERSITY Fort Valley, Georgia

Larry E. Rivers
President

Freddie L. Johnson
Interim VP for Business and Finance

FORT VALLEY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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............................................................................................ 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

FORT VALLEY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Fort Valley State University is one of the 35 institutions of higher education 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 technologyrelated 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 FTE students each year. The institution continues to grow as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
135 126 139

Students (Headcount)
2,174 2,558 2,537

Students (FTE)
2,000 2,345 2,289

Overview of the Financial Statements and Financial Analysis

Fort Valley State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 University Annual Financial Report FY 2006 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, 2006
$2,306,385.06 46,959,833.48
2,354,255.27 51,620,473.81
4,543,219.96 1,741,976.03 6,285,195.99
46,959,833.48 69,316.68
2,307,514.38
(4,001,386.72) $45,335,277.82

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

The total assets of the institution increased by $1,224,928.35. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,135,719.95 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 ($510,331.15). The combination of the increase in total assets of $1,224,928.35 and the decrease in total liabilities of ($510,331.15) yields an increase in total net assets of $1,735,259.50. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $4,135,719.95.

Fort Valley State University Annual Financial Report FY 2006 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, 2006

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 End of Year

$26,865,943.59 49,791,869.79 (22,925,926.20) 20,196,837.14
(2,729,089.06) 4,464,348.56 1,735,259.50 43,600,018.32
0.00 $45,335,277.82

$28,139,200.43 47,442,730.34 (19,303,529.91) 19,631,621.52
328,091.61 20,448,690.41 20,776,782.02 22,823,236.30
0.00 $43,600,018.32

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:

Fort Valley State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$4,348,604.77 4,697,024.74 13,509,480.20
129,798.92 4,027,094.24
153,940.72
26,865,943.59
19,057,949.00
1,474,565.89 63,267.91
(398,945.66) 20,196,837.14
4,464,348.56
4,464,348.56
$51,527,129.29

June 30, 2005
$4,304,428.00 3,009,551.05 15,436,092.47 159,548.46 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
20,448,690.41 $68,311,430.76

Fort Valley State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$12,586,513.33 3,952,374.88 2,628,061.86 6,106,502.91 3,838,722.92 6,393,989.34 5,189,648.18 2,033,044.25 5,320,278.95 1,742,733.17
49,791,869.79
0.00
$49,791,869.79

June 30, 2005
$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
91,918.40
$47,534,648.74

The combined grants and contracts (shown under both operating and nonoperating revenues) decreased by ($1,926,612.27) during the year. This decrease reflects the reclassification of Federal funds, which are being reported as Federal appropriations for fiscal year 2006.
The compensations and employee benefits category increased by $1,207,764.76.
Utilities increased by $476,807.62 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006 and the addition of the Health and Physical Education Building.
Under non-operating revenues (expenses) state appropriations increased by $97,797.00.
Statement of Cash Flows
The final statement presented by the Fort Valley State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash

Fort Valley State University Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($20,215,476.50) 20,435,423.60 (2,841,882.43) 1,418,578.25 (1,203,357.08) 232,818.00
($970,539.08)

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

The University had one significant capital asset addition for facilities in fiscal year 2006. The Warner Robins campus was completed and place into service in fiscal year 2006.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt and Liabilities

Fort Valley State University had Long-Term Debt and Liabilities of $3,033,955.16 of which $1,291,979.13 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Component Units

Fort Valley State University does not have any component units to report under the GASB Statement No. 39 requirements.

Economic Outlook

The University faced one of the most significant challenges it has had to face in recent years. The University experienced a drop in enrollment that translated into a loss of tuition and certain mandatory fee revenue. This resulted in the University making budget reductions in personnel and non-personnel areas. With a new President, we anticipate that the current year will yield much better enrollment results. We approach the new year with optimism and a commitment from the entire campus to improve significant enrollment numbers.

Larry E. Rivers, President Fort Valley State University

Fort Valley State University Annual Financial Report FY 2006 6

Statement of Net Assets
Fort Valley State University STATEMENT OF NET ASSETS
June 30, 2006
ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Prepaid Items Total Current Assets
Noncurrent Assets Investments Notes Receivable, net Capital Assets, net (note 6) Total Noncurrent Assets TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Compensated Absences (current portion) US DOE Settlement (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) US DOE Settlement ( noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrestricted
TOTAL NET ASSETS

June 30, 2006
($970,539.08) 68,953.68
2,193,947.59 800,492.89 213,529.98
2,306,385.06
201,869.58 2,152,385.69 46,959,833.48 49,314,088.75 51,620,473.81
1,466,550.97 166,380.75 163,681.91 844,810.52 2,959.23 606,857.45 791,979.21 499,999.92
4,543,219.96
1,030,090.89 711,885.14
1,741,976.03 6,285,195.99
46,959,833.48
69,316.68 2,307,514.38 (4,001,386.72) $45,335,277.82

Fort Valley State University Annual Financial Report FY 2006 7

Statement of Revenues, Expenses and Changes in Net Assets

Fort Valley State University STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

REVENUES

June 30, 2006

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Federal Appropriations Grants and Contracts Federal State Other Sales and Services Auxiliary Enterprises Residence Halls Bookstore Food Services Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses Operating Income (loss)

$6,550,950.12 2,202,345.35 4,697,024.74
12,849,089.91 311,851.08 348,539.21 129,798.92
1,416,334.22 24,557.00
1,362,223.93 311,286.98 852,773.03 59,919.08 153,940.72
26,865,943.59
7,298,072.91 17,426,592.37
7,492,377.30 514,381.86
3,401,431.11 2,878,225.25 7,997,090.58 2,783,698.41 49,791,869.79 (22,925,926.20)

Fort Valley State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
Fort Valley State University STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
June 30, 2006

NONOPERATING REVENUES (EXPENSES) State Appropriations Gifts Inves tment Income (endowments , auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expenses, gains , or los s Capital Grants and Gifts State Total Other Revenues Increase in Net Ass ets
NET AS SETS Net As s ets -beginning of year, as originally reported Prior Year Adjus tments Net As s ets -beginning of year, restated
Net As s ets -End of Year

19,057,949.00 1,474,565.89
63,267.91 (398,945.66) 20,196,837.14 (2,729,089.06)
4,464,348.56 4,464,348.56 1,735,259.50
43,600,018.32 0.00
43,600,018.32 $45,335,277.82

Fort Valley State University Annual Financial Report FY 2006 9

Statement of Cash Flows

Fort Valley State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006

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 Principal Paid on Installment Debt Net Cash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets Net Cash used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on 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, 2006
$4,316,342.88 4,697,024.74
13,442,598.50 129,798.92
(18,758,975.23) (24,724,665.28)
(3,401,431.11) (242,510.00) 390,213.47
1,424,760.08 24,557.00
1,376,857.78 0.00
313,272.46 853,594.06
61,096.20 (118,010.97) (20,215,476.50)
19,057,949.00 261,241.97
1,574,565.89 (458,333.26) 20,435,423.60
(2,841,882.43) (2,841,882.43)
1,355,310.34 63,267.91
1,418,578.25 (1,203,357.08)
232,818.00 ($970,539.08)

Fort Valley State University Annual Financial Report FY 2006 10

Statement of Cash Flows, Continued
Fort Valley State University STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($22,925,926.20)
2,783,698.41 245,385.75 92.50 (112.56) 4,791.79 2,543.00 291,817.81 (387,900.12) (303,780.41) 73,913.53
($20,215,476.50)
($4,464,348.56)

Fort Valley State University Annual Financial Report FY 2006 11

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 Units - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, 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 as amended by GASB Statements No. 37 and No. 38. The financial statements have been
Fort Valley State University Annual Financial Report FY 2006 12

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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Fort Valley State University Annual Financial Report FY 2006 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. 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 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, 2006, GSFIC transferred capital additions valued at $4,464,348.56 to Fort Valley State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Fort Valley State University Annual Financial Report FY 2006 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. Fort Valley State University had accrued liability for compensated absences in the amount of $1,748,156.57 as of 7-1-2005. For FY2006, $1,194,995.79 was earned in compensated absences and employees were paid $1,121,082.26, for a net increase of $73,913.53. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,822,070.10.
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.
Fort Valley State University Annual Financial Report FY 2006 15

Expendable Restricted Net Assets include the following:

June 30, 2006

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

($271,034.20) 2,386,462.52
192,086.06 $2,307,514.38

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 Other Unrestricted Total Unrestricted Net Assets

June 30, 2006
$767,945.48 78,979.02
(4,848,311.22) ($4,001,386.72)

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.

Fort Valley State University Annual Financial Report FY 2006 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.
Fort Valley State University Annual Financial Report FY 2006 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 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, 2006, the university's deposits were overdrawn by $20,620.56.
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.
Fort Valley State University Annual Financial Report FY 2006 18

The University's investments as of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

INVESTMENTS Interest Rate Risk
Investment type Debt Securities
U.S. Treasuries
Investment Pools Board of Regents Balanced Income Fund Total Investments

Fair Value

Less Than 1 Year

Investment Maturity 1-5 Years 6-10 Years

More Than 10 Years

$9,783.53 $9,783.53

$0.00 $0.00

$0.00 $0.00

$0.00 $0.00

$9,783.53 $9,783.53

192,086.05 $201,869.58

The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the University's total investment of $192,086.06 in the Balanced Income Fund, $126,509.00 is invested in debt securities.
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 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.

Fort Valley State University Annual Financial Report FY 2006 19

At June 30, 2006, $192,086.06 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, 2006.

June 30, 2006

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other
Less Allowance for Doubtful Accounts
Net Accounts Receivable

$391,204.50 63,663.97
2,193,947.59 518,375.73
3,167,191.79 172,751.31
$2,994,440.48

Note 4. Inventories Fort Valley State University had no Inventories as of June 30, 2006.

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the allowance for uncollectible loans was approximately $1,142,670.05.

Fort Valley State University Annual Financial Report FY 2006 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 7/1/2005
$1,262,548.17 0.00 0.00
1,262,548.17

Additions $2,500,000.00
2,500,000.00

Reductions $0.00
0.00

Ending Balance 6/30/2006
$3,762,548.17 0.00 0.00
3,762,548.17

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

2,080,191.16 3,403,127.77
192,593.23 5,675,912.16

1,298,923.89 23,485.07
1,322,408.96

0.00 60,288,089.63 1,506,124.00 11,385,945.05
0.00 6,310,077.23
0.00 79,490,235.91

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

1,636,691.20 406.53
952,642.68
193,958.00
2,783,698.41
2,892,213.75
$5,392,213.75

40.65 65,874.51
65,915.16 1,256,493.80 $1,256,493.80

0.00 22,625,539.25 1,342,636.76 6,948,915.59
0.00 5,375,859.00
0.00 36,292,950.60
43,197,285.31
$46,959,833.48

Fort Valley State University Annual Financial Report FY 2006 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2006.

Other Deferred Revenue Totals

June 30, 2006 844,810.52
$844,810.52

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences US DOE Settlement Total

1,748,156.57 1,670,218.32 3,418,374.89

1,194,995.79 1,194,995.79

1,121,082.26 458,333.26
1,579,415.52

1,822,070.10 1,211,885.06 3,033,955.16

791,979.21 499,999.92 1,291,979.13

Total Long Term Obligations

$3,418,374.89

$1,194,995.79

$1,579,415.52

$3,033,955.16 $1,291,979.13

Note 9. Significant Commitments
The University has not executed any significant unearned, outstanding, construction or renovation contracts as of June 30, 2006 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 University Annual Financial Report FY 2006 22

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,593,422.15 $1,622,022.30 $1,719,570.46

Employees' Retirement System of Georgia

Fort Valley State University did not contribute to the Employees' Retirement System of Georgia in FY 2006.

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 University Annual Financial Report FY 2006 23

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 2006, 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 $464,331.01 (9.65%) and $240,623.81 (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 Fort Valley State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2006 amounted to $30,967.24 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Fort Valley State University Annual Financial Report FY 2006 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. 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.
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
Fort Valley State University Annual Financial Report FY 2006 25

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, 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, 2006, there were 228 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Fort Valley State University recognized as incurred $815,908.59 of expenditures, which was net of $364,577.58 of participant contributions.
Fort Valley State University Annual Financial Report FY 2006 26

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Instruction
$7,298,072.91 1,858,723.69 2,215,946.71
88,991.48 234,414.98 106,198.62 716,795.40 67,369.54
$12,586,513.33

Functional Classification FY2006

Research

Public Service

Academic Support

$0.00 2,663,609.51
718,904.49

$0.00 1,487,446.26
435,899.04

$0.00 3,647,194.37 1,039,496.63

122,869.48 150,756.63 28,110.79 54,576.03 213,547.95

125,897.64
27,419.32 502,446.10 48,953.50

47,826.69 8,177.69 130,353.76 868,095.01 365,358.76

$3,952,374.88

$2,628,061.86

$6,106,502.91

Student Services
$0.00 2,193,678.96
569,510.84
57,404.34 127,597.80 42,038.28 847,879.22
613.48
$3,838,722.92

Institutional Support
$0.00 3,290,496.09 1,802,320.61
53,606.32 358,790.03 72,889.56 802,791.21 13,095.52
$6,393,989.34

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

Plant Operations & Maintenance
$0.00 1,189,286.67
70,351.65
870.53
2,307,879.92 1,450,843.45
170,415.96
$5,189,648.18

Functional Classification FY2006

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00

$0.00 1,096,156.82
639,947.33

$0.00

2,033,044.25

16,915.38 488,649.73 163,335.00 2,753,664.16 161,610.53

1,742,733.17

$2,033,044.25

$5,320,278.95 $1,742,733.17

Total Expenses
$7,298,072.91 17,426,592.37 7,492,377.30
0.00 514,381.86 3,401,431.11 2,878,225.25 7,997,090.58 2,783,698.41
$49,791,869.79

Fort Valley State University Annual Financial Report FY 2006 27

GEORGIA COLLEGE & STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

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 2006
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............................................................................................ 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

GEORGIA COLLEGE & STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia College & State University is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
293 288 288

Students (Headcount)
5,662 5,531 5,695

Students (FTE)
5,202 4,987 5,098

Overview of the Financial Statements and Financial Analysis

Georgia College & State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a

Georgia College & State University Annual Financial Report FY 2006 1

fiscal snapshot of Georgia College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

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, 2006
$10,319,122.52 50,765,433.69 8,076,247.81 69,160,804.02
6,061,933.68 968,391.77
7,030,325.45
50,711,523.03 2,962,311.75 5,883,413.02
2,573,230.77 $62,130,478.57

June 30, 2005
$9,959,897.23 52,988,393.65
8,243,904.01 71,192,194.89
5,250,711.78 873,443.55
6,124,155.33
52,938,952.08 2,871,965.91 5,668,134.09
3,588,987.48 $65,068,039.56

The total assets of the institution decreased by ($2,031,390.87). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($2,222,959.96) 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 $906,170.12. The combination of the decrease in total assets of ($2,031,390.87) and the increase in total liabilities of $906,170.12 yields a decrease in total net assets of ($2,937,560.99). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($2,227,429.05).

Georgia College & State University Annual Financial Report FY 2006 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, 2006

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

$34,128,015.51 77,099,606.41 (42,971,590.90) 39,540,933.21
(3,430,657.69) 493,096.70
(2,937,560.99) 65,068,039.56
0.00 65,068,039.56 $62,130,478.57

$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
0.00 48,570,060.75 $65,068,039.56

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

Georgia College & State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$18,844,654.72
308,521.17 1,136,268.58 13,134,059.76
704,511.28
34,128,015.51
30,074,288.00 5,072,987.81 3,799,264.52
565,583.85 30,708.95
39,542,833.13
461,296.70 31,800.00
493,096.70
$74,163,945.34

June 30, 2005
$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

Georgia College & State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$29,087,939.75 426,141.47 100,047.81
7,082,735.11 4,510,525.60 9,355,754.87 9,579,173.90 1,402,124.04 13,149,941.10 2,405,222.76
77,099,606.41
1,899.92
$77,101,506.33

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

The compensation and employee benefits category increased by approximately $3,533,678.57. The increase reflects an increased cost of health insurance for the employees of the institution. This increase also reflects an increase in the number of employees including benefits. In addition, salary increases were awarded for merit and promotions for continuing employees and the employee benefits increased by the related FICA, FICA Medicare and Retirement associated with these salary increases.
Utilities increased by approximately $980,105.60 during the past year. The increase was primarily associated with the increased natural gas and electricity costs that were experienced in the winter of fiscal year 2006, as well as the addition of square footage.
Under non-operating revenues (expenses) state appropriations increased by $2,172,894.50. 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
Georgia College & State University Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($37,872,488.90) 39,033,403.05 (834,553.47) 565,833.85 892,194.53 5,181,392.30
$6,073,586.83

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

Capital Assets
Georgia College & State University had no capital asset additions for facilities in fiscal year 2006. However, design work began for the major renovation of the Parks Nursing Building and former HPER building which will become a part of the School of Health Sciences. The design work for this facility is presented in Footnote 6 as Construction Work in Progress.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Georgia College & State University had Long-Term Debt and Liabilities of $2,162,639.97 of which $1,194,248.20 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. The Georgia College & State University Foundation, Inc. had endowment investments of $9.6 million and debt of $96.5 million as of June 30, 2006. The Georgia College & State University Alumni Association, Inc. had endowment investments of $5.2 million as of June 30, 2006. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Georgia College & State University Annual Financial Report FY 2006 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 did have a slight increase in funding; however, a reduction in Net Assets was realized primarily due to an excess in depreciation expense over capital additions of $2.2 million. 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 2006 7

Statement of Net Assets

G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

Component Units

Georgia College & S tate Univers ity

Georgia College & S tate Univers ity Foundation, Inc.

Georgia College & S tate Univers ity
Alumni As s oc, Inc.

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 - Other Due From Component Units Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items 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 Capital A s s ets , net (note 6) Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/Mortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Compens ated A bs ences (noncurrent) Revenue/Mortgage Bonds Payable (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 exp e n d a b le Exp e n d a b le Capital Projects Unres tricted
TOTAL NET AS S ETS

$5,810,207.73 130,000.00
240,532.36 2,200,799.53
537,554.39
1,213,300.35 186,728.16
10,319,122.52
263,379.10 4,984,585.93 2,828,282.78 50,765,433.69
58,841,681.50 69,160,804.02
479,066.90 218,935.48 434,810.00 2,961,859.51 402,216.41 327,050.29
21,851.64 1,172,396.56
43,746.89
6,061,933.68
32,059.02 936,332.75
968,391.77 7,030,325.45
50,711,523.03
2,962,311.75 5,883,413.02
2,573,230.77 $62,130,478.57

$828,375.00
616,020.00 43,746.89 1,500.00 55,508.00
1,545,149.89
13,930,224.00 9,637,437.00
82,320,422.00 2,303,154.00
108,191,237.00 109,736,386.89
1,681,354.50
63,373.00 531,754.39
275,000.00 450,000.00 3,001,481.89
95,782,000.00 95,782,000.00 98,783,481.89
2,043,823.00 8,626,413.00 1,892,819.00 (1,610,150.00) $10,952,905.00

$188,168.00
8,111.00 1,748.00 4,500.00 202,527.00 5,207,824.00 91,716.00 5,299,540.00 5,502,067.00
5,800.00
5,800.00
0.00 5,800.00 91,716.00 4,185,898.00 1,086,401.00 132,252.00 $5,496,267.00

Georgia College & State University Annual Financial Report FY 2006 8

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, 2006

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) 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
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Georgia College & State University
Total Operating Expenses Operating Income (loss)

Georgia College & State University

Georgia College & State University Foundation, Inc.

Georgia College & State University Alumni Assoc.

$21,126,607.73 2,281,953.01
107,931.87 5,288.41
195,300.89 1,136,268.58
33,504.70
3,799,301.58 2,881,259.09 3,253,901.47
552,629.88 670,953.30 1,768,855.11 207,159.33 671,006.58 34,128,015.51

$0.00 1,659,138.00
284,941.00
312,929.00 10,002,052.00
26,846.00 12,285,906.00

17,789,167.58 18,205,177.06 9,876,918.60
557,339.27 2,163,847.90 3,908,757.55 21,035,413.26 3,562,985.19
77,099,606.41 (42,971,590.90)

57,435.00
1,021.00 6,214,728.00 2,215,713.00
297,100.00 8,785,997.00 3,499,909.00

$0.00 14,724.00 206,754.00
93,105.00 314,583.00
6,038.00 147,713.00
7,152.00 191,110.00 352,013.00 (37,430.00)

Georgia College & State University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA COLLEGE& STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Component Units

Georgia College &
State University

Georgia College & State
Un i ve rs i ty Foundation, Inc.

Georgia College & State
Un i ve rs i ty Alumni Assoc.

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 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

30,074,288.00
3,341,460.52 72,782.54
1,658,744.75 3,799,264.52
565,583.85 (1,899.92) 30,708.95
39,540,933.21 (3,430,657.69)

245,110.00 (4,697,706.00)
(4,452,596.00) (952,687.00)

461,296.70 31,800.00
493,096.70 (2,937,560.99)
65,068,039.56 0.00
65,068,039.56 $62,130,478.57

1,156,523.00 1,156,523.00
203,836.00
10,749,069.00 0.00
10,749,069.00 $10,952,905.00

98,310.00
98,310.00 60,880.00
46,359.00 46,359.00 107,239.00 5,389,028.00
0.00 5,389,028.00 $5,496,267.00

Georgia College & State University Annual Financial Report FY 2006 10

Statement of Cash Flows
G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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, 2006
$19,385,941.01
(339,202.81) 992,358.82 (34,783,222.58) (35,793,159.66) (2,163,847.90) (371,221.38) 643,959.94
4,683,022.98 3,055,468.97 3,057,988.44
560,137.74 678,218.92 1,836,345.03 178,956.84 505,766.74 (37,872,488.90)
30,074,288.00 18,158.04
8,940,957.01 39,033,403.05
37,098.25 (835,382.52)
(34,369.28) (1,899.92)
(834,553.47)
101,677.36 463,906.49
250.00 565,833.85 892,194.53 5,181,392.30 $6,073,586.83

Georgia College & State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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 accounts receivable related to private gifts 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

June 30, 2006
($42,971,590.90)
3,562,985.19 36,432.26
113,081.24 272,738.56 230,321.76 159,254.81 617,878.34 (62,848.93) 169,258.77 ($37,872,488.90)
$38,838.37 (20,929.70) $101,677.36 ($461,296.70)

Georgia College & State University Annual Financial Report FY 2006 12

GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Georgia College & State University is reporting the activity for the Georgia College & State University Foundation, Inc. and the Georgia College & State University Alumni Association, Inc.
See Note 16, Component Units, for Foundation and Alumni Association notes.
Georgia College & State University Annual Financial Report FY 2006 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 allocated 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 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
Georgia College & State University Annual Financial Report FY 2006 14

Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 Georgia College & State University does not maintain an inventory for consumable supplies. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, GSFIC did not transfer any capital additions to Georgia College & State University.
Georgia College & State University Annual Financial Report FY 2006 15

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. The confirmation deposits are credited to student accounts for tuition and fees at registration.
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 $1,939,470.54 as of 7-1-2005. For FY2006, $3,767,733.89 was earned in compensated absences and employees were paid $3,598,475.12, for a net increase of $169,258.77. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $2,108,729.31.
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.
Georgia College & State University Annual Financial Report FY 2006 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 Total Res tricted Expendable

June 30, 2006
$1,557,882.79 3,511,639.73 813,890.50
$5,883,413.02

Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erve Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$1,895,708.25 2,820,926.75 (2,143,404.23) $2,573,230.77

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 2006 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.
Georgia College & State University Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $6,178,861.83 and the bank balance was $7,293,020.66. Of the university's deposits, $6,894,953.22 were uninsured. Of these uninsured deposits, $4,381,125.39 were collateralized with securities held by the financial institution's trust department or agent in the university's name, $190,943.21 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the university's name and $2,322,884.62 were uncollateralized.
Georgia College & State University Annual Financial Report FY 2006 19

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 of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

INVESTMENTS
Investment type Debt Securities
U.S. Treasuries U.S. Agencies
Explicitly Guaranteed Implicitly Guaranteed Corporate Debt
Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Equity Securities - International
Investment Pools Board of Regents Total Return Fund
Total Investments

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$474,190.53
0.00 271,699.05 133,686.15 $879,575.73
159,894.11 188,777.39 1,888,509.37 119,393.04

$165,469.00 $165,469.00

1,748,436.29 $4,984,585.93

$147,371.86
97,906.50 119,826.90 $365,105.26

$76,089.00
173,792.55 13,859.25 $263,740.80

$85,260.67 $85,260.67

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 2006 20

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.
The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $1,748,436.29 in the Total Return Fund, $567,894 is invested in debt securities.
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 the best realized net price.
4. The investment manager shall be available for frequent and open communication with the Vice President for Business and 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
Georgia College & State University Annual Financial Report FY 2006 21

approval to execute a response regarding requests for approval within three (3) working days.
6. The investment manager will provide reports on the investment portfolio to the institution at least quarterly.
At June 30, 2006, $1,535,316.62 of the university's applicable investments were uninsured and held by the investment's counter party in the university's name and $2,981,204.77 were uninsured and held by the investment's counter party'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 counter party to an investment will not fulfill its obligations. The university's 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.

Credit Quality Risk

Re late d D e bt Inve stm e nts
U. S. A g e n cies Co rp o rate Deb t

Fair Valu e
$271,699.05 133,686.15
$405,385.20

AAA
$212,664.45 0.00
$212,664.45

AA
$59,034.60 59,884.05
$118,918.65

A
$0.00 73,802.10 $73,802.10

As previously stated, the Board of Regents Total Return Fund is not rated.
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.

Georgia College & State University Annual Financial Report FY 2006 22

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 does not have a formal policy for managing exposure to foreign currency risk.
Of the University's total investments, $119,393.04, or 2.4%, is invested in an International equity mutual fund. Foreign currency risk associated with this investment is considered minimal.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$35,226.93 653,163.74 240,532.36 537,554.39 1,577,326.84 3,043,804.26
64,917.98
$2,978,886.28

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$1,193,481.41 19,818.94
$1,213,300.35

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the allowance for uncollectible loans was zero.

Georgia College & State University Annual Financial Report FY 2006 23

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Infras tru cture Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated
Less: Accumulated Depreciation Infras tru cture 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 7/1/2005
$634,079.21 0.00 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 5,729,556.42 (108,589.34) 5,120,577.57
41,038.75 33,720,337.40
52,354,314.44
$52,988,393.65

Additions
$0.00
424,198.45 424,198.45

Reductions
$0.00
0.00 0.00

630,263.07 38,838.37 249,865.50
918,966.94

646,480.01 8,027.87
(26,467.00) 20,000.00 648,040.88

2,443,920.28 39,015.85 782,784.92 12,495.64 279,786.00 4,982.50
3,562,985.19
(2,644,018.25)
($2,219,819.80)

787,522.84 (170,039.56)
23,125.77 4,291.67 644,900.72
3,140.16
$3,140.16

Ending Balance 6/30/2006
$634,079.21 0.00
424,198.45 1,058,277.66
0.00 70,010,891.86
867,019.00 8,464,444.30
142,694.72 6,699,728.02
160,800.00 86,345,577.90
0.00 24,782,159.85
638,530.28 5,724,818.50
73,945.86 5,377,237.80
41,729.58 36,638,421.87
49,707,156.03
$50,765,433.69

Georgia College & State University Annual Financial Report FY 2006 24

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $2,799,614.35
162,245.16 $2,961,859.51

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$49,441.57

Additions $38,838.37

Reductions

Ending Balance June 30, 2006

$34,369.28

$53,910.66

Current Portion
$21,851.64

1,939,470.54 1,939,470.54
$1,988,912.11

3,767,733.89 3,767,733.89
$3,806,572.26

3,598,475.12 3,598,475.12
$3,632,844.40

2,108,729.31 2,108,729.31
$2,162,639.97

1,172,396.56 1,172,396.56
$1,194,248.20

Note 9. Significant Commitments
The university had no significant unearned, outstanding, construction or renovation contracts as of June 30, 2006.

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.

Georgia College & State University Annual Financial Report FY 2006 25

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. Expenditures for fiscal year 2006 were $36,269.20 of which $1,899.92 represented interest. Total principal paid on capital leases was $34,369.28 for the fiscal year ended June 30, 2006. 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, 2006:

Equipment

$68,748.86

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 2007 through 2031. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Georgia College & State University has operating leases for real property which are described below with the annual lease rate for fiscal year 2006:

Facility Leased Pawprints Bookstore

Location

Lessor

Annual Lease

115 S. Wilkinson St McComb Family Tr $ 25,656.00

Milledgeville, GA

Office Space

100 E Greene St Bank of Eastman Milledgeville, GA

$ 34,563.28

Storage/Warehouse

1675 Irwinton Rd Jeanette Chambers $ 2,000.00 Milledgeville, GA

LLC Land Lease

Residence Hall GC&SU

GC&SU Foundation $ LLC

10.00

Parking Lot

Hancock/Irwin St GC&SU Foundation $ 119,000.04 Milledgeville, GA LLC

Georgia College & State University Annual Financial Report FY 2006 26

Facility Leased Student Union

Location Hancock St Milledgeville, GA

Lessor

Annual Lease

GC&SU Foundation $ 522,996.00

LLC

Academic Facility

215 S Wayne St Paula Hallman

$ 7,000.00

Milledgeville, GA (7 mos then sold)

Academic Facility

215 S Wayne St St Stephen's Church $ 5,000.00 Milledgeville, GA (5 mos)

Parking Lot

425 N Clark St

Wilkinson Colonial $ 39,999.96

Milledgeville, Ga Properties

Storage

121 Blandy Rd, NW Warehouse Solutions, $ 8,125.00 Milledgeville, GA LLC

Noncancellable operating lease expenditures in 2006 were $764,350.28 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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 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

Real Property and Equipment

Capital Leas es

Operating Leas es

$23,322.93 9,192.88 4,300.44
20,000.00
56,816.25 2,905.59 0.00
$53,910.66

$736,582.00 27,238.00 28,054.00 28,894.00 29,758.00 50.00 50.00 50.00 50.00
$850,726.00

Georgia College & State University's FY2006 expense for rental of real property and equipment under operating leases was $800,619.48.

Georgia College & State University Annual Financial Report FY 2006 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 2006, 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

2006 2005 2004

100% 100% 100%

$1,862,778.16 $1,752,523.07 $1,682,743.30

Employees' Retirement System of Georgia

Plan Description 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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Georgia College & State University Annual Financial Report FY 2006 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, 2006, for employees covered by ERS was 60,827.15. The University's total payroll for all employees was 35,994,344.64.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $7,258.05, of which $6,345.66 was made by the University and $912.39 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, 2006, financial report, which may be obtained through ERS.
Georgia College & State University Annual Financial Report FY 2006 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 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 2006, 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 $1,143,816.55 (9.65%) and $591,623.94 (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
Georgia College & State University Annual Financial Report FY 2006 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 2006 amounted to $48,030.30 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 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.
Georgia College & State University Annual Financial Report FY 2006 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 Georgia College & State University expects such amounts, if any, to be immaterial to its overall financial position.
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, 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, 2006, 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, 2006, Georgia College & State University recognized as incurred $837,777.12 of expenditures, which was net of $316,104.06 of participant contributions.
Georgia College & State University Annual Financial Report FY 2006 32

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$16,978,288.38 3,397,433.13 4,830,341.62

$52,199.96 177,930.87 34,943.31

$0.00 67,002.83 18,402.06

$670,733.08 1,901,774.06 627,804.38

$3,897.00 2,378,149.59
546,947.09

$0.00 4,947,559.02 2,284,885.10

246,457.56 11,160.00
146,523.02 3,316,990.05
160,745.99

25,884.93 4,000.00
723.64 126,882.06
3,576.70

54.52
2,445.04 10,362.89 1,780.47

116,214.61
43,178.69 2,993,084.46
729,945.83

61,213.90
46,329.57 1,466,799.25
7,189.20

68,048.08 187,609.56 122,034.50 1,543,887.71 201,730.90

$29,087,939.75

$426,141.47

$100,047.81

$7,082,735.11

$4,510,525.60

$9,355,754.87

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2006

Scholars hips & Fellowships

A u xiliary Enterpris es

Un a llo c a t e d Exp en s e s

Total Expens es

$0.00 3,394,091.35 1,065,405.53 (1,060,908.82)
1,931.04
2,313,526.98 3,773,010.03
92,117.79

$0.00 1,402,124.04

$84,049.16 1,941,236.21
468,189.51 1,060,908.82
37,534.63 558,954.30 1,233,996.11 7,611,513.22 153,559.14

$0.00
192,883.59 2,212,339.17

$17,789,167.58 18,205,177.06 9,876,918.60 0.00 557,339.27 2,163,847.90 3,908,757.55 21,035,413.26 3,562,985.19

$9,579,173.90

$1,402,124.04

$13,149,941.10

$2,405,222.76

$77,099,606.41

Georgia College & State University Annual Financial Report FY 2006 33

Note 16. Component Units
Georgia College & State University Foundation, Inc. (Foundation) and Georgia College & State University Alumni Association, Inc. (Alumni 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 Alumni Association are self-perpetuating 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 Alumni Association, the majority of resources or income thereon that the Foundation and Alumni Association holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation and Alumni Association can only be used by, or for the benefit of, the University, the Foundation and Alumni Association are considered component units of the University and are discretely presented in the University's financial statements.
The Foundation and Alumni 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 were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's and Alumni Association's fiscal year is July 1 through June 30.
During the year ended June 30, 2006, the Foundation distributed $297,100 and the Alumni Association distributed $191,110 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:
Georgia College & State University Foundation holds endowment investments in the amount of $9.6 million and Georgia College & State University Alumni Association holds endowment investments in the amount of $5.2 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia College & State University Foundation and Alumni Association, in conjunction with the donors, has established a spending plan whereby 4.75% of the earnings may be used for academic scholarships and .25% of the earnings may be used for administrative expenses.
Georgia College & State University Annual Financial Report FY 2006 34

Investments are comprised of the following amounts at June 30, 2006:

Georgia College & State University Foundation, Inc.

Money Market Accounts Corporate Bonds Equity Securities
Total Investments

Cost
$1,243,488.00 3,042,682.00 4,717,644.00
$9,003,814.00

Fair Value
$1,243,488.00 2,938,003.00 5,455,946.00
$9,637,437.00

Georgia College & State University Alumni Association, Inc.:

Money Market Accounts Corporate Bonds Equity Securities
Total Investments

Cost
$246,724.00 1,780,300.00 2,797,493.00
$4,824,517.00

Fair Value
$246,724.00 1,719,704.00 3,241,396.00
$5,207,824.00

Capital Assets for Component Units:

Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Furniture and Equipment Vehicles
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$372,188.00 6,364,814.00 6,737,002.00
75,646,127.00 3,599,332.00 121,538.00
79,366,997.00
3,783,577.00
75,583,420.00 $82,320,422.00

Georgia College & State University Annual Financial Report FY 2006 35

Georgia College & State University Alumni Association, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$24,000.00
24,000.00
227,692.00 110,600.00 338,292.00 270,576.00
67,716.00 $91,716.00

Long-term Liabilities for Component Units:

On December 1, 2003, Property II, LLC, a subsidiary of the Foundation, entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County (the Authority) whereby the Authority would issue certain bonds totaling $7,840,000 and loan the entire proceeds to Property II, LLC. Property II, LLC agreed to use the bond proceeds to construct and equip a student center and a parking lot located on the campus of the University. The principal and interest are payable solely from and secured by a lien upon certain interests in real property and certain assignments of rental income originating from rental agreements between Property II, LLC and the University System of Georgia. The rental agreements are annual arrangements and commence following the issuance of a certificate of occupancy. The serial bonds have various annual maturities with the final payment scheduled for September 1, 2022. Interest rates on the bonds range from 2.17% to 4.5%.

On July 14, 2004, Property III, LLC, a subsidiary of the Foundation, entered into a loan agreement with the Authority whereby the Authority would issue certain bonds totaling $89,000,000 and loan the entire proceeds to Property III, LLC. As part of the loan agreement, Property III, LLC agreed to use the bond proceeds to refund and redeem $55,875,000 in outstanding principal of a previous bond issue, to complete certain uncompleted projects, to perform capital renovations, improvements and acquisitions, to establish a debt service reserve, to establish certain amounts for capitalized interest and to pay the cost of issuance of the bonds. The principal and interest are payable solely from and secured by a lien upon certain leasehold deeds to secure debt and certain pledged revenues and assignments of rents and leases. Completion of various projects will be guaranteed by a letter of credit from a banking institution. The serial bonds have various annual maturities with the final payment due September 1, 2015. Interest rates on the bonds range from 4.5% to 6%.

Georgia College & State University Annual Financial Report FY 2006 36

On December 28, 2005, the Foundation entered into a loan agreement with a financial institution for $450,000 in order to purchase two houses that were gifted to the University. The Foundation is paying interest on the loan at 8.5% monthly. The principal balance is due September 28, 2006.

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable Bond Premium/Discount, net
Total Long Term Debt

$0.00 96,840,000.00
(536,924.00)
$96,303,076.00

$450,000.00 $450,000.00

$0.00 265,000.00 (18,924.00)
$246,076.00

$450,000.00 96,575,000.00
(518,000.00)
$96,507,000.00

$450,000.00 275,000.00
$725,000.00

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing and Lease Revenue bonds payable are as follows:

Year Ending June 30: Year

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021

11-15

2022 through 2026

16-20

2027 through 2031

21-25

2032 through 2034

26-30

Principal

Bonds Payable Interest

Total

$275,000.00 915,000.00
1,115,000.00 1,335,000.00 1,575,000.00 11,735,000.00 16,050,000.00 20,880,000.00 24,340,000.00 18,355,000.00

$5,264,056.25 5,241,181.25 5,197,431.25 5,142,031.25 5,066,781.25
23,738,694.25 20,188,631.75 15,357,614.50
9,083,437.00 1,696,050.00

$5,539,056.25 6,156,181.25 6,312,431.25 6,477,031.25 6,641,781.25
35,473,694.25 36,238,631.75 36,237,614.50 33,423,437.00 20,051,050.00

$96,575,000.00

$95,975,908.75

$192,550,908.75

Annual debt service requirements to maturity for Notes Payable are as follows:

Year Ending June 30: Year

2007

1

Principal
$450,000.00

Note Payable Interest
$9,563.00

Total
$459,563.00

$450,000.00

$9,563.00

$459,563.00

Georgia College & State University Annual Financial Report FY 2006 37

GAINESVILLE STATE COLLEGE
Financial Report
For the Year Ended June 30, 2006

Gainesville State College Gainesville, Georgia

Dr. Martha T. Nesbitt, President

Mr. Paul Glaser, VP for Business & Finance

GAINESVILLE STATE COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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....................................................................................................... 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

GAINESVILLE STATE COLLEGE
Management's Discussion and Analysis

Introduction

Gainesville State College is one of the 35 institutions of higher education of the University System of Georgia. The College, located south of Gainesville, Georgia, was founded in 1964 and has been recognized as one of the premier two-year colleges in the state. Specializing in a strong core curriculum and quality support services, the College initially offered Associates of Arts, Associate of Science, and Associate of Applied Science degrees. Beginning in the fall of 2006, the College, under its new designation as a State College, will also offer a limited number of four year baccalaureate degrees. With a second campus south of Athens, Georgia, 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.

FY2006 FY2005 FY2004

Faculty
131 119 111

Students (Headcount)
5,985 5,781 5,282

Students (FTE)
4,892 4,787 4,335

Overview of the Financial Statements and Financial Analysis

Gainesville State College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 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.

Gainesville State College Annual Financial Report FY 2006 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, 2006
$8,227,707.90 22,111,229.63
10,722.50 30,349,660.03
2,579,625.30 275,203.04
2,854,828.34
22,111,229.63 10,722.50
462,704.27
4,910,175.29 $27,494,831.69

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

The total assets of the institution increased by $4,321,224.86. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase in cash and cash equivalents which yielded an overall increase in current assets of $1,749,049.04 and an increase of investment in plant, net of accumulated depreciation of $2,572,175.82. 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 $508,608.24. This increase is associated with an increase in Accounts Payable and Deferred Revenue. The combination of the increase in total assets of $4,321,224.86 and the increase in total liabilities of $508,608.24 yields an increase in total net assets of $3,812,616.62.

Gainesville State College Annual Financial Report FY 2006 2

Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Statement of Revenues, Expenses and Changes in Net Assets, Condensed

Operating Revenues
Operating Expenses Operating Loss
Nonoperating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or losses
Other revenues, expenses, gains or losses
Increase in Net Assets
Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated
Net Assets at End of Year

June 30, 2006
$14,749,533.71 30,726,124.45 (15,976,590.74) 16,933,055.48
956,464.74 2,856,151.88 3,812,616.62 23,682,215.07
0.00 23,682,215.07 $27,494,831.69

June 30, 2005
$13,988,690.68 26,947,084.16 (12,958,393.48) 13,810,181.02
851,787.54 776,230.00 1,628,017.54 22,054,197.53
0.00 22,054,197.53 $23,682,215.07

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:

Gainesville State College Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$8,831,094.02
2,575,600.30 529,015.80
2,728,765.05 85,058.54
14,749,533.71
16,049,234.51 628,360.89 200,082.81 74,400.37 (19,023.10)
16,933,055.48
2,856,151.88
2,856,151.88
$34,538,741.07

June 30, 2005
$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

Gainesville State College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$12,045,167.72
85,192.13 4,015,452.04 2,849,263.79 4,164,217.53 3,101,757.21 1,577,418.99 2,275,151.77
612,503.27
30,726,124.45
0.00
$30,726,124.45

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
0.00
$26,947,084.16

The compensation and employee benefits category increased by $1,836,838.06. The increase reflects an increased number of faculty and staff cost of health insurance for the employees of the institution. Utilities increased by $113,905.92 due to increased natural gas costs.
Under non-operating revenues, state appropriations increased by $3,391,361.73. The increase is due to Gainesville State College receiving full formula funding for Fiscal Year 2006 for increased enrollment.

Gainesville State College Annual Financial Report FY 2006 5

Statement of Cash Flows
The final statement presented by Gainesville 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, 2006 and 2005, 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, 2006
($13,303,459.59) 16,915,541.30 (1,534,583.56) 74,400.37 2,151,898.52 4,691,552.42
$6,843,450.94

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

The College had some significant capital asset additions for facilities in fiscal year 2006. Renovations to the Student Activities Building, Library, Physical Education Building, and the Administration Building were completed during fiscal year 2006 which totaled $2.1M. The college also added a new HVAC system at $742,825 that controls numerous buildings.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Long Term Debt and Liabilities

Gainesville State College had Long-Term Debt and Liabilities of $675,589.57 of which $400,386.53 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Gainesville State College Annual Financial Report FY 2006 6

Component Units In compliance with GASB Statement No. 39, Gainesville State College has included the financial statements and notes for all required component units for FY2006. The Gainesville State College Foundation had endowment investments of $9.1M as of December 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 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 State College
Gainesville State College Annual Financial Report FY 2006 7

Statement of Net Assets

GAINESVILLE STATE COLLEGE STATEMENT OF NET ASSETS June 30, 2006
GAINES VILLE STATE COLLEGE

Component Unit
GAINES VILLE STATE COLLEGE
FOUNDATION

AS S ETS Current Assets Cash and Cash Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial Ass is tance Receivables - Other Pledges Receivable Inventories (note 4) Prepaid items Total Current As sets
Noncurrent Ass ets Noncurrent Cas h Investments (including Real Estate) Capital Ass ets, net (note 6) Total Noncurrent As sets TOTAL ASSETS
LIABILITIES Current Liabilities A ccounts Payable Deferred Revenue (note 7) Deposits Held for Other Organizations Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) 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

$6,832,728.44
39,620.92 408,811.58
333,413.81 613,133.15 8,227,707.90
10,722.50
22,111,229.63 22,121,952.13 30,349,660.03
551,360.79 1,323,954.68
303,923.30 400,386.53 2,579,625.30
275,203.04 275,203.04 2,854,828.34
22,111,229.63
10,722.50 462,704.27
4,910,175.29 $27,494,831.69

$0.00
306,583.00
306,583.00 463,063.00 9,081,845.00
8,400.00 9,553,308.00 9,859,891.00
298,714.00
298,714.00
0.00 298,714.00
8,400.00 2,764,214.00 5,787,353.00 1,001,210.00 $9,561,177.00

Gainesville State College Annual Financial Report FY2006 8

Statement of Revenues, Expenses and Changes in Net Assets

G AINESVILLE STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2006

GAINESVILLE STATE COLLEGE

Component Unit
GAINES VILLE STATE COLLEGE
FOUNDATION

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholars hip Allowances Gifts and Contributions Endowment Income (per s pending plan) Grants and Contracts Federal State Other Sales and Services A uxiliary Enterprises Books tore Food Services Parkin g / Tran s p o rt at io n Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits 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 Gainesville State College
Total Operating Expens es Operating Income (loss)

$9,623,809.03 792,715.01
2,442,991.30 12,609.00 120,000.00 529,015.80
2,686,749.02 9,195.69
11,420.31 21,400.03 85,058.54 14,749,533.71
7,506,297.99 7,318,818.08 3,963,258.95
213,740.55 1,696,747.16
972,970.59 7,997,579.86 1,056,711.27
30,726,124.45 (15,976,590.74)

$0.00 559,434.00 284,294.00
843,728.00
180,988.00 403,157.00 584,145.00 259,583.00

Gainesville State College Annual Financial Report FY2006 9

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

GAINESVILLE STATECOLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

GAINES VILLE STATE CO LLEGE

C ompone nt Unit
G AINES VILLE STATE CO LLEGE
FO UNDATIO N

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State 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

16,049,234.51
511,318.38 67,288.17 49,754.34
200,082.81 74,400.37 (19,023.10)
16,933,055.48 956,464.74
2,856,151.88
2,856,151.88 3,812,616.62
23,682,215.07 0.00
23,682,215.07 $27,494,831.69

228,005.00
228,005.00 487,588.00
207,131.00 207,131.00 694,719.00
8,866,458.00 0.00
8,866,458.00 $9,561,177.00

Gainesville State College Annual Financial Report FY 2006 10

Statement of Cash Flows
GAINESVILLE STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Auxiliary Enterprise Charges: Books tore Food Services Parkin g / Tra n s p o rt at io n 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 Purpos es Net Cash Flows Provided by Non-capital Financing Activities
CAS H FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets Net Cash used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on 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, 2006
$8,880,525.76
3,001,308.75 529,015.80
(11,969,631.67) (14,900,910.68) (1,696,747.16)
2,707,427.58 9,195.69
11,420.31 21,400.03 103,536.00 (13,303,459.59)
16,049,234.51 37,863.09 828,443.70
16,915,541.30
(1,534,583.56) (1,534,583.56)
74,400.37 74,400.37 2,151,898.52 4,691,552.42 $6,843,450.94

Gainesville State College Annual Financial Report FY2006 11

Statement of Cash Flows, Continued
G AINESVILLE STATE COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
RECONCILIATION OF OPERATING LOSS TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (loss) Adjustments to Reconcile Net Income (loss ) to Net Cash Provided (used) by Operating Activities
De p re c ia t io n Change in As sets and Liabilities :
Receivables, net In v e n t o rie s Other Assets Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (us ed) by Operating Activities
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELA TED FINA NCING TRA NSA CTIONS
Gift of capital ass ets reducing proceeds of capital grants and gifts

June 30, 2006
($15,976,590.74)
1,056,711.27 409,596.10 (16,790.10) 742,825.25 10,043.48 426,764.64 117,342.08 (8,739.44) (64,622.13)
($13,303,459.59)
($2,856,151.88)

Gainesville State College Annual Financial Report FY2006 12

GAINESVILLE STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations Gainesville 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 Gainesville State College is one of thirty-five (35) 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 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. Gainesville State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Gainesville 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 Gainesville State College) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, Gainesville State College is reporting the activity for the Gainesville State College Foundation.
See Note 16, Component Units, for foundation notes.
Gainesville State College Annual Financial Report FY 2006 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 predominant 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, the
Gainesville State College Annual Financial Report FY 2006 14

Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 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 State College when complete. For the year ended June 30, 2006, GSFIC did not transfer any capital additions to Gainesville State 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 State College Annual Financial Report FY 2006 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 State College had accrued liability for compensated absences in the amount of $740,211.70 as of 7-1-2005. For FY2006, $472,170.71 was earned in compensated absences and employees were paid $536,792.84, for a net decrease of $(64,622.13). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $675,589.57.

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.

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Total Res tricted Expendable

June 30, 2006
$462,704.27 $462,704.27

Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Gainesville State College Annual Financial Report FY 2006 16

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erve Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$12,016.77 2,657,663.61 2,240,494.91 $4,910,175.29

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 State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Gainesville State College Annual Financial Report FY 2006 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 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.
Gainesville State College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $6,841,380.94 and the bank balance was $7,285,136.79. Of the College's deposits, $6,785,136.79 were uninsured. Of these uninsured deposits, $6,785,136.79 were collateralized with securities held by the financial institution, by its trust department or agency in the College's name.
B. Investments Gainesville State College had no investments as of June 30, 2006.
Gainesville State College Annual Financial Report FY 2006 19

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$260,390.55 81,524.28 39,620.92 35,521.42 31,571.33
448,628.50 196.00
$448,432.50

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Total

June 30, 2006 $333,413.81 $333,413.81

Note 5. Notes/Loans Receivable Gainesville College has no loans receivable as of June 30, 2006.

Gainesville State College Annual Financial Report FY 2006 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$105,849.29

Additions $0.00

Reductions $0.00

105,849.29

0.00

0.00

371,830.00 27,489,552.58
1,188,698.00 2,110,838.32
1,901,669.18
33,062,588.08

742,825.25 2,364,903.38
484,821.06 83,620.50
3,676,170.19

27,100.00 123,711.14
62,174.00 212,985.14

409,085.02 8,769,662.04 1,017,864.30 1,688,892.20
1,743,880.00
13,629,383.56
19,433,204.52
$19,539,053.81

3,136.60 775,392.53
10,970.84 191,358.30
75,853.00
1,056,711.27
2,619,458.92
$2,619,458.92

92,263.56 (275,547.11)
44,907.90 241,903.69
62,174.00
165,702.04
47,283.10
$47,283.10

Ending B al anc e 6/30/2006
$105,849.29 0.00 0.00
105,849.29
1,114,655.25 29,827,355.96
1,188,698.00 2,471,948.24
0.00 1,923,115.68
0.00 36,525,773.13
319,958.06 9,820,601.68
983,927.24 1,638,346.81
0.00 1,757,559.00
0.00 14,520,392.79
22,005,380.34
$22,111,229.63

Gainesville State College Annual Financial Report FY 2006 21

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $1,147,754.79
176,199.89 $1,323,954.68

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, 2006 was as follows:

Other Liabilities Compensated Absences
Total Long Term Obligations

Beginning Balance July 1, 2005
$740,211.70
$740,211.70

Additions $472,170.71 $472,170.71

Reductions

Ending Balance June 30, 2006

$536,792.84 $536,792.84

$675,589.57 $675,589.57

Current Portion
$400,386.53 $400,386.53

Note 9. Significant Commitments
The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1.1M as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements and no construction has taken place in FY2006.

Note 10. Lease Obligations
Gainesville State College has no outstanding capital or operating lease obligations at June 30, 2006.
Gainesville State College had no operating lease expenditures in fiscal year 2006.

Gainesville State College Annual Financial Report FY 2006 22

Note 11. Retirement Plans

Teachers Retirement System of Georgia

Plan Description Gainesville State 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 Gainesville State College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Gainesville 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 2006, 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

2006 2005 2004

100% 100% 100%

$931,369.02 $786,858.51 $759,949.74

Employees' Retirement System of Georgia

Plan Description Gainesville State College has no participants in 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 to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Gainesville State College Annual Financial Report FY 2006 23

Funding Policy Gainesville 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 2006, 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 State College and the covered employees made the required contributions of $348,978.75 (9.65%) and $180,820.00 (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 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 2006 amounted to $101,259.55 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.
Gainesville State College Annual Financial Report FY 2006 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. Gainesville 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 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. Gainesville 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 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 State College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Gainesville State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to
Gainesville State College Annual Financial Report FY 2006 25

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, 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, 2006, there were 108 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Gainesville State College recognized as incurred $387,591.48 of expenditures, which was net of $116,277.12 of participant contributions.
Gainesville State College Annual Financial Report FY 2006 26

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$7,483,120.62 1,386,319.85 1,997,823.77

$0.00

$0.00 67,921.32 15,435.81

$14,000.00 1,705,918.80
429,105.64

$2,550.00 1,702,710.18 404,415.95

$6,627.37 1,534,241.24
855,611.96

100,530.69 9,199.20
62,668.35 989,006.63
16,498.61

1,835.00

32,643.20
59,355.63 1,665,735.12
108,693.65

44,111.82
23,739.65 667,007.67
4,728.52

34,446.52 110,128.97 26,340.63 1,567,418.51 29,402.33

$12,045,167.72

$0.00

$85,192.13

$4,015,452.04

$2,849,263.79

$4,164,217.53

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2006

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 793,150.46 225,796.09 (37,329.13)
1,363.35
798,523.98 1,269,191.06
51,061.40

$0.00 1,577,418.99

$0.00 128,556.23 34,049.37
37,329.13 644.97
2,342.35 2,068,441.35
3,788.37

$0.00 1,020.36
(231,055.48) 842,538.39

$7,506,297.99 7,318,818.08 3,963,258.95 0.00 213,740.55 1,696,747.16 972,970.59 7,997,579.86 1,056,711.27

$3,101,757.21

$1,577,418.99

$2,275,151.77

$612,503.27

$30,726,124.45

Gainesville State College Annual Financial Report FY 2006 27

Note 16. Component Units

Gainesville State College Foundation (Foundation) is a legally separate, tax-exempt component unit of Gainesville State College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The thirty-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 January 1 through December 31.

During the year ended December 31, 2005, the Foundation distributed $403,157 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at P O Box 1358, Gainesville, GA 30503.

Investments for Component Units:

Gainesville State College Foundation holds endowment investments in the amount of $9.1 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Gainesville State College Foundation, in conjunction with the donors, has established a spending plan whereby 3-5% of the total market value at November 30th may be used for academic scholarships. Normally, not more than 2% is spent.

Gainesville State College Foundation Investments are comprised of the following amounts at December 31, 2005:

Co s t

Fair Value

Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds

$1,293,759.00 16,180.00
1,631,681.00 6,187,101.00

$1,293,759.00 15,826.00
1,623,633.00 6,148,627.00

Total Inves tments

$9,128,721.00

$9,081,845.00

Gainesville State College Annual Financial Report FY 2006 28

Capital Assets for Component Units:
Gainesville State College Foundation holds the following Capital Assets as of December 31, 2005:

Capital As sets Disclosure

December 31, 2005

Capital A s s ets not being Depreciated: Land and other A ssets
Total Capital As sets not being Depreciated
Capital Ass ets, Net

$8,400.00 8,400.00
$8,400.00

Gainesville State College Annual Financial Report FY 2006 29

Georgia Perimeter College Financial Report
For the Year Ended June 30, 2006

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 2006
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................................................................................................ 24 Note 13 Contingencies...................................................................................................... 25 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 26 Note 15 Special Item Transfers ....................................................................26 Note 16 Natural Classifications With Functional Classifications..................................... 27

GEORGIA PERIMETER COLLEGE
Management's Discussion and Analysis

Introduction

Georgia Perimeter College is one of the 35 institutions of higher education 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 twoyear 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.

FY2006 FY2005 FY2004

Faculty
465 366 335

Students (Headcount)
20,461 20,316 18,986

Students (FTE)
15,327 15,395 14,242

Overview of the Financial Statements and Financial Analysis

Georgia Perimeter College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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.

Georgia Perimeter College Annual Financial Report FY 2006 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, 2006
$19,672,355.86 83,444,623.02 1,047,837.85
104,164,816.73
10,431,828.31 1,335,565.96
11,767,394.27
83,444,623.02 31,338.39
141,959.59 1,000,215.54 7,779,285.92 $92,397,422.46

June 30, 2005
$17,428,226.61 112,671,450.84
1,052,358.50 131,152,035.95
9,705,528.34 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

The total assets of the institution decreased by ($26,987,219.22). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($29,226,827.82) of investment in plant, net of accumulated depreciation. This decrease reflects the transfer of significant assets from the Lawrenceville Campus of the Gwinnett University Center to Georgia Gwinnett College, which was approved by the Board of Regents to be a separate state college. Georgia Perimeter College has been serving as the administrative service agent for Georgia Gwinnett College and is currently working with college administration on the transition plan. Georgia Perimeter College will be completely phased out of the Georgia Gwinnett College operations by fiscal year 2009. 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 ($14,501,630.71). The combination of the decrease in total assets of ($26,987,219.22) and the decrease in total liabilities of ($14,501,630.71) yields a decrease in total net assets of ($12,485,588.51). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($13,308,363.28).

Georgia Perimeter College Annual Financial Report FY 2006 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, 2006

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

$55,489,607.07 112,231,460.94 (56,741,853.87)
58,847,661.23
2,105,807.36 6,689,784.30 8,795,591.66 104,883,010.97
0.00 104,883,010.97 $92,397,422.46

$53,003,086.44 112,224,040.64 (59,220,954.20)
58,172,848.30
(1,048,105.90) 3,145,435.29 2,097,329.39 102,785,681.58
0.00 102,785,681.58 $104,883,010.97

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in operating revenues. 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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$32,156,781.47
17,676,682.12 1,626,854.32 2,547,257.48 1,482,031.68
55,489,607.07
57,466,393.13
296,494.70 701,231.50 383,541.90 58,847,661.23
6,689,784.30
6,689,784.30 $121,027,052.60

June 30, 2005
$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

Georgia Perimeter College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$40,725,889.46
(36.10) 9,809,292.98 11,429,124.74 18,904,074.17 11,633,107.15 15,146,915.21 2,038,178.44 2,544,914.89
112,231,460.94
0.00
$112,231,460.94

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
829,088.22
$113,053,128.86

Grants and contracts revenue continued to grow during the year with an increase of $787,516.55 in State grants awarded. Other operating revenues increased significantly as a result of contractual services revenue from Georgia Gwinnett College for public safety and plant services. The increase in instruction and academic support is due to an increase in staffing and purchase of supplies and materials. The elimination of interest expense for Capital Assets is due to the transfer of a capital lease to the Georgia Gwinnett College.
Utilities decreased by ($555,947.18) during the fiscal year. While utility rates increased during the fiscal year, this decrease in cost is due primarily to the decrease in building space transferred to the Georgia Gwinnett College.
Under non-operating revenues state appropriations decreased by ($329,929.05). The reduction was due to Georgia Gwinnett College's state appropriations being shown as part of Georgia Perimeter College's appropriations in fiscal year 2005 and not in fiscal year 2006. In fiscal year 2006, Georgia Gwinnett College's state appropriations were no longer considered to be a part of Georgia Perimeter College.
Statement of Cash Flows
The final statement presented by the 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
Georgia Perimeter College Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($53,922,599.63) 57,848,247.18 (5,191,641.28) 701,231.50 (564,762.23) 15,027,278.64
$14,462,516.41

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

Capital Assets
The College completed renovation and repair projects to the Clarkston Fine Arts building as well as exterior door access projects at the Decatur campus. The 684,115.71 for these projects was funded by the Georgia State Finance and Investment Commission (GSFIC). Other construction funded by the GSFIC included $6,005,668.59 for the renovation of the B Building on the Dunwoody Campus, and ongoing construction of the Student Center on the Clarkston Campus.
Georgia Perimeter College also transferred $37,147,245.71 in capital assets (net of accumulated depreciation) to Georgia Gwinnett College during the fiscal year. This transfer is part of the ongoing transition of the Gwinnett University Center Lawrenceville Campus to the Georgia Gwinnett College, approved as a new state college in June of 2005.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Georgia Perimeter College had Long-Term Debt and Liabilities of $3,016,608.44 of which $1,681,042.48 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Georgia Perimeter College Annual Financial Report FY 2006 6

Component Units For FY2006, Georgia Perimeter College does not have any foundations that meet the criteria for being reported as component units of the College. Economic Outlook The college is responding to the increasing higher education needs of the Newton and Rockdale County areas by establishing a Newton Campus which is expected to open in the summer of 2007. Enrollment is projected at 3,000 students in the fall of 2007. Once this facility opens, Georgia Perimeter College will close the Rockdale Center as enrollment has outgrown the facilities available. The University System administration is working closely with Georgia Perimeter College on the transition of students, administrative operations and financial resources to the Georgia Gwinnett College. Georgia Perimeter College will be completely phased out of Georgia Gwinnett College's operations by fiscal year 2009. 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. With the exception of the transition of the Lawrenceville Campus to Georgia Gwinnett College, Georgia Perimeter College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the ability to react to unknown internal and external issues.
Robert E. Watts, Interim President Georgia Perimeter College
Georgia Perimeter College Annual Financial Report FY 2006 7

Statement of Net Assets
GEORGIA PERIMETER COLLEGE STATEMENT OF NET ASSETS June 30, 2006
AS S ETS Current Ass ets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Inventories (note 4) Prepaid items Total Current A ssets
Noncurrent As sets Noncurrent Cas h Notes Receivable, net Capital Ass ets, net (note 6) Total Noncurrent As sets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, 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 Un re s tric ted
TOTAL NET ASSETS

June 30, 2006
$13,419,551.89 16,614.41
2,292,422.24 3,785,095.22
152,581.70 6,090.40
19,672,355.86
1,042,964.52 4,873.33
83,444,623.02 84,492,460.87 104,164,816.73
2,584,900.70 564,558.27 71,311.48
4,350,812.15 375,587.93 803,615.30
1,681,042.48 10,431,828.31
1,335,565.96 1,335,565.96 11,767,394.27
83,444,623.02
31,338.39 141,959.59 1,000,215.54 7,779,285.92 $92,397,422.46

Georgia Perimeter College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA PERIMETER COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Les s: Scholarship Allowances Grants and Contracts Fe d e ra l State Other Sales and Services Rents and Royalties Auxiliary Enterprises Bo o ks t o re Food Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services De p re c ia t io n
Total Operating Expenses Operating Income (loss )

June 30, 2006
$37,866,938.40 5,710,156.93
16,245,547.29 1,009,727.33
421,407.50 1,626,854.32
59,390.62
935,628.00 9,501.15
1,236,971.16 365,157.17
1,422,641.06 55,489,607.07
27,935,668.78 33,695,878.00 14,371,215.11
703,350.41 10,501,092.81 3,183,760.12 17,903,184.31 3,937,311.40 112,231,460.94 (56,741,853.87)

Georgia Perimeter College Annual Financial Report FY 2006 9

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

GEORGIA PERIMETER COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
June 30, 2006

NO NO PERATING REVENUES (EXPENSES) State Appropriations Gift s Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e T otal Other Revenues Special Item (See Note 15) 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

57,466,393.13 296,494.70 701,231.50 383,541.90
58,847,661.23 2,105,807.36
6,689,784.30 6,689,784.30 (21,281,180.17) (12,485,588.51)
104,883,010.97 0.00
104,883,010.97 $92,397,422.46

Georgia Perimeter College Annual Financial Report FY 2006 10

Statement of Cash Flows
G EORG IA PERIMETER COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 : Books tore Food 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 Sale of Capital A s s ets Purchas es of Capital A s s ets Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES Interes t on 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, 2006
$33,247,737.18
15,291,852.70 1,557,530.47
(35,763,897.30) (61,048,251.27) (10,501,092.81)
(39,547.82) 43,363.07
388,461.00 9,501.15
1,747,682.20 448,322.93 695,738.87
(53,922,599.63)
57,466,393.13 8,118.98
373,735.07 57,848,247.18
(5,191,641.28) (5,191,641.28)
701,231.50 701,231.50 (564,762.23) 15,027,278.64 $14,462,516.41

Georgia Perimeter College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
G EORG IA PERIMETER COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($56,741,853.87)
3,937,311.40 (2,828,656.29)
14,757.68 5,007.13 3,815.25
884,696.30 504,129.61
62,708.26 235,484.90 ($53,922,599.63)
($6,689,784.30)

Georgia Perimeter College Annual Financial Report FY 2006 12

GEORGIA PERIMETER COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Perimeter College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Perimeter College is one of thirty-five (35) 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 Units - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, Georgia Perimeter College does not have any foundations that meet the criteria for being reported as component units of the College.
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
Georgia Perimeter College Annual Financial Report FY 2006 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.
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-institution 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.
Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Georgia Perimeter College Annual Financial Report FY 2006 14

Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 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, 2006, GSFIC did not transfer any capital additions to Georgia Perimeter 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. Georgia Perimeter College had accrued liability for compensated absences in the amount of $2,781,123.54 as of 7-1-2005. For FY2006, $2,222,910.20 was earned in compensated absences and employees were paid $1,987,425.30,
Georgia Perimeter College Annual Financial Report FY 2006 15

for a net increase of $235,484.90. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $3,016,608.44.
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:

June 30, 2006

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Quas i-Endowments Total Res tricted Expendable

($10,692.37) 17,542.67
123,698.70 11,410.59
$141,959.59

Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Georgia Perimeter College Annual Financial Report FY 2006 16

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$56,320.28 6,340,993.62
203,000.00 1,178,972.02 $7,779,285.92

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Perimeter College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Georgia Perimeter College Annual Financial Report FY 2006 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 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 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.
Georgia Perimeter College Annual Financial Report FY 2006 18

At June 30, 2006, the carrying value of deposits was $11,624,928.40 and the bank balance was $13,183,887.23. Of the College's deposits, $13,064,473.25 were uninsured. Of these uninsured deposits, $13,064,473.25 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.

B. Investments

Georgia Perimeter 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 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, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Inve s tme nt Type : Investment P ools
Office of Treasury and Fiscal Services Georgia Fund 1
Total Investment P ools

F ai r Val ue 2 ,8 2 2 ,2 0 2 .4 2
$ 2 ,8 2 2 ,2 0 2 .4 2

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 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.
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.
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.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Georgia Fund 1 pool was rated AAA by Standard and Poor's.

Georgia Perimeter College Annual Financial Report FY 2006 19

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,615,095.24 568,683.74
2,292,422.24 2,688,246.32 7,164,447.54 1,086,930.08
$6,077,517.46

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Phys ical Plant Total

June 30, 2006 $152,581.70 $152,581.70

Note 5. Notes/Loans Receivable Georgia Perimeter College has loans/notes receivable of $4,873.33 as of June 30, 2006.

Georgia Perimeter College Annual Financial Report FY 2006 20

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

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

Beginning Balances 7/1/2005
$4,420,775.73
1,507,635.43 5,928,411.16

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

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

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

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

Total Capital Assets, Being Depreciated, Net

106,743,039.68

Capital Assets, net

$112,671,450.84

Special Item Transfer $0.00 (850,827.25) (850,827.25)
(19,727,623.33) (1,171,577.10) (17,279,804.07)
(789,079.00) (38,968,083.50)
(986,381.17) (516,866.08) (991,557.79) (176,851.00) (2,671,656.04) (36,296,427.46) ($37,147,254.71)

Additions
$0.00
9,047,282.21 9,047,282.21

Reductions $0.00
0.00

Ending Balance 6/30/2006
$4,420,775.73 0.00
9,704,090.39 14,124,866.12

14,400.00 8,579.00 2,218,021.79
593,142.58
2,834,143.37

799,330.03 226,971.00 1,026,301.03

0.00 92,334,489.65 4,784,924.03 11,675,391.95
0.00 12,002,355.66
0.00 120,797,161.29

2,482,818.76 98,418.01
1,010,815.63
345,259.00
3,937,311.40
(1,103,168.03)
$7,944,114.18

774,542.74 1,100.00
226,971.00
1,002,613.74
23,687.29
$23,687.29

0.00 31,845,202.97 2,461,713.70 7,145,440.72
0.00 10,025,047.00
0.00 51,477,404.39
69,319,756.90
$83,444,623.02

Georgia Perimeter College Annual Financial Report FY 2006 21

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $3,888,958.06
461,854.09 $4,350,812.15

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$15,866,074.54

Special Item Transfer
($15,866,074.54)

Additions $0.00

Reductions

Ending Balance
June 30, 2006

$0.00

$0.00

2,781,123.54 2,781,123.54
$18,647,198.08

0.00 ($15,866,074.54)

2,222,910.20 2,222,910.20
$2,222,910.20

1,987,425.30 1,987,425.30
$1,987,425.30

3,016,608.44 3,016,608.44
$3,016,608.44

Note 9. Significant Commitments
Georgia Perimeter College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $2,199,333.41 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Georgia Perimeter College transferred the capital lease obligations for the acquisition of real property to Georgia Gwinnett College as of July 1, 2005

Georgia Perimeter College Annual Financial Report FY 2006 22

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 2006, 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

2006 2005 2004

100% 100% 100%

$3,043,707.59 $2,875,100.63 $2,714,400.40

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 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

Georgia Perimeter College Annual Financial Report FY 2006 23

accordance with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $1,594,022.59 (9.65%) and $824,286.37 (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 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 2006 amounted to $677,190.05 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
Georgia Perimeter College Annual Financial Report FY 2006 24

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 considered to be actions against the State of Georgia. Accordingly, significant litigation, claims
Georgia Perimeter College Annual Financial Report FY 2006 25

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, 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, 2006, there were 250 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia Perimeter College recognized as incurred $1,046,139.29 of expenditures, which was net of $341,405.00 of participant contributions.
Note 15. Special Item Transfers Due to the creation of Georgia Gwinnett College by the State of Georgia, all assets and associated liabilities for the Gwinnett University Center were transferred to Georgia Gwinnett College as of July 1, 2005. These assets and associated liabilities were transferred from Georgia Perimeter College, who acted as custodian for the Gwinnett University Center. The total assets and liabilities transferred was $21,281,180.17. This transfer of assets and liabilities is noted as a Special Item Transfer on the Statement of Revenues, Expenses and Changes in Net Assets. See Notes 6 and 8 for additional information.
Georgia Perimeter College Annual Financial Report FY 2006 26

Note 16. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$27,593,947.60 5,676,427.57 6,540,696.79

$0.00

$0.00

$11,300.00 6,784,373.16 1,319,641.83

$23,999.28 7,081,108.88 1,612,122.52

$305,321.90 9,352,881.46 3,549,087.68

315,500.50 (5,574,989.27)
105,973.55 5,981,225.55
87,107.17

(36.10)

86,724.05 13,500.00 66,209.00 987,315.83 540,229.11

131,881.29 183,632.48 50,215.36 2,337,877.39
8,287.54

110,765.49 397,037.65 336,264.17 4,433,185.25 419,530.57

$40,725,889.46

$0.00

($36.10)

$9,809,292.98

$11,429,124.74

$18,904,074.17

Plant Operations & Maintenance

Functional Classification FY2006

Scholars hips & Fellowships

Auxiliary Enterprises

Unallocated Expenses

Total Expenses

$0.00 4,249,565.59 1,244,843.43
(93,813.96) 20,845.72
2,613,339.23 3,282,076.51
316,250.63

$0.00 15,146,915.21

$1,100.00 551,521.34 104,822.86 93,813.96 37,633.36 334,996.74
11,794.91 881,503.78 20,991.49

$0.00 2,544,914.89

$27,935,668.78 33,695,878.00
14,371,215.11 0.00
703,350.41 10,501,092.81 3,183,760.12 17,903,184.31 3,937,311.40

$11,633,107.15

$15,146,915.21

$2,038,178.44

$2,544,914.89

$112,231,460.94

Georgia Perimeter College Annual Financial Report FY 2006 27

GEORGIA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Carl V. Patton President

Georgia State University Atlanta, Georgia
Jerry J. Rackliffe Vice President for Finance & Administration

GEORGIA STATE UNIVERSITY ANNUAL FINANCIAL REPORT
FY 2006
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............................................................................................ 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 ................................................................................................. 25 Note 12 Risk Management................................................................................................ 28 Note 13 Contingencies...................................................................................................... 29 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 29 Note 15 Natural Classifications With Functional Classifications..................................... 31 Note 16 Component Units ........................................................................ 32

GEORGIA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction
Georgia State University is one of the 35 institutions of higher education 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 25,000 students each year. The comparison numbers follow:

FY2006 FY2005 FY2004

Faculty
1,090 1,055 1,019

Students (Headcount)
25,967 27,261 28,042

Students (FTE)
22,635 23,242 23,634

Overview of the Financial Statements and Financial Analysis

Georgia State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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

Georgia State University Annual Financial Report FY 2006 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 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, 2006
$135,410,371.76 317,722,929.13 6,664,255.74 459,797,556.63
47,036,085.39 43,763,090.27 90,799,175.66
275,556,139.96 45,958.74
16,596,237.54 598,193.07
76,201,851.66 $368,998,380.97

June 30, 2005
$123,004,353.59 297,155,174.70 5,943,290.46 426,102,818.75
40,004,563.38 45,102,404.48 85,106,967.86
253,527,266.27 45,699.00
17,101,683.96 598,193.07
69,723,008.59 $340,995,850.89

The total assets of the institution increased by $33,694,737.88. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $20,567,754.43 in investment in plant, net of accumulated depreciation and an increase of $12,406,018.17 in current assets.
The total liabilities for the year increased by $5,692,207.80. The combination of the increase in total assets of $33,694,737.88 and the increase in total liabilities of $5,692,207.80 yields an increase in total net assets of $28,002,530.08. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $22,028,873.69.
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

Georgia State University Annual Financial Report FY 2006 2

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, 2006

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

$229,787,148.45 430,023,087.22 (200,235,938.77) 203,118,200.51
2,882,261.74 25,120,268.34 28,002,530.08 340,995,850.89
0.00 340,995,850.89 $368,998,380.97

$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
0.00 319,957,068.86 $340,995,850.89

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

Georgia State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services A u xiliary 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

$117,012,953.87
73,223,810.98 6,011,417.47 29,968,560.14 3,570,405.99
229,787,148.45
194,839,879.57 5,881,412.83 154,487.37 5,267,441.47 (119,657.86)
206,023,563.38
11,379,002.72 13,741,265.62 25,120,268.34
$460,930,980.17

June 30, 2005
$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

Georgia State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

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, 2006
$142,183,783.96 65,664,010.80 22,760,795.62 47,247,250.59 22,896,039.49 41,779,918.62 38,199,852.14 25,501,288.76 23,790,147.24
430,023,087.22
2,905,362.87
$432,928,450.09

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

Revenues associated with student tuition and fees, net of sponsored and unsponsored scholarships, category increased $9,800,231.62 during the year. Grants and Contracts decreased in the amount of ($3,462,017.68) with a decrease in federal grants of ($1,042,349.17), a decrease in state grants of ($838,288.99) and a decrease in local and private grants of ($1,581,379.52).
The compensation and employee benefits category increased by $15,899,907.82.
Utilities increased by $1,144,277.86 during the past year.
Under non-operating revenues (expenses), state appropriations increased by $14,511,054.53.
Statement of Cash Flows
The final statement presented by the 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 2006 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, 2006 and 2005, Condensed

Cash Provided (us ed) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Activities Inves ting Activities
Net Change in Cash Cash, Beginning of Year
Cash, End of Year
Capital Assets

June 30, 2006
($177,052,108.85) 203,349,676.66 (19,104,889.04) 5,267,412.80 12,460,091.57 106,531,761.41
$118,991,852.98

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

In fiscal year 2006, the State Legislature approved funding for the University's top capital priority, the Science Teaching Laboratory Building. The 213,000 gross square foot building is projected to cost a total of $77 million. The University will receive State funding of $40.2 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 $77.5 million estimated cost to construct the building, the University has requested $57.5 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 and Liabilities

Georgia State University had Long-Term Debt and Liabilities of $52,579,784.94 of which $8,816,694.67 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Component Units

In compliance with GASB Statement No. 39, Georgia State University has included the financial statements and notes for all required component units for FY2006. The Georgia State University Foundation, Inc. had endowment and other investments of $108.7 million as of June 30, 2006 and long-term debt of $205 million. The Georgia State University Research Foundation, Inc. had endowment and other investments of $5.6 million and no long-term debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Georgia State University Annual Financial Report FY 2006 6

Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Carl V. Patton, President Georgia State University
Georgia State University Annual Financial Report FY 2006 7

Statement of Net Assets

G EORG IA STATE UNIVERSITY STATEMENT OF NET ASSETS
June 30, 2006

Component Units

Georgia S tate Univers ity

Georgia S tate Univers ity
Foundation, Inc.

Georgia S tate Univers ity Res earch
Foundation, Inc.

AS S ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Due From Component Units Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items Other A s s ets Total Current A s s ets

$118,153,618.87
3,787,401.18 2,969,934.57 6,536,851.91
117,923.80 3,844,641.43
135,410,371.76

$20,430,398.00
152,856.00 9,782,262.00
124,449.00 30,489,965.00

$5,296,043.00
6,011,570.00
60,223.00 4,402,019.00 15,769,855.00

Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Pledges Receivable Capital A s s ets , net (note 6) Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS

838,234.11 47,473.47
5,778,548.16
317,722,929.13
324,387,184.87 459,797,556.63

115,482,909.00 108,656,231.00
4,062,203.00 102,617,490.00
5,155,556.00 335,974,389.00 366,464,354.00

5,619,165.00
5,116,506.00 10,735,671.00 26,505,526.00

LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Due to Component Units Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Liabilities under Split-Interes t A greements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES

6,635,432.16 558,895.71 564,707.11 559,961.47
25,230,215.20 387,123.50
4,222,832.57
2,056,388.49 6,760,306.18
60,223.00 47,036,085.39
40,110,400.68
3,652,689.59
43,763,090.27 90,799,175.66

10,517,644.09
349,191.91 686,221.00
19,101.00 1,550,000.00 13,122,158.00 9,722,456.00
864,510.00 192,636,673.00
249,819.00 5,197,804.00 208,671,262.00 221,793,420.00

19,957.00 3,914,328.00 6,187,660.00 10,121,945.00
0.00 10,121,945.00

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

275,556,139.96
45,958.74 16,596,237.54
598,193.07 76,201,851.66 $368,998,380.97

17,498,892.00
65,098,919.00 52,938,451.00
9,134,672.00 $144,670,934.00

5,116,506.00
2,000,000.00 475,225.00
8,791,850.00 $16,383,581.00

Georgia State University Annual Financial Report FY 2006 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, 2006

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Books tore Food Services Parking/Transportation Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries : Faculty Staff
Employee 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

Component Units

Georgia State Univers ity
Foundation, Inc.

Georgia State Univers ity Research
Foundation, Inc.

$142,724,041.25 25,711,087.38
55,720,619.18 7,228,973.58 10,274,218.22 6,011,417.47
24,139.78
14,338,824.13 792,420.12 233,666.45
5,237,955.13 5,703,644.75 3,662,049.56 3,546,266.21 229,787,148.45

$0.00 687,221.00 2,840,551.00
10,796,623.00
2,905,910.00 17,230,305.00

$0.00 37,977,238.00 5,440,952.00 8,397,532.00
51,815,722.00

82,399,131.39 136,112,508.78 48,425,330.39
29,564.04 3,848,404.22 29,348,648.08 10,421,477.59 99,473,720.36 19,964,302.37
430,023,087.22 (200,235,938.77)

403,712.00 103,596.00
183,903.00
4,477,478.00 2,284,833.00 14,843,631.00 22,297,153.00 (5,066,848.00)

606,074.00 109,213.00 50,878,645.00 51,593,932.00 221,790.00

Georgia State University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot h er 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

Georgia State Un i ve rs i ty

Component Units

Georgia State Un i ve rs i ty
Foundation, Inc.

Georgia State Un i ve rs i ty Re s e arch
Foundation, Inc.

194,839,879.57

95,631.67 5,785,781.16
154,487.37 5,267,441.47
(2,905,362.87) (119,657.86)
203,118,200.51 2,882,261.74

13,312,882.00 2,795,717.00 8,409,749.00 (1,735,215.00) (710,940.00)
22,072,193.00 17,005,345.00

11,379,002.72 13,741,265.62
25,120,268.34 28,002,530.08
340,995,850.89 0.00
340,995,850.89 $368,998,380.97

1,753,104.00 1,753,104.00 18,758,449.00
125,912,485.00 0.00
125,912,485.00 $144,670,934.00

360,889.00 439,064.00
15,992.00 815,945.00 1,037,735.00
0.00 1,037,735.00 15,345,846.00
0.00 15,345,846.00 $16,383,581.00

Georgia State University Annual Financial Report FY 2006 10

Statement of Cash Flows

GEORGIA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006

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 Enterpris e Charges: Residence Halls Bo o ks to re Food Services Pa rkin g /Tran s p o rt at io n 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 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 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 Interest on 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, 2006
$118,793,810.80
73,770,741.92 6,426,131.37 (161,617,629.43) (218,821,311.83) (29,348,648.08) (1,577,136.83) 1,694,434.33
14,423,626.98 792,420.12 233,666.45
5,237,955.13 5,703,644.75 3,662,049.56 3,574,135.91 (177,052,108.85)
194,839,879.57 2,473,896.89 6,035,900.20
203,349,676.66
12,156,199.24
(26,355,614.12) (2,000,111.29) (2,905,362.87) (19,104,889.04)
5,267,412.80 5,267,412.80 12,460,091.57 106,531,761.41 $118,991,852.98

Georgia State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
GEORGIA STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
RECONCILIATION OF OPERATING LOS S TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (los s ) Adjustments to Reconcile Net Income (los s) to Net Cash Provided (us ed) by Operating Activities
De p re c ia t io n Change in As s ets and Liabilities :
Receivables , net In v e n t o rie s Other Assets Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compens ated Absences
Net Cas h Provided (us ed) by Operating Activities
** NON-CASH INVESTING, NON-CAPITAL FINA NCING, AND CAPITAL AND RELA TED FINA NCING TRA NSA CTIONS
Fixed ass ets acquired by incurring capital lease obligations Change in fair value of inves tments recognized as a component of interes t income Gift of capital as sets reducing proceeds of capital grants and gifts

June 30, 2006
($200,235,938.77)
19,964,302.37 664,366.22 (32,238.37)
(1,307,602.54) 117,297.50
1,391,925.17 (155,857.74) 2,583,632.63 (41,995.32) ($177,052,108.85)
$538,992.03 ($259.74)
($13,600,000.00)

Georgia State University Annual Financial Report FY 2006 12

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Georgia State University is reporting the activity for the Georgia State University Foundation, Inc. and the Georgia State University Research 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 State University Annual Financial Report FY 2006 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 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Georgia State University Annual Financial Report FY 2006 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 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 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 State University when complete. For the year ended June 30, 2006, GSFIC did not transfer any capital additions to Georgia State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Georgia State University Annual Financial Report FY 2006 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 State University had accrued liability for compensated absences in the amount of $10,454,991.09 as of July 1, 2005. For FY2006, $7,778,610.49 was earned in compensated absences and employees were paid $7,820,605.81, for a net decrease of $(41,995.32). The ending balance as of June 30, 2006 in accrued liability for compensated absences was $10,412,995.77.
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 State University Annual Financial Report FY 2006 16

Expendable Restricted Net Assets include the following:

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

June 30, 2006
$10,206,878.64 6,295,513.10 93,845.80
$16,596,237.54

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 As s ets

June 30, 2006
$15,891,756.96 13,266,184.88 89,732.15 46,954,177.67
$76,201,851.66

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
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:

Georgia State University Annual Financial Report FY 2006 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.
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.
Georgia State University Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $18,766,417.88 and the bank balance was $23,946,764.65. Of the university's deposits, $23,937,977.41 were uninsured. Of these uninsured deposits, $23,937,977.41 were uncollateralized.

B. Investments

At June 30, 2006, the carrying value of the University's investments was $100,235,063.57, 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 Pools Board of Regents Total Return Fund Sub Total

$47,473.47 47,473.47

Office of Treasury and Fiscal Services Georgia Fund 1
Sub Total
Total Investment Pools

100,187,590.10 100,187,590.10
$100,235,063.57

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 State University Annual Financial Report FY 2006 19

The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $47,473.47 in the Total Return Fund, $15,419.00 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 28 days.
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 to comply with University policy and applicable Federal and State laws. The University's policy for managing interest rate risk for Endowment Funds is that the average maturity of the fixed income portfolio shall not exceed ten years and for Operating Funds the average maturity of the fixed income portfolio shall not exceed two years.
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 is to comply with University policy and applicable Federal and State laws. The University's policy for managing credit quality risk is that 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 as defined by the University System of Georgia.
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 is that the University 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 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.
At June 30, 2006, none of the university's applicable investments were uninsured and held by the investment's counterparty in the university's name and $47,473.47 were uninsured and held by the investment's counterparty's trust department or agent, but not in the university's name.
Georgia State University Annual Financial Report FY 2006 20

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$4,776,487.52 981,438.66
3,787,401.18 595,884.77
6,536,851.91 1,516,322.39 18,194,386.43 4,900,198.77
$13,294,187.66

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Phys ical Plant Other
Total

June 30, 2006
$104,351.87 13,571.93
$117,923.80

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the allowance for uncollectible loans was approximately $293,071.39.

Georgia State University Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital As sets , Not Being Depreciated: Land Capitalized Collections Cons truction W ork-in-Progress
Total Capital As sets Not Being Depreciated

Beginning Balances 7/1/2005
$28,811,853.59 0.00
12,080,238.79 40,892,092.38

Additions
$13,600,000.00 90,389.00
13,612,651.79 27,303,040.79

Reductions
$0.00 (61,148.60) 8,180,587.43 8,119,438.83

Capital As sets , Being Depreciated: In fra s t ru ct u re Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leases Library Collections Capitalized Collections Total Ass ets Being Depreciated

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

3,802,728.14 6,917,477.61
7,481.18 5,221,930.43
538,992.04 5,758,099.55
22,246,708.95

683,147.99
1,465,315.40 164,947.87
1,701,485.46 61,148.60
4,076,045.32

Less : Accumulated Depreciation In fra s t ru ct u re Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

805,775.36 117,259,307.70
760,592.94 38,583,962.07
336,978.44 63,196,577.13
220,943,193.64

186,450.51 9,077,987.75
67,072.08 5,338,314.32
266,318.67 5,028,159.04
19,964,302.37

1,372,731.97 103,573.78
1,701,485.46
3,177,791.21

Total Capital As sets , Being Depreciated, Net Capital As sets , net

256,263,082.32 $297,155,174.70

2,282,406.58 $29,585,447.37

898,254.11 $9,017,692.94

Ending Balance 6/30/2006
$42,411,853.59 151,537.60
17,512,303.15 60,075,694.34
6,561,381.11 330,489,205.74
1,463,019.30 63,024,784.39 1,688,734.96 92,149,814.09
0.00 495,376,939.59
992,225.87 126,337,295.45
827,665.02 42,549,544.42
499,723.33 66,523,250.71
0.00 237,729,704.80
257,647,234.79
$317,722,929.13

Georgia State University Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006:

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2006
$19,198,898.51 3,264,430.80 2,766,885.89
$25,230,215.20

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$43,627,908.43

Additions $551,610.06

Reductions

Ending Balance June 30, 2006

Current Portion

$2,012,729.32 $42,166,789.17 $2,056,388.49

Other Liabilities Compensated Absences Total
Total Long Term Obligations

10,454,991.09 10,454,991.09
$54,082,899.52

7,778,610.49 7,778,610.49
$8,330,220.56

7,820,605.81 7,820,605.81
$9,833,335.14

10,412,995.77 10,412,995.77
$52,579,784.94

6,760,306.18 6,760,306.18
$8,816,694.67

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $8,937,980.87 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.
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, 2006, were as follows:

Georgia State University Annual Financial Report FY 2006 23

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 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

Real Property/Equipment

Capital Leas es

Operating Leas es

$4,931,517.93 4,924,163.34 4,844,472.18 5,429,891.62 5,518,985.88
29,172,242.07 30,589,353.56 85,410,626.58 43,243,837.41
0.00 $42,166,789.17

$5,480,795.48 4,881,489.51 3,705,926.49 3,176,344.08 2,884,643.16 6,110,275.47
$26,239,474.19

CAPITAL LEASES

Capital leases are generally payable in monthly installments and have terms expiring in various years between 2007 and 2021. Expenditures for fiscal year 2006 were $4,919,307.15 of which $2,906,577.83 represented interest. Total principal paid on capital leases was $2,012,729.32 for the fiscal year ended June 30, 2006. Interest rates range from 2.00 percent to 13.89 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Buildings Equipment Total Assets Held Under Capital Lease

$45,421,220.58 1,189,011.63
$46,610,232.21

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 into 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, 2006 on these capital leases is $29,881,093.13 and $11,466,858.64 respectively. Each year the monthly payments for both of these leases will increase by the greater of 2 percent 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, 2006 in the amount of $818,837.40.

Georgia State University Annual Financial Report FY 2006 24

OPERATING LEASES

Georgia State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2007 through 2016. 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 2006, Georgia State University entered into an operating lease for surplus storage space at 934 Brady Avenue in Atlanta.

Georgia State University's FY2006 operating lease expense for rental of real property was $8,835,454.93, and equipment was $168,116.57 for a total of $9,003,571.50.

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 2006, 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

2006 2005 2004

100% 100% 100%

$9,434,148.13 $9,403,541.59 $9,706,222.04

Georgia State University Annual Financial Report FY 2006 25

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 60. 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, 2006, for employees covered by ERS was $730,298.32. The University's total payroll for all employees was $218,511,640.17.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For
Georgia State University Annual Financial Report FY 2006 26

the year ended June 30, 2006, 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 2006 amounted to $87,368.04, of which $76,413.64 was made by the University and $10,954.40 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, 2006, 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 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 2006, 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 $7,750,491.16 (9.65%) and $4,004,962.84 (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 State University Annual Financial Report FY 2006 27

Georgia Defined Contribution Plan
Plan Description Georgia State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions 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 2006 amounted to $534,175.22 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
Georgia State University Annual Financial Report FY 2006 28

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.
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, 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
Georgia State University Annual Financial Report FY 2006 29

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, 2006, there were 810 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia State University recognized as incurred $3,875,047.08 of expenditures, which was net of $1,627,198.42 of participant contributions.
Georgia State University Annual Financial Report FY 2006 30

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses
Natural Classification
F a c ulty Staff B e ne fits P ersonal Services Travel Scholarships and Fellow ships U tilitie s Supplies and O thers Services D e pre c ia tion
Total Expenses

Functional Classification FY2006

In s tru ctio n

Res earch

Public Service

Academic Support

Student Services

In s titu tio n al Support

$67,264,751.59 32,448,031.20 21,569,051.70 37,949.00 1,692,104.99 1,397,834.95 956,592.17 10,858,258.56 5,959,209.80

$14,325,123.86 24,358,519.54
4,418,349.18
977,054.60 990,811.19 178,825.34
18,037,276.17 2,378,050.92

$307,883.95 6,058,202.86 1,344,107.02
185,254.38 872,187.51 87,720.24 13,379,159.88 526,279.78

$382,240.99 25,587,211.60 6,053,727.30
450,448.77 913.80
323,117.20 12,740,222.99 1,709,367.94

$14,173.47 12,055,824.35
2,697,185.64
219,982.28 109,917.89 367,328.92 5,586,530.81 1,845,096.13

$103,507.53 22,248,935.84
9,279,966.01
261,120.35 554,845.63 413,098.81 7,200,688.75 1,717,755.70

$142,183,783.96

$65,664,010.80

$22,760,795.62

$47,247,250.59

$22,896,039.49

$41,779,918.62

Plan t Op eratio n s & M ain ten an ce

Functional Classification FY2 0 0 6

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

Total Exp en s es

$0.00 10 ,0 5 6 , 0 6 8 .7 1 2,480,347.71
3 6 , 6 0 1.2 9
6,383,957.71 15 , 5 4 9 , 2 0 4 .8 5
3 ,6 9 3 , 6 7 1.8 7

$0.00
2 5 , 4 17 ,2 7 8 . 7 6 84,010.00

$ 1, 4 5 0 .0 0 3 ,2 9 9 , 7 14 .6 8
582,595.83 (8,384.96) 25,837.56 4,858.35
1,7 10 , 8 3 7 .2 0 16 ,0 3 8 , 3 6 8 .3 5
2 ,13 4 , 8 7 0 .2 3

$0.00

$ 8 2 ,3 9 9 , 13 1. 3 9 13 6 ,112 ,5 0 8 . 7 8 48,425,330.39
29,564.04 3,848,404.22 29,348,648.08 10 , 4 2 1,4 7 7 . 5 9 99,473,720.36 19 , 9 6 4 ,3 0 2 . 3 7

$ 3 8 ,19 9 , 8 5 2 .14

$ 2 5 , 5 0 1,2 8 8 . 7 6

$ 2 3 ,7 9 0 , 14 7 .2 4

$0.00

$430,023,087.22

Georgia State University Annual Financial Report FY 2006 31

Note 16. Component Units

Georgia State University Foundation, Inc. Georgia State University Foundation, Inc. (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 28-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 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. The fiscal year of the Foundation is July 1 through June 30.

During the year ended June 30, 2006, the Foundation distributed $14,843,631 to the University for both restricted and unrestricted purposes. This amount includes land transferred at its historical cost of $7,470,140 to the University. Complete financial statements for the Foundation can be obtained from James F. Winters, III, Controller, Georgia State University Foundation, P.O. Box 3963, Atlanta, GA 30302-3963 or in person at One Park Place South, Atlanta, GA.

Investments for Component Units:

Georgia State University Foundation holds endowment and other investments in the amount of $108.7 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.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Equities and Equity Funds Fixed Income Securities and Funds Real Estate Investment Trust Funds
Total Investments

$60,588,703.00 33,350,103.00 3,702,251.00
$97,641,057.00

$62,323,033.00 39,757,180.00 6,576,018.00
$108,656,231.00

Georgia State University Annual Financial Report FY 2006 32

Capital Assets for Component Units:

Georgia State University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$3,746,265.00 54,462,946.00 58,209,211.00
63,537,731.00 63,537,731.00 19,129,452.00 44,408,279.00 $102,617,490.00

Long-term Liabilities for Component Units:

Changes in long-term liabilities for Georgia State University Foundation, Inc. for the fiscal year ended June 30, 2006 are shown below:

Compensated Absences Rialto Center - Capital Lease Alpharetta Campus Facilities - Capital Lease Student Recreation Center - Bonds Piedmong Ellis - Promissory Note Piedmont Ellis - Bonds Piedmont Ellis- Unamortized Bond Prem. Other Liabilities
Total Long Term Debt

Beginning Balance July 1, 2005
$0.00 3,833,028.27 7,226,925.00 28,015,000.00 8,833,332.00
0.00 0.00 0.00
$47,908,285.27

Additions
$19,101.00
161,330,000.00 6,620,809.00 249,819.00
$168,219,729.00

Reductions
$0.00 263,001.27 388,275.00 1,490,000.00 8,833,332.00
289,136.00
$11,263,744.27

Ending Balance June 30, 2006
$19,101.00 3,570,027.00 6,838,650.00 26,525,000.00
0.00 161,330,000.00
6,331,673.00 249,819.00
$204,864,270.00

Amounts due within
One Year
$19,101.00 281,246.00 404,975.00 1,550,000.00
$2,255,322.00

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 is being financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (the "Authority"). 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 in turn leases 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
Georgia State University Annual Financial Report FY 2006 33

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 extension of 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.

Annual debt requirements to maturity for TUFF/Rialto Capital Lease Obligation are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

Capital Lease Obligation

Principal

Interest

Total

$281,246.00 300,755.00 321,618.00 343,927.00 367,785.00 1,954,696.00 $3,570,027.00

$231,538.00 212,029.00 191,166.00 168,857.00 144,999.00 310,100.00 $1,258,689.00

$512,784.00 512,784.00 512,784.00 512,784.00 512,784.00 2,264,796.00 $4,828,716.00

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 and are 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 in turn subleases the facilities to the Board of Regents of the University System of Georgia (Board of Regents) for the use by 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.

Georgia State University Annual Financial Report FY 2006 34

Annual debt requirements to maturity for Alpharetta Capital Lease Obligation are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2019

Year
1 2 3 4 5 6-10 11-13

Capital Lease Obligation Principal Interest Total

$404,975.00 421,675.00 438,375.00 455,075.00 471,775.00 2,701,225.00 1,945,550.00 $6,838,650.00

$298,973.68 282,469.35 264,956.94 246,318.72 226,383.66 782,949.41 135,303.40
$2,237,355.16

$703,948.68 704,144.35 703,331.94 701,393.72 698,158.66
3,484,174.41 2,080,853.40 $9,076,005.16

Student Recreation Center Note Payable

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%.

Annual debt service requirements to maturity for ADA/GSU Student Recreation Center Revenue Notes Payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2019

1 2 3 4 5 6-10 11-13

Bonds Payable

P r inc i pal

Interest

$1,550,000.00 1,615,000.00 1,680,000.00 1,755,000.00 1,830,000.00
10,505,000.00 7,590,000.00
$26,525,000.00

$1,249,946.66 1,085,058.74 1,015,585.00 942,004.39 864,340.00 2,956,188.12 462,056.25 $8,575,179.16

Total
$2,799,946.66 2,700,058.74 2,695,585.00 2,697,004.39 2,694,340.00
13,461,188.12 8,052,056.25 $35,100,179.16

Piedmont Ellis Bonds

On September 8, 2005, $161,330,000 of tax-exempt and taxable revenue bonds were issued by the Atlanta Development Authority (ADA) on behalf of the Foundation with the proceeds to be used for the purpose of financing the acquisition, construction and equipping of certain land,

Georgia State University Annual Financial Report FY 2006 35

buildings and personal property to be used as a student housing project. The project has approximately 1,984 beds, including community activity facilities, site amenities and parking for approximately 786 vehicles. There is a 22-month construction schedule for the project to be completed and open for occupancy in the fall semester of 2007. The real property upon which the project is located is owned by the Board of Regents and leased to the Foundation pursuant to a Ground Lease for a construction term of up to two years. Upon completion of the project, the Foundation will lease the facility to the Board of Regents on an annually-renewable basis for a term of 33 years for the use and benefit of the University. Principal payments are to be made annually starting September 1, 2009 and ending September 1, 2036. Interest is paid semiannually through 2036 at a rate specified in the revenue bonds ranging from 3.875% to 5.0%.

Annual debt service requirements to maturity for ADA/GSU Piedmont Ellis Student Housing Revenue Bonds Payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037

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

Bonds Payable

Principal

Interest

Total

$0.00 0.00 0.00
1,270,000.00 1,580,000.00 13,105,000.00 22,345,000.00 28,735,000.00 36,680,000.00 46,805,000.00 10,810,000.00 $161,330,000.00

$7,762,467.50 7,762,467.50 7,762,467.50 7,713,784.18 7,642,822.50
36,740,777.49 32,817,020.89 26,488,895.89 18,218,854.18
7,663,229.21 78,822.92
$160,651,609.76

$7,762,467.50 7,762,467.50 7,762,467.50 8,983,784.18 9,222,822.50
49,845,777.49 55,162,020.89 55,223,895.89 54,898,854.18 54,468,229.21 10,888,822.92 $321,981,609.76

Georgia State University Research Foundation, Inc. Georgia State University Research Foundation, Inc. (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.

Georgia State University Annual Financial Report FY 2006 36

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 the year ended June 30, 2006, the Research Foundation paid to the University $49,845,424 in grant revenue and $1,033,221 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:
Deposits:
The custodial credit risk for deposits is the risk that in the event of a bank failure, the Research Foundations deposits may not be recovered. 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 Authority 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. Insurance of accounts provided by the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation.
At June 30, 2006, the Research Foundation's carrying amount of deposits was $5,296,043 and the bank balance was $6,380,292. Of the bank balance, $100,000 was covered by FDIC insurance and the remaining balance was uninsured and uncollateralized.
Investments:
At June 30, 2006, the carrying value and fair value of the Research Foundation's investments was $5,619,165. Investments are comprised of common stock and mutual funds. The common stock investment in the amount of $198,607 is held in the Research Foundation's name. Other
Georgia State University Annual Financial Report FY 2006 37

investments are held by the Georgia State University Foundation on behalf of the Research Foundation.
Capital Assets for Component Units:
Georgia State University Research Foundation, Inc. had the following Capital Asset activity for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land (and other assets) Construction W ork-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Total Assets Being Depreciated
Less: Accumulated Depreciation Bu ild in g s Facilities and Other improvements Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning Balances 7/1/2005
$150,024.00
150,024.00
3,894,651.00 359,744.00
4,254,395.00
402,948.00 269,719.00 672,667.00
3,581,728.00
$3,731,752.00

Additions $1,493,967.00 1,493,967.00

Reductions $0.00 0.00

Ending Balance 6/30/2006
$1,643,991.00 0.00
1,643,991.00

3,894,651.00

359,744.00

0.00

0.00

4,254,395.00

87,629.00 21,584.00 109,213.00
(109,213.00)
$1,384,754.00

0.00 0.00 $0.00

490,577.00 291,303.00 781,880.00
3,472,515.00
$5,116,506.00

Georgia State University Annual Financial Report FY 2006 38

GEORGIA GWINNETT COLLEGE
Financial Report
For the Year Ended June 30, 2006

Georgia Gwinnett College Lawrenceville, Georgia

Daniel J. Kaufman President

Edwin R. Beauchamp Vice President for Business & Finance

GEORGIA GWINNETT COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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 ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ..................................................... 11 Note 2 Deposits and Investments.................................................................................... 15 Note 3 Accounts Receivable............................................................................................ 16 Note 4 Inventories............................................................................................................ 16 Note 5 Notes/Loans Receivable....................................................................................... 16 Note 6 Capital Assets....................................................................................................... 16 Note 7 Deferred Revenue................................................................................................. 17 Note 8 Long-Term Liabilities .......................................................................................... 17 Note 9 Significant Commitments.................................................................17 Note 10 Lease Obligations................................................................................................ 17 Note 11 Retirement Plans ................................................................................................. 18 Note 12 Risk Management................................................................................................ 20 Note 13 Contingencies...................................................................................................... 21 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 21 Note 15 Special Item Transfer .......................................................................................... 21 Note 16 Natural Classifications With Functional Classifications ........................ . . . 22

GEORGIA GWINNETT COLLEGE
Management's Discussion and Analysis
Introduction
As the 35th and newest unit of the University System of Georgia, Georgia Gwinnett College is opening its doors to its charter class on August 18, 2006. Designated the "Campus of Tomorrow" because of the unique mission emanating from the Board of Regents, Georgia Gwinnett College will use state-of-the-art instructional technology, advanced learning methodology, and on-line courses to matriculate students. Of special importance will be the foundation of "mobile classrooms" in the sense that students will be able to access class work and archived lessons using various portable technology. Georgia Gwinnett College will offer initial baccalaureate degrees in business administration, biology, and psychology, followed by degree offerings in nursing, education, radiologic technology, and technology management in subsequent years. This pressing academic schedule, brought about by demand from the community, requires a rapid ramp-up in course design, technology acquisition, and the hiring of faculty.
Overview of the Financial Statements and Financial Analysis
Georgia Gwinnett College is proud to present its financial statements for fiscal year 2006. The emphasis of discussions about these statements will be on current year data. This is the first year of operation of Georgia Gwinnett College; therefore comparative data from the prior year is not available. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Gwinnett 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.
Georgia Gwinnett College Annual Financial Report FY 2006 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 ets : Current A s s ets Capital A s s ets , net 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 Unres tricted Total Net As s ets

June 30, 2006
$1,477,955.24 40,310,346.20 41,788,301.44
741,235.39 14,844,123.02 15,585,358.41
24,892,453.63 1,310,489.40
$26,202,943.03

The total assets of the institution are $41,788,301.44. A review of the Statement of Net Assets will reveal that most of this balance consists of $40,310,346.20 in capital assets, net of accumulated depreciation. These assets largely consist of two buildings and a capital lease. The Signature Building, built in 2002 and presently valued at approximately $18.7 million, was transferred to Georgia Gwinnett College from Georgia Perimeter College. This building was financed by the Georgia State Financing and Investment Commission. The capital lease, valued at approximately $16.3 million, was also transferred from Georgia Perimeter College. This lease has a liability of $15,417,892.57 associated with it. The Academic Building, built in 2006 and financed by the Georgia State Financing and Investment Commission, is valued at approximately $4.6 million. 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 are $15,585,358.41. The largest liability of the College is the capital lease of $15,417,892.57. The combination of the total assets of $41,788,301.44 and the total liabilities of $15,585,358.41 yields a balance of total net assets of $26,202,943.03. The total net assets consist primarily of investment in capital assets, net of debt, in the amount of $24,892,453.63.

Georgia Gwinnett College Annual Financial Report FY 2006 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, 2006

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 Special Item Trans fer Increas e in Net A s s ets
Net A s s ets at beginning of year, as originally reported
Net A s s ets at End of Year

$224,742.73
6,347,948.35 (6,123,205.62)
7,208,866.76
1,085,661.14 3,836,101.72 21,281,180.17 26,202,943.03
0.00
$26,202,943.03

The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with a small increase in the net assets at the end of the year, after accounting for the Special Item Transfer of assets from Georgia Perimeter College. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

Georgia Gwinnett College Annual Financial Report FY 2006 3

Revenue by Source For the Year Ended June 30, 2006
Operating Revenue Tuition and Fees Sales and Services Other
Total Operating Revenue
Nonoperating Revenue State A ppropriations Gifts Inves tment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State
Total Capital Gifts and Grants
Total Revenues

June 30, 2006
$75,186.00 2,941.99
146,614.74 224,742.73
7,663,329.00 332,230.00 19,929.75 0.04
8,015,488.79
3,836,101.72 3,836,101.72 $12,076,333.24

Expenses (By Functional Classification) For the Year Ended June 30, 2006
Operating Expens es In s t ru ct io n A cademic Support Student Services Institutional Support Plant Operations and Maintenance Unallocated Expenses
Total Operating Expens es
Nonoperating Expenses Interes t Expens e (Capital Ass ets)
Total Expenses

June 30, 2006
$1,160,452.66 1,495,626.06
148,058.75 3,369,876.82
174,011.11 (77.05)
6,347,948.35
806,622.03
$7,154,570.38

Expenditures for Instruction and Student Services are related to the hiring of administrative academic personnel charged with establishing the new academic programs at Georgia Gwinnett College. Expenditures for Academic Support are related to the continued support that Georgia Gwinnett College provides to Georgia Perimeter College, Medical College of Georgia, and the University of Georgia as partners in the former Gwinnett University Center. This support is given primarily in investment in state of the art technology for all classrooms on campus.
Georgia Gwinnett College Annual Financial Report FY 2006 4

The compensation and employee benefits category equaled $2,037,789.74. The amount reflects an increase in staff due to the start-up of the college. Utilities equaled $236,392.02 during the past year. Included in this cost is an increase due to a new building that was occupied as of January 1, 2006.

Under non-operating revenues (expenses) state appropriations equaled $7,663,329.00. This appropriation was to fund the services that Georgia Gwinnett College provides to the partners of the former Gwinnett University Center and the start-up of Georgia Gwinnett College.

Statement of Cash Flows

The final statement presented by Georgia Gwinnett 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, 2006 and 2005, 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, 2006
($5,013,655.37) 7,995,559.00 (1,562,942.60) 19,929.75 1,438,890.78 0.00
$1,438,890.78

Capital Assets
The College had one significant capital asset addition for facilities in fiscal year 2006. The first phase of the new Academic Building was completed and placed into service in early January, 2006.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Georgia Gwinnett College Annual Financial Report FY 2006 5

Long Term Debt and Liabilities
Georgia Gwinnett College had Long-Term Debt and Liabilities of $15,531,543.75 of which $687,420.73 is reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
In compliance with GASB Statement No. 39, Georgia Gwinnett College is not including the financial statements and notes for any component units for FY2006. The Georgia Gwinnett College Foundation does not meet the criteria to consider it significant for component unit reporting at this time.
Economic Outlook
As a new institution, Georgia Gwinnett College initially will be involved in a number of activities in the coming year that will have substantial impact on both its short and long term financial outlook. Included in these activities will be the hiring of faculty and deans, initiation of the College's first classes, integration of technology-related functions for enrollment, admission, matriculation, and other routine components of administering an educational institution, and most importantly accreditation through the Southern Association of Colleges and Schools (SACS) for accreditation. The accreditation process will consist of a thorough review of academic and financial aspects of the college. Receiving this accreditation is critical to the future of the college.
Also critical to the future of the institution is the construction of urgently needed facilities, some an important part of the SACS accreditation process. During the next year the College will begin construction of the second phase of an academic building, funded by Georgia State Investment and Financing Commission. Additionally, the College will begin construction of a parking deck financed through private funding and paid for by a new student parking fee. Additionally, the Board of Regents recently approved a new library learning resource center that is vital both for SACS accreditation and as a critical resource for Georgia Gwinnett College's student body. The funds for the new Library Resource Center will come through appropriated funds from the General Assembly.
Of further importance will be increasing our state budget allotment in advance of the normal process of funding. Normally, the General Assembly appropriates funds based on two-year retroactive cycle related to FTE's of an institution. Since Georgia Gwinnett College is new, funds for both the hiring of faculty and operating expenses must be provided before the FTE production occurs. This funding will come from several sources including the budget of the Board of Regents, special initiative funds from the General Assembly, or a combination of public and private dollars. Without adequate funding from these sources, Georgia Gwinnett College
Georgia Gwinnett College Annual Financial Report FY 2006 6

will not be able to acquire the personal and administrative resources necessary to meet the anticipated demand for student enrollment from the community. The next year will be an exciting time for Georgia Gwinnett College as it begins its operations and the initiation of classes. While there are many pressing needs for the college, the Gwinnett community, the General Assembly, and the Board of Regents have consistently supported the institution through its transition. We look forward to this continued support in meeting the objectives of the newest publicly funded state institution in the Nation. Daniel J. Kaufman, President Georgia Gwinnett College
Georgia Gwinnett College Annual Financial Report FY 2006 7

Statement of Net Assets
G EORG IA G WINNETT COLLEG E STATEMENT OF NET ASSETS June 30, 2006
AS S ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Other Total Current A s s ets
Noncurrent As s ets 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 Other Liabilities Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Inves ted in Capital A s s ets , net of related debt Unres tricted
TOTAL NET AS S ETS

June 30, 2006
$1,438,890.78
39,064.46 1,477,955.24
40,310,346.20 40,310,346.20 41,788,301.44
2,935.84 13,222.07 37,656.75 573,769.55 113,651.18 741,235.39
14,844,123.02 14,844,123.02 15,585,358.41
24,892,453.63 1,310,489.40
$26,202,943.03

Georgia Gwinnett College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA GWINNETT COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES i n NET ASSETS
for the Year Ended June 30, 2006

REVENUES

June 30, 2006

Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Sales and Services Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Staff
Employee Benefits T ra v e l Utilities Supplies and Other Services De p re c ia t io n
Total Operating Expens es Operating Income (loss)

$75,186.00 2,941.99
146,614.74 224,742.73
1,691,061.93 346,727.81 20,538.74 236,392.02
3,072,078.98 981,148.87
6,347,948.35 (6,123,205.62)

NONOPERATING REVENUES (EXPENSES) State Appropriations 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 State Total Other Revenues Special Item (See Note 15) Increase in Net As sets
NET ASSETS Net Assets-beginning of year, as originally reported
Net Assets-End of Year

7,663,329.00 332,230.00 19,929.75 (806,622.03) 0.04
7,208,866.76 1,085,661.14
3,836,101.72 3,836,101.72 21,281,180.17 26,202,943.03
0.00 $26,202,943.03

Georgia Gwinnett College Annual Financial Report FY 2006 9

Statement of Cash Flows
GEORGIA GWINNETT COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Payments to Suppliers Payments to Employees Other Receipts (payments) Net Cash Provided (used) by Operating Activities
CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations 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 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 Interes t on Investments 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
RECONCILIATION OF OPERATING LOSS TO NET CAS H PROVIDED (US ED) BY OPERATING ACTIVITIES :
Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities
De p re c ia t io n Change in As sets and Liabilities :
Receivables, net Accounts Payable Other Liabilities Compensated Absences
Net Cas h Provided (used) by Operating Activities
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL A ND RELA TED FINA NCING TRA NSA CTIONS
Gift of capital ass ets reducing proceeds of capital grants and gifts

June 30, 2006 $75,186.00 (27,008.50)
(3,662,555.95) (1,574,434.44)
175,157.52 (5,013,655.37) 7,663,329.00
332,230.00 7,995,559.00
(308,138.60) (448,181.97) (806,622.03) (1,562,942.60)
19,929.75 19,929.75 1,438,890.78
0.00 $1,438,890.78
($6,123,205.62)
981,148.87 (39,064.46) 16,157.91 37,656.75 113,651.18 ($5,013,655.37)
($3,836,101.72)

Georgia Gwinnett College Annual Financial Report FY 2006 10

GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Gwinnett College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Gwinnett College is one of thirty-five (35) 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 Gwinnett 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 Gwinnett College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Gwinnett 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 Gwinnett College) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, Georgia Gwinnett 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
Georgia Gwinnett College Annual Financial Report FY 2006 11

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 predominant 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.
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.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will
Georgia Gwinnett College Annual Financial Report FY 2006 12

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 Gwinnett College when complete. For the year ended June 30, 2006, GSFIC did not transfer any capital additions to Georgia Gwinnett College.
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 Gwinnett College had accrued liability for compensated absences in the amount of $0.00 as of 7-1-2005. For FY2006, $113,651.18 was earned in compensated absences and employees were paid $0 for a net increase of $113,651.18. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $113,651.18.
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.
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).
Georgia Gwinnett College Annual Financial Report FY 2006 13

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.

Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$1,372,140.58 (61,651.18)
$1,310,489.40

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Gwinnett College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Georgia Gwinnett College Annual Financial Report FY 2006 14

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, 2006, the carrying value of deposits was $1,438,890.78 and the bank balance was $1,544,840.08. Of the College's deposits, $1,444,840.08 were uninsured. Of these uninsured deposits, $1,444,840.08 were 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, 2006, the College had no investments.
Georgia Gwinnett College Annual Financial Report FY 2006 15

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Georgia State Financing and Inves tment Commis s ion Other
Les s A llowance for Doubtful A ccounts Net A ccounts Receivable

$27,008.50 12,055.96 39,064.46 0.00
$39,064.46

Note 4. Inventories Georgia Gwinnett College had no inventories as of June 30, 2006.

Note 5. Notes/Loans Receivable Georgia Gwinnett College had no loans/notes receivable as of June 30, 2006.

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Building and Building Improvements Equipment Capital Leases Library Collections Total Assets Being Depreciated
Less: Accumulated Depreciation Buildings Equipment Capital Leases Library Collections Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning Balances 7/1/2005
$0.00 0.00

Special Item
Transfers
$850,827.25 850,827.25

Additions

Reductions

$3,847,663.72 3,847,663.72

$4,671,482.47 4,671,482.47

Ending Balance 6/30/2006
$27,008.50 27,008.50

0.00

19,727,623.33

0.00

1,171,577.10

0.00

17,279,804.07

0.00

789,079.00

0.00

38,968,083.50

4,676,480.47 61,631.34
229,947.30 4,968,059.11

3,554.00 3,554.00

24,404,103.80 1,233,208.44 17,279,804.07 1,015,472.30 43,932,588.61

0.00 0.00 0.00 0.00 0.00
0.00
$0.00

986,381.17 516,866.08 991,557.79 176,851.00 2,671,656.04
36,296,427.46
$37,147,254.71

389,028.55 246,992.66 262,565.66 82,562.00 981,148.87
3,986,910.24
$7,834,573.96

3,554.00 3,554.00
0.00
$4,671,482.47

1,375,409.72 763,858.74
1,254,123.45 255,859.00
3,649,250.91
40,283,337.70
$40,310,346.20

Georgia Gwinnett College Annual Financial Report FY 2006 16

Note 7. Deferred Revenue Georgia Gwinnett College had no deferred revenue as of June 30, 2006.

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total LongTermObligations

Beginning Balance July 1, 2005

Special Item Transfer

$0.00 $15,866,074.54

Additions $0.00

Reductions

Ending Balance June 30, 2006

$448,181.97 $15,417,892.57

Current Portion
$573,769.55

0.00

0.00

0.00

$0.00 $15,866,074.54

113,651.18 113,651.18
$113,651.18

113,651.18

0.00

113,651.18

$448,181.97 $15,531,543.75

113,651.18 113,651.18
$687,420.73

Note 9. Significant Commitments

Georgia Gwinnett College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $4,479,574.00 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.

Note 10. Lease Obligations

Georgia Gwinnett College is obligated under a capital lease for the acquisition of real property.

CAPITAL LEASES

Georgia Gwinnett College has one capital lease payable in monthly installments with the term expiring in 2023. Expenditures for fiscal year 2006 were $1,254,804.00, of which $806,622.03 represented interest expense. Principal paid on the capital lease was $448,181.97. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Buildings Total Assets Held Under Capital Lease

$17,279,804.07 _____________ $17,279,804.07

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 Gwinnett College Annual Financial Report FY 2006 17

Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 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

Real Property Capital Leas es
$1,354,804.00 1,374,804.00 1,374,804.00 1,374,804.00 1,374,804.00 6,920,676.00 7,054,000.00 2,154,309.06
22,983,005.06 7,565,112.49 0.00
$15,417,892.57

Georgia Gwinnett College's FY2006 expense for rental of real property and equipment under capital leases was $1,254,804.00.

Note 11. Retirement Plans

Teachers Retirement System of Georgia

Plan Description Georgia Gwinnett 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 Gwinnett College who are covered by TRS are required by State statute to

contribute 5% of their gross earnings to TRS. Georgia Gwinnett 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 2006, the employer

contribution rate was 9.24% for covered employees. Employer contributions for the current

fiscal year are as follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2006

100%

$64,331.13

Georgia Gwinnett College Annual Financial Report FY 2006 18

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 Gwinnett 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 2006, 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 Gwinnett College and the covered employees made the required contributions of $12,500.36 (9.65%) and $6,476.83 (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 Gwinnett 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.
Georgia Gwinnett College Annual Financial Report FY 2006 19

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 2006 amounted to $3,974.29, 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.
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 Gwinnett 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 Gwinnett 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 Gwinnett College Annual Financial Report FY 2006 20

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 Gwinnett College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Gwinnett 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, 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, 2006, there were no employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia Gwinnett College recognized as incurred $0.00 of expenditures, which was net of $0.00 of participant contributions.
Note 15. Special Item Transfers
Due to the creation of Georgia Gwinnett College by the State of Georgia, all assets purchased by the Gwinnett University Center were transferred to Georgia Gwinnett College as of July 1, 2005. These assets were transferred from Georgia Perimeter College, who acted as custodian for the Gwinnett University Center. The net book value of the assets transferred is $21,281,180.18. These assets are included in the Statement of Net Assets and are noted as Special Item Transfers
Georgia Gwinnett College Annual Financial Report FY 2006 21

on the Statement of Revenues, Expenses, and Changes in Net Assets and on Note 6, Capital Assets.
Note 16. Natural Classifications with Functional Classifications
The College's operating expenses by functional classification for FY2006 are shown below:

Natural Classification
Faculty Staff Benefits Travel Utilities Supplies and Others Services Depreciation
Total Expenses
N a tura l C la ssific a tion
Fa c ulty S ta ff B e ne fits Travel U tilitie s Supplie s a nd O the rs Se rvic e s D e pre c ia tion
Total Expenses

Functional Classification FY2006

Ins truction

A cad emic Su p p o rt

Student Se rv ic e s

Ins titutional Su p p o rt

$0.00
99,333.37 314,944.45 746,174.84

$0.00 564,090.62 138,935.26
7,254.22 3,741.34 669,207.87 112,396.75

$0.00 124,095.30
21,665.52 254.54
2,043.39

$0.00 993,268.46 185,987.71
13,029.98 25,608.50 2,149,643.61
2,338.56

$1,160,452.66

$1,495,626.06

$148,058.75

$3,369,876.82

Functional Classification

FY2 0 0 6

Pla n t

Op e ra tio n s

Un a llo ca te d

Total

& M ain ten an ce

Exp e n s es

Exp en s e s

$0.00 9,607.55
13 9 .3 2
10 7 ,7 0 8 .8 1 (63,760.34) 12 0 ,3 15 .7 7

$0.00 (77.05)

$0.00 1,6 9 1, 0 6 1.9 3 346,727.81
20,538.74 236,392.02 3,072,078.98 9 8 1, 14 8 .8 7

$ 17 4 ,0 11.11

($77.05)

$6,347,948.35

Georgia Gwinnett College Annual Financial Report FY 2006 22

GEORGIA HIGHLANDS COLLEGE
Financial Report
For the Year Ended June 30, 2006

J. Randy, Pierce President

Georgia Highlands College Rome, Georgia
Wilbur Shuler Vice President, Finance & Business

GEORGIA HIGHLANDS COLLEGE ANNUAL FINANCIAL REPORT FY 2006
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 .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 30 Note 16 Component Units ........................................................................ 31

GEORGIA HIGHLANDS COLLEGE
Management's Discussion and Analysis

Introduction

Georgia Highlands College (previously named Floyd College) is one of the 35 institutions of higher education of the University System of Georgia. The name change for the college became official on August 1, 2005. The College, located in Rome, Georgia, and Cartersville, Georgia (with satellite offices in Marietta, Georgia and Acworth, 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 3,000 students each year. The institution continues to grow as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
95 90 88

Students (Headcount)
3,817 3,416 3,293

Students (FTE)
3,072 2,724 2,541

Overview of the Financial Statements and Financial Analysis

Georgia Highlands College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 Highlands 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.

Georgia Highlands College Annual Financial Report FY 2006 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

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, 2006
$2,192,459.99 29,758,418.65
26,612.39 31,977,491.03
1,674,114.93 250,751.25
1,924,866.18
29,758,418.65 26,612.39 75,311.29 38,590.16
153,692.36 $30,052,624.85

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

The total assets of the institution increased by $17,764,322.63. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $17,936,464.01 of investment in plant, net of accumulated depreciation. This was due primarily to placing into service the new Cartersville Campus.
The total liabilities for the year increased by $272,815.83. The combination of the increase in total assets of $17,764,322.63 and the increase in total liabilities of $272,815.83 yields an increase in total net assets of $17,491,506.80. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $17,936,464.01.

Georgia Highlands College Annual Financial Report FY 2006 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, 2006

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

$10,840,602.01 24,926,698.23 (14,086,096.22) 13,634,445.37
(451,650.85) 18,295,879.92 17,844,229.07 12,561,118.05
(352,722.27) 12,208,395.78 $30,052,624.85

$9,226,924.76 20,691,723.00 (11,464,798.24) 11,656,260.04
191,461.80 576,351.04 767,812.84 11,793,305.21
0.00 11,793,305.21 $12,561,118.05

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 Highlands College Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$5,609,317.15
3,672,234.71 213,830.20
1,136,223.41 208,996.54
10,840,602.01
12,203,145.00 375,451.64 971,435.53 79,843.91 4,767.94
13,634,644.02
18,295,879.92
18,295,879.92
$42,771,125.95

June 30, 2005
$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

Georgia Highlands College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

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, 2006
$10,238,920.20
1,833,942.92 1,637,082.13 4,142,723.26 2,437,239.89 2,730,587.66 1,148,830.09
757,372.08
24,926,698.23
198.65 $24,926,896.88

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
0.00 $20,691,723.00

Operating revenue increased by $1,613,677.75, due primarily to the $1,170,106.40 increase in tuition and fee revenue. Non-operating revenue showed an increase of $2,132,136.20, a significant portion of which was the increase in State Appropriations of $1,369,015.00, offset by the reduction of Non Operating Grants and Contracts of ($281,153.43). State gift revenue increased by $17,719,528.88, due to the funding received for the new Cartersville Center.
Revenues associated with the auxiliary services decreased from last year by ($497,832.07), due primarily to the sale of the bookstore to Barnes & Noble in December. While this segment of auxiliary services has traditionally carried the smaller units, such as food services, vending, and to some extent data card services, we have also experienced a dramatic cost savings as well.
The compensation and employee benefits category increased by $1,923,892.83. In addition to rate increases in salaries, benefits, etc., this increase also reflects the growth and expansion of the College.
Utilities increased by $295,843.48 during the past year. The increase was primarily associated with the increased natural gas costs, as well as the expected increase of covering the new campus.

Georgia Highlands College Annual Financial Report FY 2006 5

Statement of Cash Flows
The final statement presented by the Georgia Highlands 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, 2006 and 2005, 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, 2006
($13,052,593.13) 13,388,177.08 (525,951.61) 86,889.71 (103,477.95) 1,112,803.28
$1,009,325.33

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

Capital Assets

The College had a significant capital asset addition for facilities in fiscal year 2006. The new Cartersville Campus was completed and opened in August 2005.

For additional information concerning Capital Assets, see Notes 1 and 6 in the notes to the financial statements.

Long Term Debt and Liabilities

Georgia Highlands College had Long-Term Debt and Liabilities of $592,294.80 of which $341,543.55 was reflected as current liability at June 30, 2006.

For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Georgia Highlands College Annual Financial Report FY 2006 6

Component Units In compliance with GASB Statement No. 39, Georgia Highlands College has included the financial statements and notes for all required component units for FY2006. The Georgia Highlands College Foundation, Inc. had investments of $634,000 as of June 30, 2006. 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 the expenses that accompany rapid growth, 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. J. Randy Pierce, President Georgia Highlands College
Georgia Highlands College Annual Financial Report FY 2006 7

Statement of Net Assets

GEORGIA HIGHLANDS COLLEGE STATEMENT OF NET ASSETS June 30, 2006

ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Pledges Receivable Inventories (note 4) Prepaid items Other Assets Total Current Assets
Noncurrent Assets Investments (including Real Estate) Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Deferred Revenue (note 7) Deposits Held for Other Organizations Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) 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

Georgia Highlands College
$1,009,325.33
73,674.44 649,791.05
9,652.07 450,017.10
2,192,459.99
26,612.39
29,758,418.65
29,785,031.04 31,977,491.03
127,264.70 98,273.51 13,942.28
1,031,135.04 61,955.85
341,543.55 1,674,114.93
250,751.25 250,751.25 1,924,866.18
29,758,418.65
26,612.39 75,311.29 38,590.16 153,692.36 $30,052,624.85

Component Unit Georgia Highlands College Foundation,
Inc.
$478,354.00
6,733.00
485,087.00 633,761.00
77,553.00 711,314.00 1,196,401.00
0.00 0.00 0.00
469,616.00 549,039.00 177,746.00 $1,196,401.00

Georgia Highlands College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
GEORGIA HIGHLANDS COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Bookstore Food Services Other Organizations Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Georgia Highlands College
Total Operating Expenses Operating Income (loss)

Georgia Highlands College

Georgia Highlands College
Foundation, Inc.

$5,889,035.05 279,717.90
3,140,670.10 335,591.48 195,973.13 213,830.20 9,460.00
879,311.62 48,690.21
208,221.58 199,536.54 10,840,602.01
5,739,915.00 5,996,286.70 3,146,120.93
2,624.83 230,454.12 2,862,446.86 1,090,816.90 4,973,301.79 884,731.10
24,926,698.23 (14,086,096.22)

$0.00 502,993.00
51,022.00
28,000.00 5,600.00
587,615.00
35,520.00
102,095.00 1,790.00
114,909.00 254,314.00 333,301.00

Georgia Highlands College Annual Financial Report FY 2006 9

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

GEORGIA HIGHLANDS COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Ge orgia Highlands College

C ompone nt Un i t
Ge orgi a Hi gh l an ds
College Foundation, Inc.

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 St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

12,203,145.00

363,731.63 11,720.01
971,435.53 79,843.91 (198.65) 4,767.94
13,634,445.37 (451,650.85)
18,295,879.92
18,295,879.92 17,844,229.07
12,561,118.05 (352,722.27)
12,208,395.78 $30,052,624.85

5,126.00
(298,996.00) (293,870.00)
39,431.00
26,616.00 26,616.00 66,047.00
1,130,354.00 0.00
1,130,354.00 $1,196,401.00

Georgia Highlands College Annual Financial Report FY 2006 10

Statement of Cash Flows
GEORGIA HIGHLANDS COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Auxiliary Enterprise Charges: Bookstore Food Services 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 Other Nonoperating Receipts Net Cash Flows Provided by Non-capital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets Net Cash used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on 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, 2006
$6,009,298.83
3,969,583.71 217,530.20
(9,194,868.51) (12,166,454.31)
(2,862,446.86)
1,450,096.35 49,351.24
141,534.70 (666,218.48) (13,052,593.13)
12,203,145.00 (77,162.34)
1,352,291.53 (90,097.11)
13,388,177.08
(525,951.61) (525,951.61)
86,889.71 86,889.71 (103,477.95) 1,112,803.28 $1,009,325.33

Georgia Highlands College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
GEORGIA HIGHLANDS COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items 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
Change in fair value of investments recognized as a component of interest income Gift of capital assets reducing proceeds of capital grants and gifts

June 30, 2006
($14,086,096.22)
884,731.10 (376,928.02) 237,168.92
(61,248.43) (101,263.56) 489,588.10
2,722.01 (41,267.03) ($13,052,593.13)
($141.32) ($18,295,879.92)

Georgia Highlands College Annual Financial Report FY 2006 12

GEORGIA HIGHLANDS COLLEGE
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Highlands College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity Georgia Highlands College is one of thirty-five (35) 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 Highlands 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 Highlands College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Highlands 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 Highlands College) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, Georgia Highlands College is reporting the activity for the Georgia Highlands College Foundation, Inc.
See Note 16, Component Units, for foundation notes.
Georgia Highlands College Annual Financial Report FY 2006 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 predominant 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
Georgia Highlands College Annual Financial Report FY 2006 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 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 Highlands College when complete. For the year ended June 30, 2006, GSFIC transferred capital additions valued at $18,161,403.41 to Georgia Highlands College.
Georgia Highlands College Annual Financial Report FY 2006 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 Highlands College had accrued liability for compensated absences in the amount of $633,561.83 as of 7-1-2005. For FY2006, $442,701.09 was earned in compensated absences and employees were paid $483,968.12, for a net decrease of $(41,267.03). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $592,294.80.
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.
Georgia Highlands College Annual Financial Report FY 2006 16

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities Total Restricted Expendable

June 30, 2006
$75,311.29 $75,311.29

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, 2006
$85,309.40 389,421.86
9,652.07 (330,690.97) $153,692.36

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Georgia Highlands 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

Georgia Highlands College Annual Financial Report FY 2006 17

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 Georgia Highlands College has a restatement of prior year net assets decreasing beginning net assets by $352,722.27. This is due primarily to a correction of a prior year error related to invalid PELL receipts.
Georgia Highlands College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $1,003,900.33 and the bank balance was $1,584,770.58. Of the college's deposits, $1,484,770.58 were uninsured. Of these uninsured deposits, $1,484,770.58 were collateralized with securities held by the financial institution's trust department or agent in the College's name.
Georgia Highlands College Annual Financial Report FY 2006 19

B. Investments

At June 30, 2006, the carrying value of the College's investments was $26,312.39, 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 Pools Board of Regents Balanced Income Fund
Total Investment Pools

$26,612.39 $26,612.39

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 8.2 years. Of the College's total investment of $26,612.39 in the Balanced Income Fund, $17,527.00 is invested in debt securities.
Georgia Highlands 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 Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
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.
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.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations.

Georgia Highlands College Annual Financial Report FY 2006 20

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other
Less Allowance for Doubtful Accounts
Net Accounts Receivable

$304,517.14 13,786.87 73,674.44
433,820.35 825,798.80 102,333.31
$723,465.49

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Bookstore Food Services Physical Plant Other
Total

June 30, 2006
$0.00 $3,557.31
0.00 6,094.76 $9,652.07

Note 5. Notes/Loans Receivable Georgia Highlands College had no Notes or Loans Receivable as of June 30, 2006.

Georgia Highlands College Annual Financial Report FY 2006 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

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

Beginning Balances 7/1/2005
$569,490.00 0.00
246,304.94 815,794.94

Additions
$0.00
226,190.82 226,190.82

Reductions
$0.00
246,304.94 246,304.94

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

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

474,875.97 17,720,330.13
25,195.00 485,869.76
197,729.78
18,904,000.64

45,774.45 136,186.90
8,395.06 190,356.41

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

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

78,214.01 597,911.17
8,635.70 72,159.91
127,810.31
884,731.10

119,636.00 8,029.00
127,665.00

Total Capital Assets, Being Depreciated, Net

11,006,159.70

18,019,269.54

62,691.41

Capital Assets, net

$11,821,954.64

$18,245,460.36

$308,996.35

Ending Balance 6/30/2006
$569,490.00 0.00
226,190.82 795,680.82
1,831,260.97 36,592,223.35
1,375,203.00 2,296,004.54
0.00 2,312,039.68
0.00 44,406,731.54
1,095,815.42 9,682,506.54 1,107,250.63 1,607,377.79
0.00 1,951,043.33
0.00 15,443,993.71
28,962,737.83
$29,758,418.65

Georgia Highlands College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
Totals

June 30, 2006
$951,122.21 80,012.83
$1,031,135.04

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

633,561.83 633,561.83
$633,561.83

442,701.09 442,701.09
$442,701.09

483,968.12 483,968.12
$483,968.12

592,294.80 592,294.80
$592,294.80

341,543.55 341,543.55
$341,543.55

Note 9. Significant Commitments
Georgia Highlands College had no significant commitments as of June 30, 2006.
Note 10. Lease Obligations
Georgia Highlands College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment.
OPERATING LEASES
Georgia Highlands College'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 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, maintenance and custodial agreements, and leasing of parking lot space.

Georgia Highlands College Annual Financial Report FY 2006 23

Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30:

Year

2007

1

Total minimum lease payments

Less: Interest

Less: Executory costs (if paid) Principal Outstanding

Real Property & Equipment Operating Leases
$83,798.00 $83,798.00

Georgia Highlands College's FY2006 expense for rental of real property and equipment under operating leases was $116,441.34.

Note 11. Retirement Plans

Teachers Retirement System of Georgia

Plan Description Georgia Highlands 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 Highlands College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Highlands 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 2006, 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

2006 2005 2004

100% 100% 100%

$665,258.01 $587,585.40 $577,291.91

Georgia Highlands College Annual Financial Report FY 2006 24

Employees' Retirement System of Georgia
Plan Description Georgia Highlands 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 60. 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, 2006, for employees covered by ERS was $56,312.77. The College's total payroll for all employees was $11,736,201.70.
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, 2006, the ERS employer contribution rate for the College amounted to 10.41% of
Georgia Highlands College Annual Financial Report FY 2006 25

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 2006 amounted to $6,706.89, of which $5,862.16 was made by the College and $844.73 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, 2006, 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 Georgia Highlands 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 2006, 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 Highlands College and the covered employees made the required contributions of $262,393.27 (9.65%) and $136,229.51 (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 Highlands College Annual Financial Report FY 2006 26

Georgia Defined Contribution Plan
Plan Description Georgia Highlands 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 2006 amounted to $72,291.44 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 Highlands 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
Georgia Highlands College Annual Financial Report FY 2006 27

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 Highlands 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 Highlands College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Highlands 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, 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
Georgia Highlands College Annual Financial Report FY 2006 28

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, 2006, there were 86 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia Highlands College recognized as incurred $337,620.29 of expenditures, which was net of $104,848.00 of participant contributions.
Georgia Highlands College Annual Financial Report FY 2006 29

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Instruction
$5,739,915.00 1,210,921.85 1,540,736.88
2,624.83 124,739.88
55,731.40 1,535,702.89
28,547.47
$10,238,920.20

Research
$0.00
$0.00

Functional Classification FY2006

Public Service

Academic Support

$0.00

$0.00 1,047,668.09
252,284.24

35,210.64 500.00
8,151.32 408,948.37 81,180.26

$0.00

$1,833,942.92

Student Services
$0.00 $1,007,439.53
271,565.43
31,862.79 27,167.00 12,507.89 286,497.06
42.43
$1,637,082.13

Institutional Support
$0.00 2,079,986.34
898,971.91
36,113.54 104,192.20 87,561.45 910,400.53 25,497.29
$4,142,723.26

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

Plant Operations & Maintenance

Functional Classification FY2006

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 550,540.39 169,262.73 (11,012.94)
345.40
922,660.76 821,435.52 (15,991.97)

$0.00 2,730,587.66

$0.00 99,730.50 13,299.74 11,012.94 2,181.87
4,204.08 1,010,317.42
8,083.54

$0.00 757,372.08

$2,437,239.89

$2,730,587.66

$1,148,830.09

$757,372.08

Total Expenses
$5,739,915.00 5,996,286.70 3,146,120.93
2,624.83 230,454.12 2,862,446.86 1,090,816.90 4,973,301.79 884,731.10
$24,926,698.23

Georgia Highlands College Annual Financial Report FY 2006 30

Note 16. Component Units

Georgia Highlands College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Highlands 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. 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.

During August, 2005, Floyd College Foundation, Inc. formally changed its name to Georgia Highlands College Foundation, Inc.; therefore the financial statements are presented under the new name.

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, 2006, the Foundation distributed $114,909 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3175 Cedartown Highway S.E. Rome, GA 30162.

Investments for Component Units:

Georgia Highlands College Foundation holds investments, including endowment investments, in the amount of $633,761. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors.

Georgia Highlands College Foundation Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Equity Securities Mutual Funds

$546,269.74 44,845.00

$596,881.00 36,880.00

Total Investments

$591,114.74

$633,761.00

Georgia Highlands College Annual Financial Report FY 2006 31

GORDON COLLEGE
Financial Report
For the Year Ended June 30, 2006

Gordon College Barnesville, Georgia

Dr. Lawrence V. Weill
President

George J. Turner
Senior Vice President for Fiscal Affairs

GORDON COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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 .................................. 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 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
96 83 78

Students (Headcount)
3,500 3,449 3,415

Students (FTE)
3,014 2,959 2,898

Overview of the Financial Statements and Financial Analysis

Gordon College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006
$6,778,294.67 29,561,575.74
10,632.54 36,350,502.95
2,084,084.29 60,011.78
2,144,096.07
29,561,575.74
13,052.91
4,631,778.23 $34,206,406.88

June 30, 2005
$6,528,631.21 28,160,049.66
10,632.54 34,699,313.41
2,657,941.39 45,126.67
2,703,068.06
28,160,049.66
13,052.91
3,823,142.78 $31,996,245.35

The total assets of the institution increased by $1,651,189.54. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,401,526.08 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 missions of the institution.
The total liabilities for the year decreased by ($558,971.99). The combination of the increase in total assets of $1,651,189.54 and the decrease in total liabilities of ($558,971.99) yields an increase in total net assets of $2,210,161.53. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $1,401,526.08.

Gordon College Annual Financial Report FY 2006 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, 2006

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

$14,728,733.06 25,328,304.10 (10,599,571.04) 11,445,661.46
846,090.42 1,364,071.11 2,210,161.53 31,996,245.35
0.00 31,996,245.35 $34,206,406.88

$10,805,304.59 21,944,348.25 (11,139,043.66) 10,200,046.83
(938,996.83) 2,163,832.88 1,224,836.05 30,771,409.30
0.00 30,771,409.30 $31,996,245.35

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$3,550,387.99 3,594,461.09
76,983.79 6,415,783.31 1,091,116.88 14,728,733.06
11,007,927.67 194,237.00 243,496.79
11,445,661.46
1,364,071.11 1,364,071.11 $27,538,465.63

June 30, 2005
$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

Gordon College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$8,466,898.39
1,606,254.57 1,663,591.84 2,932,958.23 2,672,931.30 1,685,418.73 5,351,490.65
948,760.39
25,328,304.10
0.00 $25,328,304.10

June 30, 2005
$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
0.00
$21,944,348.25

Revenues associated with the residential life category, net of sponsored and unsponsored scholarships, increased approximately $2,013,577 during the year. This increase reflects the changing environment of residence life on the College's campus. In FY 2006, the College increased the number of beds on campus by four hundred and fifty six (456) and the number of meal plans by approximately the same amount. The increase in revenues in rents and meal plans is also due to a three percent (3%) increase in the fees for these services based on the CPI.
Revenues from Other Operating Revenues increased by $1,004,109.97. This increase is the result of the reallocation of bond funds by GSFIC from project numbers J-53, J-54, and J-67 as well as from agency funds for the reallocation of funds from project I-10.
The compensation and employee benefits category increased by approximately $1,963,857.64. The increase reflects an increased cost of health insurance for the employees of the institution. With the increased enrollment, the need for more faculty has also been a factor in the increased amount for compensation and employee benefits category.
Utilities increased by approximately $380,275.12 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006, as well as the additional number of beds on campus.
Under non-operating revenues (expenses) state appropriations increased by approximately $916,608.19. The College's enrollment increased and as a result, the amount of state appropriations increased too. We are hopeful that the economy is now on an upward trend.
Gordon College Annual Financial Report FY 2006 5

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 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, 2006 and 2005, 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, 2006
($9,271,694.59) 10,429,393.55 (1,310,414.46)
243,496.79 90,781.29
5,777,992.34
$5,868,773.63

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

Capital Assets
The College had one significant capital asset addition for facilities in fiscal year 2006. The Lambdin renovation was completed.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Gordon College had Long-Term Debt and Liabilities of $358,383.55 of which $298,371.77 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Gordon College Annual Financial Report FY 2006 6

Component Units In compliance with GASB Statement No. 39, Gordon College has included the financial statements and notes for all required component units for FY2006. 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 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 2006 7

Statement of Net Assets

GORDON COLLEGE STATEMENT OF NET ASSETS
June 30, 2006

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 - Other Inventories (note 4) Prepaid items Other Ass ets Total Current A s s ets
Noncurrent As s ets Inves tments (including Real Es tate) Notes Receivable, net Capital A s s ets , net (note 6) Other Ass ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Compens ated A bs ences (current portion) Revenue/Mortgage Bonds Payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Notes and Loans Payable (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

Gordon College
$5,868,773.63
174.00 642,562.02 259,948.83
6,836.19 6,778,294.67
10,632.54 29,561,575.74 29,572,208.28 36,350,502.95
573,743.93 100,451.11 217,000.00 603,737.89
83,163.16 207,616.43 298,371.77
2,084,084.29 60,011.78
60,011.78 2,144,096.07
29,561,575.74
13,052.91 4,631,778.23 $34,206,406.88

Component Unit Gordon College
Foundation
$143,010.00 4,853,964.00
4,996,974.00
3,924,750.00 12,566,571.00
674,027.00 17,165,348.00 22,162,322.00
310,483.00
390,000.00 304,844.00 1,005,327.00
15,745,000.00 53,060.00
15,798,060.00 16,803,387.00
53,847.00 86,843.00 2,948,249.00 2,269,996.00 $5,358,935.00

Gordon College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

GORDON COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006

Component Unit

Gordon College

Gordon College Foundation

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Gifts and Contributions 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 Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 Gordon College
Total Operating Expens es Operating Income (los s )

$5,459,430.35 1,909,042.36
3,594,461.09
76,983.79 19,181.64
2,871,716.29 1,671,928.04 1,466,128.23
65,600.52 301,747.95 38,662.28 1,071,935.24 14,728,733.06

$0.00 88,204.00
279,521.00 367,725.00

6,016,175.89 4,523,898.36 2,785,209.57
589.00 144,482.10 1,812,876.33 1,597,799.56 7,174,313.80 1,272,959.49
25,328,304.10 (10,599,571.04)

264.00 176,684.00 179,175.00
92,172.00 448,295.00 (80,570.00)

Gordon College Annual Financial Report FY 2006 9

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

GORDON COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Compone nt Un i t

Gordon Colle ge

Gordon College Fou n da ti o n

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 Income 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 Loss on Bond Retirement Additions to permanent endowments T otal Other Revenues Increase in Net Assets
NET AS SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year

11,007,927.67

194,237.00 243,496.79
11,445,661.46 846,090.42

381,092.00
(248,578.00)
132,514.00 51,944.00

1,364,071.11

1,364,071.11 2,210,161.53
31,996,245.35 0.00
31,996,245.35 $34,206,406.88

0.00 51,944.00
5,306,991.00 0.00
5,306,991.00 $5,358,935.00

Gordon College Annual Financial Report FY 2006 10

Statement of Cash Flows
GORDON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Principal Paid on Ins tallment Debt Interes t Paid on Ins tallment Debt 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 Sale 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, 2006 $3,559,520.01
3,594,742.70 68,290.34
(11,528,993.72) (10,439,980.21)
(1,812,876.33)
2,897,757.93 517,901.81
1,462,453.23 65,600.52 303,344.27 38,662.28
2,001,882.58 (9,271,694.59) 11,007,927.67
(772,771.12) 194,237.00
10,429,393.55
(1,310,414.46)
(1,310,414.46)
243,496.79
243,496.79 90,781.29 5,777,992.34 $5,868,773.63

Gordon College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
GORDON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($10,599,571.04)
1,272,959.49 (193,953.49)
35,552.91 (481.59)
250,053.45 (64,806.10) (40,717.43) 69,269.21 ($9,271,694.59)
($1,364,071.11)

Gordon College Annual Financial Report FY 2006 12

GORDON COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Gordon College is reporting the activity for the Gordon 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
Gordon College Annual Financial Report FY 2006 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 predominant 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Gordon College Annual Financial Report FY 2006 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 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, 2006, GSFIC did not transfer any capital additions 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 2006 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 $289,114.34 as of 7-1-2005. For FY2006, $352,737.09 was earned in compensated absences and employees were paid $283,467.88, for a net increase of $69,269.21. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $358,383.55.
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 2006 16

Expendable Restricted Net Assets include the following:

June 30, 2006

Res tricted - E&G and Other Organized A ctivities Federal Loans Total Res tricted Expendable

$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 Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$2,743,673.75 1,701,639.02
25,683.80 160,781.66 $4,631,778.23

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 Gordon College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Gordon College Annual Financial Report FY 2006 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.
Gordon College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $1,036,560.64 and the bank balance was $1,171,556.84. Of the College's deposits, $1,071,556.84 were uninsured. Of these uninsured deposits, $1,071,556.84 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.
Gordon College Annual Financial Report FY 2006 19

B. Investments

At June 30, 2006, the carrying value of the College's investments was $4,829,987.99, 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 P ools Board of Regents Short-Term Fund
Total Investment P ools

$ 4 ,8 2 9 ,9 8 7 .9 9 $ 4 ,8 2 9 ,9 8 7 .9 9

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.
The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the College's total investment of $4,829,987.99 in the Short Term Fund, $4,748,061 is invested in debt securities.
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, 2006, $4,829,987.99 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.
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. As previously stated, the Board of Regents Short-Term Fund investment pool is not rated.

Gordon College Annual Financial Report FY 2006 20

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$22,033.02 25,982.72 174.00
606,113.28 654,303.02
11,567.00
$642,736.02

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$240,617.97 19,330.86
$259,948.83

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006, the allowance for uncollectible accounts was $.00.

Gordon College Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A ssets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital As sets Not Being Depreciated
Capital A ssets , Being Depreciated: In fra s t ru ct u re Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leases Library Collections Capitalized Collections Total A ssets Being Depreciated

Beginning Balances 7/1/2005
$348,207.04 0.00
19,158.75 367,365.79

Additions
$60,667.00
297,968.61 358,635.61

Reductions
$0.00 (1,083.33)
(1,083.33)

2,699,055.85 32,993,424.62
1,362,167.35 3,706,487.64
2,498,975.99 1,083.33
43,261,194.78

2,010,420.46 206,444.66 98,984.84
2,315,849.96

1,083.33 1,083.33

Les s: A ccumulated Depreciation

Infras tructure

1,378,212.81

96,098.52

Bu ild in g s

8,907,332.40

750,164.77

Facilities and Other improvements

853,088.25

41,885.51

Eq u ip me n t

2,253,960.99

304,689.61

Capital Leases

Library Collections

2,075,916.46

80,121.08

Capitalized Collections

Total A ccumulated Depreciation

15,468,510.91

1,272,959.49

0.00

Total Capital As sets, Being Depreciated, Net Capital A ssets , net

27,792,683.87 $28,160,049.66

1,042,890.47 $1,401,526.08

1,083.33 $0.00

Ending Balance 6/30/2006
$408,874.04 1,083.33
317,127.36 727,084.73
2,699,055.85 35,003,845.08 1,362,167.35 3,912,932.30
0.00 2,597,960.83
0.00 45,575,961.41
1,474,311.33 9,657,497.17
894,973.76 2,558,650.60
0.00 2,156,037.54
0.00 16,741,470.40
28,834,491.01
$29,561,575.74

Gordon College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $601,007.23 2,730.66 $603,737.89

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

289,114.34 289,114.34
$289,114.34

352,737.09 352,737.09
$352,737.09

283,467.88 283,467.88
$283,467.88

358,383.55 358,383.55
$358,383.55

Current Portion
$0.00
298,371.77 298,371.77 $298,371.77

Note 9. Significant Commitments
Gordon College had no significant unearned, outstanding, construction or renovation contracts that are not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Gordon College had no lease obligations as of June 30, 2006
Gordon College had no expense for rental of real property and equipment under operating leases for fiscal year 2006.

Gordon College Annual Financial Report FY 2006 23

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 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 2006, 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

2006 2005 2004

100% 100% 100%

$543,410.66 $472,048.55 $466,188.64

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 60. 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

Gordon College Annual Financial Report FY 2006 24

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, 2006, for employees covered by ERS was $109,088.50. The College's total payroll for all employees was $10,540,074.25.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the College amounted 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 2006 amounted to $13,056.35, of which $8,549.44 was made by the College and $4,506.91 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, 2006, financial report, which may be obtained through ERS.
Gordon College Annual Financial Report FY 2006 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 2006, 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 $333,701.13 (9.65%) and $172,903.11 (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 2006 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 2006 amounted to $26,067.53 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. Gordon College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Gordon College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of
Gordon College Annual Financial Report FY 2006 27

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, 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, 2006, 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, 2006, Gordon College recognized as incurred $103,395.84 of expenditures, which was net of $43,250.10 of participant contributions.
Gordon College Annual Financial Report FY 2006 28

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$6,016,175.89 295,002.44
1,545,056.49 39.00
41,261.45
44,876.30 410,971.91 113,514.91

$0.00

$0.00

$0.00 698,363.20 179,970.92
8,934.16
14,475.40 601,511.83 102,999.06

$0.00 932,195.43 249,554.77
46,171.16 1,250.00 43,754.22 388,253.07 2,413.19

$0.00 1,348,380.31 436,063.06
34,595.86
36,301.79 1,127,651.62
(50,034.41)

$8,466,898.39

$0.00

$0.00

$1,606,254.57

$1,663,591.84

$2,932,958.23

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

Auxiliary En terp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 821,571.21 283,411.10 (165,404.64)
3,326.19
1,188,421.38 486,113.56 55,492.50

$0.00 1,685,418.73

$0.00 428,385.77
91,153.23 165,954.64
10,193.28 126,207.60 269,970.47 4,159,811.81
99,813.85

$0.00 948,760.39

$6,016,175.89 4,523,898.36 2,785,209.57
589.00 144,482.10 1,812,876.33 1,597,799.56 7,174,313.80 1,272,959.49

$2,672,931.30

$1,685,418.73

$5,351,490.65

$948,760.39

$25,328,304.10

Gordon College Annual Financial Report FY 2006 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 38member 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.

Capital Assets valued at $12.6 million and the associated long-term debt of $16.1 million are included in the financial statements of the Foundation. The Series 2004 Bond issue will be used to finance the cost of the construction and equipping of a new student housing complex containing approximately 459 beds, including related parking for approximately 597 vehicles and road and pedestrian walkway improvements located on the campus of Gordon College. Interest rates on the Series 2004 bonds range from 3 to 5%.

During the year ended December 31, 2005, the Foundation distributed $92,172 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 419 College Drive, Barnesville, GA 30204.

Investments for Component Units:

Gordon College Foundation Investments are comprised of the following amounts at December 31, 2005:

Co s t

Fair Value

Equity Securities Mutual Funds Real Estate

$6,130.00 2,893,090.00
293,659.00

$6,130.00 3,624,961.00
293,659.00

Total Inves tments

$3,192,879.00

$3,924,750.00

Gordon College Annual Financial Report FY 2006 30

Capital Assets for Component Units:
The following represents Gordon College Foundation's Capital Assets for the Housing complex, which was in progress as of December 31, 2005:

December 31, 2005

Capital As sets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital As sets being Depreciated
Less Total Accumulated Depreciation
Total Capital As sets being Depreciated, Net Capital Ass ets, Net

$12,137,201.00 579,964.00
12,717,165.00
150,594.00
12,566,571.00 $12,566,571.00

Long-Term Liabilities for Component Units:

Long-term liability activity for the year ended December 31, 2005 was as follows:

Beginning Balance January 1, 2005

Additions

Reductions

Ending Balance December 31, 2005

Amounts due within
One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable
Total Long Term Debt

$0.00

$362,977.00

$5,073.00

$357,904.00

$304,844.00

0.00

16,135,000.00

16,135,000.00

390,000.00

$0.00

$16,497,977.00

$5,073.00

$16,492,904.00

$694,844.00

Gordon College Annual Financial Report FY 2006 31

Debt Service Obligations

Annual debt service requirements to maturity for the Housing complex Series 2004 bonds payable are as follows:

Year ending December 31:

2006

1

2007

2

2008

3

2009

4

2010

5

2011 through 2015

6-10

2016 through 2020

11-15

2021 through 2025

16-20

2026 through 2030

21-25

Principal
$390,000.00 405,000.00 415,000.00 430,000.00 440,000.00
2,455,000.00 3,005,000.00 3,780,000.00 4,815,000.00

Bonds Payable Interest
$721,465.00 709,700.00 697,550.00 685,100.00 671,125.00
3,107,950.00 2,559,625.00 1,788,750.00
746,000.00

Total
$1,111,465.00 1,114,700.00 1,111,465.00 1,114,700.00 1,112,550.00 5,562,950.00 5,564,625.00 5,568,750.00 5,561,000.00

$16,135,000.00

$11,687,265.00

$27,822,205.00

Final maturity is scheduled for August 1, 2030.

Gordon College Annual Financial Report FY 2006 32

GEORGIA SOUTHERN UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Dr. Bruce Grube President

Georgia Southern University Statesboro, Georgia
Mr. Joe Franklin Vice President of Business and Finance

GEORGIA SOUTHERN UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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............................................................................................ 23 Note 4 Inventories............................................................................................................ 23 Note 5 Notes/Loans Receivable....................................................................................... 24 Note 6 Capital Assets....................................................................................................... 24 Note 7 Deferred Revenue................................................................................................. 25 Note 8 Long-Term Liabilities .......................................................................................... 25 Note 9 Significant Commitments.................................................................26 Note 10 Lease Obligations................................................................................................ 26 Note 11 Significant Contingent Liabilities ......................................................28 Note 12 Retirement Plans ................................................................................................. 29 Note 13 Risk Management................................................................................................ 32 Note 14 Contingencies...................................................................................................... 33 Note 15 Post-Employment Benefits Other Than Pension Benefits .................................. 33 Note 16 Natural Classifications With Functional Classifications..................................... 34 Note 17 Component Units ........................................................................ 35

GEORGIA SOUTHERN UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia Southern University is the largest and most comprehensive center of higher education in the southern half of Georgia. A residential campus of more than 16,500 students, Georgia Southern is one of the top universities of choice in Georgia for new freshman; every state and 86 nations are represented in the student body. The University's hallmark is a superior undergraduate experience emphasizing academic distinction, excellent teaching, and student success in its eight 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, College of Information Technology and Jiann-Ping Hsu College of Public Health.

FY2006 FY2005 FY2004

Faculty
705 663 661

Students (Headcount)
16,646 16,100 15,704

Students (FTE)
15,183 14,715 14,289

Overview of the Financial Statements and Financial Analysis

Georgia Southern University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 footnotes to the financial statements.

Georgia Southern University Annual Financial Report FY 2006 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, 2006
$48,863,254.67 280,495,747.11
2,905,000.02 332,264,001.80
17,168,984.24 76,771,398.61 93,940,382.85
203,618,388.87 2,465,813.64 3,286,533.81 0.00
31,418,696.27
$240,789,432.59

June 30, 2005
$40,914,597.42 249,191,321.85
5,161,001.51 295,266,920.78
16,580,352.73 44,331,389.94 60,911,742.67
205,289,375.71 2,321,820.06 3,302,099.97 0.00
23,587,298.88
$234,500,594.62

The total assets of the institution increased by $39,317,478.15. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $31,304,425.26 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 increase in total assets also includes an increase in Federal Financial Student Assistance receivable of $5,027,209.87 due to differences in timing of collections between prior and current fiscal years.
The total liabilities for the year increased by $33,028,640.18. The combination of the increase in total assets of $39,317,478.15 and the increase in total liabilities of $33,028,640.18 yields an increase in total net assets of $6,288,837.97. The increase in total net assets is primarily in the category of Unrestricted Net Assets. Net Assets invested in capital assets increased but was offset with debt on assets resulting in a net decrease in the amount of $1,670,986.84.

Georgia Southern University Annual Financial Report FY 2006 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, 2006

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

$107,604,324.56 181,147,931.13 (73,543,606.57) 77,840,957.57
4,297,351.00 3,761,934.27 8,059,285.27 234,500,594.62 (1,770,447.30) 232,730,147.32 $240,789,432.59

$98,884,782.64 164,957,600.85 (66,072,818.21)
71,792,575.49
5,719,757.28 3,264,778.53 8,984,535.81 225,516,058.81
0.00 225,516,058.81 $234,500,594.62

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 FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$43,869,787.71
18,343,148.28 2,471,413.10
42,016,301.30 903,674.17
107,604,324.56
79,089,552.69
1,078,504.85 1,611,060.31 (205,948.83) 81,573,169.02
2,898,224.07 863,710.20
3,761,934.27
$192,939,427.85

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
(1,736,342.07) 73,977,943.81
3,264,778.53 3,264,778.53 $176,127,504.98

Georgia Southern University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$63,814,416.50 3,627,484.16 2,836,826.89 13,443,674.36 13,555,179.72 19,394,484.05 21,337,622.26 4,364,795.43 38,773,447.76
181,147,931.13
3,732,211.45
$184,880,142.58

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
$167,142,969.17

Georgia Southern University enrollment continues to increase at a moderate but consistent rate as admission standards continue to increase. Campus wide efforts to increase student retention and graduation rates are having a positive effect on overall student success. 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. Increases in investment income and external gift revenue provide funding for capital enhancements without allocation of tuition and state appropriation funds. 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 2006. We anticipate the completion of our Library renovation funded by GSFIC capital funds to be completed in fiscal year 2007 resulting in an increase in state gift revenue in that year and a substantial enhancement in library academic services to the student and faculty community.
Operating expenses increased $16,190,330.28. The increase includes compensation and employee benefits of $8,136,709.51. This increase also reflects the addition of 22 new permanent faculty positions, increases in employee benefits of $3,220,785.11 and a mid-year increase in

Georgia Southern University Annual Financial Report FY 2006 5

salaries for merit raises and related employee benefits. Utilities, operating supplies and other expenses increased $5,798,834.87 due to increases in utility rates and cost increases directly and indirectly related to higher fuel costs. Through strategic allocation of new funds and efficiencies the University was able to maintain levels of service in-light of previous year budget reductions and increasing costs of operations. Net non-operating revenue increased by $6,064,831.97 due to increases in state appropriations from prior years increased enrollment and increases in gift and investment income.
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, 2006 and 2005, 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, 2006
($68,764,177.52) 80,179,420.61 (12,552,226.29) 521,417.38 (615,565.82) 29,055,971.78
$28,440,405.96

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

Capital Assets
Capital Assets, Net increased $31,304,425.26. The increase is primarily due to addition of four capital leases with the GSU Housing Foundation, Inc. of a new residence hall and three capital renovations of Athletic Facilities. The GSU Housing Foundation provides funding sources external to State resources for construction and renovation of facilities used to enhance the overall educational experience of students.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the notes to the financial statements.

Georgia Southern University Annual Financial Report FY 2006 6

Long Term Debt and Liabilities Georgia Southern University had Long-Term Debt and Liabilities of $81,020,538.75 of which $4,249,140.14 was reflected as current liability at June 30, 2006. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Georgia Southern University has included the financial statements and notes for all required component units for FY2006. For additional information concerning Component Units, see notes 1 and 17 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. We anticipate continued analysis of available resources for use in enhancing academic programs and student successes as well as process reviews of non-academic services to enhance efficiencies while maintaining high levels of customer service.
Dr. Bruce Grube, President Georgia Southern University
Georgia Southern University Annual Financial Report FY 2006 7

Statement of Net Assets
G EORG IA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

Component Unit

AS S ETS Current As s ets Cas h and Cas h Equ iv alen ts Sh ort-term Inv es tmen ts A ccou nts Receiv ab le, n et (n ote 3) Receivables - Fed eral Fin ancial A s s is tance Receivables - Oth er Du e Fro m Co mpo nent Units Leas es Receivable Pled ges Receiv able Due From Primary Go vern men t Inv en tories (no te 4) Prepaid items To tal Cu rrent A s s ets
Noncurrent As s ets Non cu rrent Cas h Sh ort-term Inv es tmen ts Due fro m Co mp o nen t Un its Inv es tments (in clu ding Real Es tate) Notes Receivable, net Leas es Receivable Receiv ab les Oth er Pled ges Receiv able Capital A s s ets , n et (n ote 6) Other A s s ets To tal No ncurren t A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccou nts Payable Salaries Pay ab le Con tracts Payable Dep os its Deferred Reven u e (n ote 7) Dep os its Held fo r Other Org an izatio ns Due to Primary Gov ernment Leas e Purchas e Oblig ation s (cu rrent po rtio n) Comp ens ated A bs ences (cu rrent po rtio n) Revenu e/M ortgage Bo nd s Pay ab le (curren t) Due to Co mpo nent Units Notes and Lo ans Pay ab le (cu rren t p ortion ) To tal Cu rrent Liab ilities Noncurrent Liabilities Leas e Purchas e Oblig ation s (no ncurren t) Deferred Reven u e (n on cu rrent) Comp ens ated A bs ences (no ncurren t) Revenu e/M ortgage Bo nd s Pay ab le (n on cu rrent) Due to Co mpo nent Units Notes and Lo ans Pay ab le (n on cu rrent) To tal No ncurren t Liabilities TOTAL LIABILITIES
NET AS S ETS Inv es ted in Capital A s s ets , n et o f related d ebt Res tricted fo r No nexpen dable Expend able Cap ital Pro jects Unres tricted
TOTAL NET AS S ETS

Georgia S outhern Univers ity

Georgia S outhern Univers ity Foundation

$28,440,405.96 2,853,692.33
7,095,647.51 4,201,697.26 1,254,200.80
1,875,158.57 3,142,452.24 48,863,254.67
2,465,813.64
8,349.11 2,896,650.91
280,495,747.11
285,866,560.77 334,729,815.44
1,474,156.65 537,142.85 543,325.15
1,237,800.00 8,198,416.36
925,277.51
1,715,949.90 2,456,906.04
3,725.58 76,284.20 17,168,984.24
72,796,488.60
1,686,274.47
2,288,635.54 76,771,398.61 93,940,382.85
203,618,388.87
2,465,813.64 3,286,533.81
31,418,696.27 $240,789,432.59

$125,069.00 38,169,066.00
50,628.00 842,929.00
39,187,692.00
707,406.00
3,401,429.00 421,416.00 103,294.00
4,633,545.00 43,821,237.00
217,907.40
2,325,006.00 17,037.60
2,559,951.00
844,936.00 844,936.00 3,404,887.00 421,416.00 25,920,651.00 11,924,588.00 2,149,695.00 $40,416,350.00

Georgia Southern University Annual Financial Report FY 2006 8

Statement of Net Assets, Continued
G EORG IA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006
Component Units

AS S ETS Current As s ets Cas h an d Cas h Eq u iv alen ts Sh o rt-term In v es tmen ts A cco u n ts Receiv ab le, n et (n o te 3) Receiv ab les - Fed eral Fin an cial A s s is tan ce Receiv ab les - Oth er Du e Fro m Co mp o n en t Un its Leas es Receiv ab le Pled g es Receiv ab le Du e Fro m Primary Go v ern men t In v en to ries (n o te 4) Prep aid items To tal Cu rren t A s s ets
Noncurrent As s ets No n cu rren t Cas h Sh o rt-term In v es tmen ts Du e fro m Co mp o n en t Un its In v es tmen ts (in clu d in g Real Es tate) No tes Receiv ab le, n et Leas es Receiv ab le Receiv ab les Oth er Pled g es Receiv ab le Cap ital A s s ets , n et (n o te 6) Other A s s ets To tal No n cu rren t A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A cco u n ts Pay ab le Salaries Pay ab le Co n tracts Pay ab le Dep o s its Deferred Rev en u e (n o te 7) Dep o s its Held fo r Oth er Org an izatio n s Du e to Primary Go v ern men t Leas e Pu rch as e Ob lig atio n s (cu rren t p o rtio n ) Co mp en s ated A b s en ces (cu rren t p o rtio n ) Rev en u e/M o rtg ag e Bo n d s Pay ab le (cu rren t) Du e to Co mp o n en t Un its No tes an d Lo an s Pay ab le (cu rren t p o rtio n ) To tal Cu rren t Liab ilities Noncurrent Liabilities Leas e Pu rch as e Ob lig atio n s (n o n cu rren t) Deferred Rev en u e (n o n cu rren t) Co mp en s ated A b s en ces (n o n cu rren t) Rev en u e/M o rtg ag e Bo n d s Pay ab le (n o n cu rren t) Du e to Co mp o n en t Un its No tes an d Lo an s Pay ab le (n o n cu rren t) To tal No n cu rren t Liab ilities TOTAL LIAB ILITIES
NET AS S ETS In v es ted in Cap ital A s s ets , n et o f related d eb t Res tricted fo r No n exp en d ab le Exp en d ab le Cap ital Pro jects Un res tricted
TOTAL NET AS S ETS

Georg ia S outhern Univers ity S outhern
B oos ters

Georg ia S outhern Hous ing
Foundati on

Georg ia S outhern Univers ity Res earch
S ervice Foundation

$1,259,737.00
565,764.00 400,481.00
2,225,982.00
690,657.00 1,074,219.00 1,764,876.00 3,990,858.00
18,413.78
59,600.00 31,043.22
417,468.00 526,525.00
212,836.00 212,836.00 739,361.00 673,497.00 1,307,463.00 884,035.00 386,502.00 $3,251,497.00

$418,701.00
3,994,735.00 1,601,531.00
2,171.00 6,017,138.00 24,412,749.00
844,936.00 64,434,914.00 63,753,628.00 27,043,744.00 180,489,971.00 186,507,109.00
3,554,721.00
3,994,735.00
1,785,000.00 9,334,456.00 63,698,591.00 112,495,000.00 176,193,591.00 185,528,047.00
1,459,257.00 (480,195.00) $979,062.00

$1,119,221.00 1,337,888.00 3,725.58 103,380.00 2,564,214.58
0.00 2,564,214.58
1,326.00 825,968.60 1,206,119.98
2,033,414.58
0.00 2,033,414.58
530,800.00 $530,800.00

Georgia Southern University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets
G EORG IA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

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) 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
Employee Benefits 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 Univ.
Total Operating Expens es Operating Income (los s )

Georgia S outhern Univers ity

Georgia S outhern Foundation

$51,272,724.48 7,402,936.77
16,557,362.25 438,884.22
1,346,901.81 2,471,413.10
49,176.58
13,634,967.91 9,070,058.19 7,993,026.00 2,109,818.99 2,564,830.98 5,896,003.57 747,595.66 854,497.59
107,604,324.56

$0.00 3,777,119.00 2,203,210.00
399,065.00 6,379,394.00

39,486,493.60 50,229,253.39 24,926,047.23
662.50 1,737,389.73 6,899,023.13 6,853,786.72 38,867,970.00 12,147,304.83
181,147,931.13 (73,543,606.57)

122,693.00
966,721.00 1,667.00
2,194,105.00 3,285,186.00 3,094,208.00

Georgia Southern University Annual Financial Report FY 2006 10

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, 2006
Compone nt Un i t

Ge orgia Southe rn Unive rsity

Ge orgi a Southe rn Fou n da ti o n

NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 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

79,089,552.69 1,078,504.85 1,611,060.31 (3,732,211.45) (205,948.83)
77,840,957.57 4,297,351.00

533,315.00
533,315.00 3,627,523.00

2,898,224.07 863,710.20
3,761,934.27 8,059,285.27
234,500,594.62 (1,770,447.30)
232,730,147.32 $240,789,432.59

2,241,059.00 2,241,059.00 5,868,582.00
34,547,768.00 0.00
34,547,768.00 $40,416,350.00

Georgia Southern University Annual Financial Report FY 2006 11

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, 2006
Component Units

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholarship Allowances Gifts and Contributions Endowment Income (per s pending plan) 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
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 Univ.
Total Operating Expens es Operating Income (los s )

S outhern Boos ters , Inc.

Georgia Southern Univers ity Hous ing
Foundation

Georgia Southern Uni ve r s i ty
Res earch Service Foundation

$0.00 1,704,150.00
131,600.00

$0.00 102,827.00
3,689,263.00

$0.00
4,025,387.00 89,339.00 632,471.00 29,832.00

122,571.00 1,958,321.00

30,000.00 3,822,090.00

480.00 4,777,509.00

19,375.00
389,661.00 18,508.00 928,755.00 1,356,299.00 602,022.00

106,183.00
106,183.00 3,715,907.00

28,897.00
4,524,543.00 4,553,440.00
224,069.00

Georgia Southern University Annual Financial Report FY 2006 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, 2006
Component Units

NONOPERATING REVENUES (EXPENSES) State Appropriations Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets ) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expenses , gains , or los s Capital Grants and Gifts State Other Additions to permanent endowments Total Other Revenues Increase in Net As sets
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

S outhern Boos ters , Inc.

Georgia S outhern Univers ity Hous ing
Foundation

Georgia S outhern Uni ve r s i ty
Res earch Service Foundation

49,111.00 (15,341.00)
33,770.00 635,792.00

195,548.00 (3,265,614.00) (1,160,694.00) (4,230,760.00)
(514,853.00)

29,383.00
29,383.00 253,452.00

0.00 635,792.00
2,615,705.00 0.00
2,615,705.00 $3,251,497.00

0.00 (514,853.00)
1,493,915.00 0.00
1,493,915.00 $979,062.00

0.00 253,452.00
277,348.00 0.00
277,348.00 $530,800.00

Georgia Southern University Annual Financial Report FY 2006 13

Statement of Cash Flows
G EORG IA SOUTHERN UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Sale 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, 2006
$44,690,542.97
19,014,251.39 2,231,061.18
(73,218,053.17) (89,427,040.23)
(6,899,023.13) (532,990.94) 559,129.39
14,764,403.48 9,076,083.97 8,030,342.43 2,109,727.59 2,572,041.17 5,578,211.29 (921,839.78) (6,391,025.13)
(68,764,177.52)
79,089,552.69 (14,151.44)
1,104,019.36 80,179,420.61
2,807,071.56 19,608.77
(9,774,335.37) (1,872,359.80) (3,732,211.45) (12,552,226.29)
(945,649.35) 1,467,066.73
521,417.38 (615,565.82) 29,055,971.78 $28,440,405.96

Georgia Southern University Annual Financial Report FY 2006 14

Statement of Cash Flows, Continued
G EORG IA SOUTHERN UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($73,543,606.57)
12,147,304.83 (7,306,249.42)
316,829.29 (471,973.63)
26,138.45 (561,106.59) 462,556.37
12,151.83 153,777.92 ($68,764,177.52)
$34,847,771.90 $143,993.58 ($954,862.71)

Georgia Southern University Annual Financial Report FY 2006 15

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Georgia Southern University is reporting the activity for the Georgia Southern University Foundation, Inc., Southern Boosters, Inc., the Georgia Southern University Housing Foundation, Inc., and the Georgia Southern University Research and Service Foundation, Inc.
See Note 17, 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 FY 2006 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 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.
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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Georgia Southern University Annual Financial Report FY 2006 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 grants 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.
Non-current Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as non-current assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 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 Southern University when complete. For the year ended June 30, 2006, GSFIC transferred capital additions valued at $91,152.51 to Georgia Southern University.
Georgia Southern University Annual Financial Report FY 2006 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 $3,989,402.59 as of July 1, 2005. For FY2006, $3,038,798.28 was earned in compensated absences and employees were paid $2,885,020.36, for a net increase of $153,777.92. The ending balance as of June 30, 2006 in accrued liability for compensated absences was $4,143,180.51.
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 FY 2006 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 Total Res tricted Expendable

June 30, 2006
$155,056.47 3,075,021.14
56,456.20 $3,286,533.81

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, 2006
$3,766,428.35 16,773,440.48
124,000.00 10,754,827.44 $31,418,696.27

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes Georgia Southern University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Georgia Southern University Annual Financial Report FY 2006 20

Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and un-sponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and un-sponsored 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 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.
Restatement of Prior Year Net Assets
Georgia Southern University has a restatement of prior year net assets decreasing beginning net assets by $1,770,447.30. This is due to (a) Georgia Southern University Housing Foundation Capital Lease assets which were not depreciated in prior year, (b) Library Collections depreciation was overstated in prior year, and (c) Capitalized Collections were capitalized but did not meet the capitalization threshold in prior years.
Georgia Southern University Annual Financial Report FY 2006 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 Georgia Southern University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus Georgia Southern University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, 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, 2006, the carrying value of deposits was $33,457,205.18 and the bank balance was $37,223,255.93. Of Georgia Southern University's deposits, $36,723,255.93 were uninsured. Of these uninsured deposits, $900,000.00 were collateralized with securities held by the financial institution's trust department or agent in Georgia Southern University's name, and $35,823,255.93 were collateralized with securities held by the financial institution, by its trust department or agency, but not in Georgia Southern University's name.
Georgia Southern University Annual Financial Report FY 2006 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, 2006 are presented below. The University held an investment in a life insurance policy as noted below. All other funds are held in either demand or time deposits as described in the Deposit section of Note 2 above.

Other Investments Life Insurance Policy-Cash Surrender Value
Total Investments

$8,349.11 $8,349.11

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$309,506.27 1,755,263.26 7,095,647.51 1,254,200.80 2,252,297.73 12,666,915.57
115,370.00
$12,551,545.57

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2006
$1,355,608.74 369,027.75 16,989.95 133,532.13
$1,875,158.57

Georgia Southern University Annual Financial Report FY 2006 23

Note 5. Notes/Loans Receivable

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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.

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

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

(Res tated) Beginning Balances 7/1/2005
$4,239,944.89 0.00
3,127,917.13 7,367,862.02

Additions
$4,000.00
8,215,359.87 8,219,359.87

Reductions
$0.00
6,578,948.35 6,578,948.35

Ending Balance 6/30/2006
$4,243,944.89 0.00
4,764,328.65 9,008,273.54

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

13,311,925.00 251,443,290.62
1,726,693.00 17,962,813.69 43,500,978.79 32,723,544.01
11,430.00 360,680,675.11

751,378.00 5,872,181.27
1,456,510.40 34,847,771.90 1,347,247.89
44,275,089.46

699,900.00
1,422,923.00 330,437.91 71,196.00 11,430.00
2,535,886.91

14,063,303.00 256,615,571.89
1,726,693.00 17,996,401.09 78,018,312.78 33,999,595.90
0.00 402,419,877.66

Less: Accumulated Depreciation In fras tru ctu re Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation

10,584,484.01 66,553,138.68
2,348.45 14,134,611.81 2,549,193.43 26,802,468.81
1,417.39 120,627,662.58

235,653.75 6,730,782.80
210,956.85 1,462,090.34 2,321,187.09 1,186,634.00
12,147,304.83

410,783.29
1,336,806.20 22,360.44 71,196.00 1,417.39
1,842,563.32

10,820,137.76 72,873,138.19
213,305.30 14,259,895.95 4,848,020.08 27,917,906.81
(0.00) 130,932,404.09

Total Capital Assets, Being Depreciated, Net

240,053,012.53

32,127,784.63

693,323.59

271,487,473.57

Capital Assets, net

$247,420,874.55

$40,347,144.50

$7,272,271.94

$280,495,747.11

Georgia Southern University Annual Financial Report FY 2006 24

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $7,427,308.49
771,107.87 $8,198,416.36

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$41,464,770.90

Additions $34,847,771.90

Reductions $1,800,104.30

Ending Balance June 30, 2006
$74,512,438.50

Current Portion
$1,715,949.90

Other Liabilities Compensated Absences Notes and Loans Total

3,989,402.59 2,437,175.24 6,426,577.83

3,038,798.28 3,038,798.28

2,885,020.36 72,255.50
2,957,275.86

4,143,180.51 2,364,919.74 6,508,100.25

2,456,906.04 76,284.20
2,533,190.24

Total Long Term Obligations

$47,891,348.73

$37,886,570.18

$4,757,380.16

$81,020,538.75

$4,249,140.14

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 October 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, 2006 is $2,364,919.74. Annual maturities are as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2025

Year 1 2 3 4 5 6-10 16-20 21-25

Principal
$76,284.20 80,537.51 85,027.98 89,768.82 94,774.00
559,278.18 733,577.82 645,671.23
$2,364,919.74

Interest
$129,035.90 124,782.59 120,292.12 115,551.28 110,546.10 467,322.32 293,022.68 72,949.48
$1,433,502.47

Total
$205,320.10 205,320.10 205,320.10 205,320.10 205,320.10
1,026,600.50 1,026,600.50
718,620.71
$3,798,422.21

Georgia Southern University Annual Financial Report FY 2006 25

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $8,449,110.99 as of June 30, 2006. 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 (buildings, and office facilities) and equipment, and also is obligated under capital leases 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 2031. Expenditures for fiscal year 2006 were $5,358,574.44 of which $3,567,191.69 represented interest. Total principal paid on capital leases was $1,791,382.75 for the fiscal year ended June 30, 2006. 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, 2006:

Buildings Equipment Total Assets Held Under Capital Lease

$77,449,896.72 568,416.06
$78,018,312.78

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 had a capital lease with related entities in the current fiscal year. In October 2002, Georgia Southern University entered into a capital lease of $42,668,051.33 at 4.89 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization, whereby the University leases buildings (Southern Courtyard and Southern Pines) for a twenty-seven year period that began September 2003 and expires October 2031. The outstanding liability at June 30, 2006, for this capital lease was $40,190,523.86.

Georgia Southern University had a capital lease with related entities in the current fiscal year. In July 2005, Georgia Southern University entered into a capital lease of $2,230,349.81 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization, whereby the University leases a facility (Clements Baseball Stadium) for a twentyfour year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2006, for this capital lease was $2,185,181.44.

Georgia Southern University had a capital lease with related entities in the current fiscal year. In July 2005, Georgia Southern University entered into a capital lease of $694,056.02 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization, whereby the University leases a facility (Athletic Training Center) for a twenty-

Georgia Southern University Annual Financial Report FY 2006 26

four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2006, for this capital lease was $679,976.78.
Georgia Southern University had a capital lease with related entities in the current fiscal year. In July 2005, Georgia Southern University entered into a capital lease of $1,677,441.30 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization, whereby the University leases a facility (Soccer Stadium) for a twenty-four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2006, for this capital lease was $1,642,736.98.
Georgia Southern University had a capital lease with related entities in the current fiscal year. In July 2005, Georgia Southern University entered into a capital lease of $30,179,998.26 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization, whereby the University leases buildings (Eagle Village) for a twenty-four year period that began August 2005 and expires July 2030. The outstanding liability at June 30, 2006, for this capital lease was $29,539,516.35.
Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2006 in the amount of $274,503.09.
OPERATING LEASES
Georgia Southern University has certain operating leases which provide for renewal options of one year at their fair rental 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 leases is for office space, copiers and other small business equipment.
In 2006, 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 2006, 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 $9,200.04 in the current year.
In 2006, 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.
In 2006, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $450.00. The agreement contains a
Georgia Southern University Annual Financial Report FY 2006 27

renewal option on a year-to-year basis. Under this agreement, the University paid $5,400.00 in the current year.
In 2006, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $19,400.00. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $28,787.15 in the current year.
Non-cancellable operating lease expenditures in 2006 were $157,387.19 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-cancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 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

Capital Leas es

Real Property Operating Leas es

$5,341,271.18 5,401,958.10 5,384,570.34 5,327,973.64 5,301,388.70
26,414,376.07 26,295,827.99 26,147,484.01 21,174,927.01 126,789,777.04 52,277,338.54
0.00 $74,512,438.50

$388,454.04 $388,454.04

Georgia Southern University's FY2006 expense for rental of real property and equipment under operating leases was $240,665.46.
Note 11. Significant Contingent Liabilities
In March 2006, Georgia Southern University Housing Foundation, Inc., made payments to the Georgia State Financing and Investment Commission to defease the 1993 Pay Back Bonds related to the Recreation Activities Center. In 2006, the Georgia Southern University Housing Foundation, Inc. started additional construction and renovation on the Recreation Activities Center which will subsequently be leased to Georgia Southern University. In 2006, there is not an official agreement between the Georgia Southern University Housing Foundation, Inc., and Georgia Southern University, but is the understanding of the University that a capital lease will be entered into in 2007 for the cost of debt defeasement, new construction and renovation of the Recreation Activities Center.

Georgia Southern University Annual Financial Report FY 2006 28

Note 12. 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 2006, 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

2006 2005 2004

100% 100% 100%

$3,867,087.66 $3,797,349.69 $3,907,198.42

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to

Georgia Southern University Annual Financial Report FY 2006 29

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, 2006, for employees covered by ERS was $171,357.63. The University's total payroll for all employees was $89,715,746.99.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $20,644.54, of which $18,074.19 was made by the University and $2,570.35 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, 2006, financial report, which may be obtained through ERS.
Georgia Southern University Annual Financial Report FY 2006 30

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $3,484,368.49 (9.65%) and $1,806,390.23 (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 FY 2006 31

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 2006 amounted to $284,813.69 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 13. 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 FY 2006 32

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 14. 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, 2006.
Note 15. 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, 2006, there were 580 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia Southern University recognized as incurred $2,478,624.56 of expenditures, which was net of $953,464.71 of participant contributions.
Georgia Southern University Annual Financial Report FY 2006 33

Note 16. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$38,094,002.52 7,628,059.66 11,349,310.88
632,969.29 156,293.80 418,841.54 4,801,312.11 733,626.70

$784,889.98 743,829.46 178,203.15
183,511.25 20,254.00 13,512.23 1,674,915.17 28,368.92

$115,884.03 1,166,573.21 260,062.81
61,379.54 167,983.87 19,890.50 1,028,479.14 16,573.79

$434,087.45 7,489,282.71 1,849,039.31
221,452.87 81,942.56 102,960.99 1,971,777.81 1,293,130.66

$20,974.50 7,943,991.04 1,924,894.14
505.07 164,473.34
1,500.00 119,410.53 3,297,840.27 81,590.83

$36,655.12 9,552,408.58 5,412,485.59
(9,685.27) 134,024.91 288,830.12 198,766.85 3,608,277.83 172,720.32

$63,814,416.50

$3,627,484.16

$2,836,826.89

$13,443,674.36

$13,555,179.72

$19,394,484.05

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary Enterpris es

Unallocated Exp en s es

Total Exp en s es

$0.00 6,392,198.43 2,114,932.58 (542,030.87)
34,756.39
4,021,669.74 3,261,230.73 6,054,865.26

$0.00
4,359,527.38 5,268.05

$0.00 9,312,910.30 1,837,118.77
551,873.57 304,822.14 1,822,691.40 1,958,734.34 19,218,868.89 3,766,428.35

$0.00

$39,486,493.60 50,229,253.39 24,926,047.23 662.50 1,737,389.73 6,899,023.13 6,853,786.72 38,867,970.00 12,147,304.83

$21,337,622.26

$4,364,795.43

$38,773,447.76

$0.00

$181,147,931.13

Georgia Southern University Annual Financial Report FY 2006 34

Note 17. Component Units
Georgia Southern University Foundation, Inc.
Georgia Southern University Foundation, Inc. (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, 2006, the Foundation distributed $2,194,105.00 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from Georgia Southern University Legal Office, P.O. Box 8020, Statesboro, GA 30461.
Investments for Component Units:
Georgia Southern University Foundation, Inc. holds endowment and other investments in the amount of $39 million. The $24 million corpus of the endowment portion 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 established a spending plan whereby 5% of the three year moving average of the endowment fair market value may be used for academic scholarships. The remaining earnings are set aside as a reserve. $2.3 million of the Foundation's reported investments are funds invested on behalf of the University. The University reports these funds as Short-term Investments.
In addition to investments in Money Market/Certificates of Deposits and Mutual Funds, Georgia Southern University Foundation, Inc. also holds investments in real property valued at $707,406.00.
Georgia Southern University Annual Financial Report FY 2006 35

Investments are comprised of the following amounts at June 30, 2006:

Money Market Accounts/Certificates of Deposits Mutual Funds Real Estate
Total Investments

Cost
$2,490,962.00 34,287,317.00
707,406.00
$37,485,685.00

Fair Value
$2,490,962.00 35,678,104.00
707,406.00
$38,876,472.00

Capital Assets for Component Units

Georgia Southern University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$395,860.00 0.00
395,860.00
50,000.00 50,000.00 24,444.00 25,556.00 $421,416.00

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
Georgia Southern University Annual Financial Report FY 2006 36

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 fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Boosters Foundation distributed $928,755.00 to the University for athletic scholarship support and for the support of other 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.

Capital Assets for Component Units

Southern Boosters, Inc. has the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Infrastructure Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$80,301.00 678,679.00 758,980.00
324,687.00 0.00
93,085.00 417,772.00
102,533.00
315,239.00 $1,074,219.00

Long-Term Liabilities for Component Units
Southern Boosters, Inc. has a Note Payable to Sea Island Bank, payable in annual installments of $35,220.00 including interest at a variable rate (8.25% at June 30, 2006), through September 14, 2013, unsecured. The original note amount was $279,000.
Southern Boosters, Inc. obtained new financing in 2006 with a Note Payable to Park Avenue Bank. Interest is payable in quarterly installments at a variable rate (8.25% at June 30, 2006) and the note matures on November 13, 2006. This debt is secured by the Golf Practice facility.

Georgia Southern University Annual Financial Report FY 2006 37

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Notes and Loans Payable Total Long Term Debt

$250,553.00 $250,553.00

$400,722.00 $400,722.00

$20,971.00 $20,971.00

$630,304.00 $630,304.00

$417,468.00 $417,468.00

Notes Payable Obligations

Annual requirements to maturity for notes payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016

Year
1 2 3 4 5 6-10

Notes Payable Principal
$417,468.00 17,661.00 19,118.00 20,695.00 22,403.00
132,959.00

Interest

Total

$35,350.00 17,559.00 16,102.00 14,525.00 12,817.00 26,740.00

$452,818.00 35,220.00 35,220.00 35,220.00 35,220.00
159,699.00

$630,304.00

$123,093.00

$753,397.00

Georgia Southern University Housing Foundation, Inc.

Georgia Southern University Housing Foundation, Inc. (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 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.

Georgia Southern University Annual Financial Report FY 2006 38

Buildings (Construction in Progress) valued at $27 million and the associated long-term debt of $41 million, plus the net Investment in Direct Financing Lease valued at $66 million and the associated long-term receivables of $68 million along with the associated long-term debt of $73 million 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 University Legal Office, P.O. Box 8020, Statesboro, GA 30461.

Investments for Component Units

Georgia Southern University Foundation holds a Net Investment in direct financing leases with the University in the amount of $66,036,445 as of June 30, 2006.

Capital Assets for Component Units

Georgia Southern University Foundation held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Construction in Progress
Total Capital Assets not being Depreciated
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$27,043,744.00 27,043,744.00 0.00
$27,043,744.00

Long-Term Liabilities for Component Units

Student Housing Bonds were 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 rates on the Bonds vary, based on the Bond and the Year; from 2.75% to 5.25%.

Changes in long-term liabilities for the Housing Foundation for the fiscal year ended June 30,

2006 are shown below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2005

Additions

Reductions

June 30, 2006

One Year

Bond Issuance Costs, net Revenue/Mortgage Bonds Payable
Total Long Term Debt

$1,153,489.00 114,225,000.00
$115,378,489.00

$0.00 0.00
$0.00

$113,489.00 985,000.00
$1,098,489.00

$1,040,000.00 113,240,000.00
$114,280,000.00

$0.00 1,785,000.00
$1,785,000.00

Georgia Southern University Annual Financial Report FY 2006 39

Annual debt service requirements to maturity for Student Housing (Real Estate Foundation) revenue bonds payable are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021

11-15

2022 through 2026

16-20

2027 through 2031

21-25

Bonds Payable Principal Interest Total

$1,785,000.00 2,685,000.00 2,840,000.00 3,000,000.00 3,170,000.00
17,745,000.00 21,835,000.00 27,710,000.00 32,470,000.00
$113,240,000.00

$3,341,880.00 5,168,219.00 5,071,254.00 5,740,273.00 6,384,510.00
24,299,791.00 17,783,953.00 11,667,325.00
3,965,955.00
$83,423,160.00

$5,126,880.00 7,853,219.00 7,911,254.00 8,740,273.00 9,554,510.00 42,044,791.00 39,618,953.00 39,377,325.00 36,435,955.00
$183,683,061.00

Georgia Southern University Research and Service Foundation, Inc.
Georgia Southern University Research & Service Foundation, Inc. (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 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 2006, the Research Foundation transferred $4,524,543 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 FY 2006 40

GEORGIA SOUTHWESTERN STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

GEORGIA SOUTHWESTERN STATE UNIVERSITY Americus, Georgia

Dr. Michael L. Hanes
President

Dr. C Alan Parks
Vice President for Business and Finance

GEORGIA SOUTHWESTERN STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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....................................................................................................... 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 ................................................................................................. 26 Note 12 Risk Management................................................................................................ 28 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

GEORGIA SOUTHWESTERN STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia Southwestern State University is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
100 104 118

Students (Headcount)
2,427 2,323 2,410

Students (FTE)
2,123 2,016 2,051

Overview of the Financial Statements and Financial Analysis

Georgia Southwestern State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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

Georgia Southwestern State University Annual Financial Report FY 2006 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 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, 2006
$6,679,959.42 41,811,362.54
1,192,884.67 49,684,206.63
3,344,085.58 268,089.88
3,612,175.46
41,811,362.54 387,971.00
1,213,453.59 0.00
2,659,244.04 $46,072,031.17

June 30, 2005
$5,644,596.89 18,641,681.28
1,186,941.80 25,473,219.97
2,789,220.29 271,092.98
3,060,313.27
18,641,681.28 387,971.00
1,166,561.17 0.00
2,216,693.25 $22,412,906.70

The total assets of the institution increased by $24,210,986.66. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $23,169,681.26 of investment in plant, net of accumulated depreciation. This increase was primarily attributable to the recording of a completed GSFIC Project, the Student Success Center, in the amount of $20,150,626.04.
The total liabilities for the year increased by $551,862.19. The combination of the increase in total assets of $24,210,986.66 and the increase in total liabilities of $551,862.19 yields an increase in total net assets of $23,659,124.47. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $23,169,681.26.

Georgia Southwestern State University Annual Financial Report FY 2006 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, 2006

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

$18,303,264.54 31,475,192.71 (13,171,928.17) 12,003,448.98
(1,168,479.19) 24,827,603.66 23,659,124.47 22,412,906.70
0.00 22,412,906.70 $46,072,031.17

$16,983,750.07 30,520,716.92 (13,536,966.85) 13,313,083.70
(223,883.15) 3,290,936.85 3,067,053.70 19,345,853.00
0.00 19,345,853.00 $22,412,906.70

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$4,973,104.33
6,625,852.90 1,699,017.72 4,839,732.46
165,557.13
18,303,264.54
12,158,474.44
237,771.61 (392,797.07) 12,003,448.98
24,827,603.66 0.00
24,827,603.66 $55,134,317.18

June 30, 2005
$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 0.00
3,290,936.85 $33,587,770.62

Georgia Southwestern State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$10,599,636.62 337,585.62
1,057,591.72 2,120,743.22 1,915,719.26 4,256,054.90 4,883,881.72 1,846,060.88 4,457,918.77
31,475,192.71
0.00
$31,475,192.71

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
0.00
$30,520,716.92

Tuition and fees increased by $ 527,183.55. Grants and contracts increased by $ 364,359.18. As a result of both of these increases, more funds were available for operating expenses.
The compensation and employee benefits category increased by approximately $988,188.56. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $295,619.01 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006.
Under non-operating revenues (expenses) state appropriations increased by approximately $97,012.03.
Statement of Cash Flows
The final statement presented by the Georgia Southwestern State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles

Georgia Southwestern State University Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($11,274,541.63) 12,112,847.30 (407,293.40) 247,528.02 678,540.29 4,413,795.18
$5,092,335.47

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

Capital Assets
The University had two significant capital asset additions for facilities in fiscal year 2006. Construction of the Student Success Center was completed and placed into service early in fiscal year 2006. A major renovation of the Physical Plant Building was also completed during 2006.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Georgia Southwestern State University had Long-Term Debt and Liabilities of $736,479.41 of which $468,389.53 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006.
For additional information concerning Component Units, see notes 1 and 16 in the Notes to the Financial Statements.

Georgia Southwestern State University Annual Financial Report FY 2006 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. With the addition of two Capital Projects, the University was able to generate a large increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr Michael Hanes, President
Georgia Southwestern State University Annual Financial Report FY 2006 7

Statement of Net Assets

G EORG IA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

Component Units

Ge or g i a S outhwes tern S tate
Univers ity

Ge or g i a S outhwes tern Foundation, Inc.

Ge or g i a S outhwes tern Res earch and Development Corp.,
Inc.

AS S ETS

Current As s ets

Cas h and Cas h Equivalents

$5,092,335.47

$1,670,561.00

$0.00

A ccounts Receivable, net (note 3)

Receivables - Federal Financial A s s is tance

57,081.48

Receivables - Other

960,872.62

143,694.00

52,000.00

Due From Component Units

109,382.17

Pledges Receivable

341,527.00

Inventories (note 4)

341,014.10

16,570.00

Prepaid items

119,273.58

Other Assets

Total Current A s s ets

6,679,959.42

2,172,352.00

52,000.00

Noncurrent As s ets Noncurrent Cas h Due from Component Units Inves tments (including Real Es tate) Notes Receivable, net Capital As s ets , net (note 6) Other Assets Total Noncurrent As s ets
TOTAL ASS ETS

570,451.37 622,433.30 41,811,362.54
43,004,247.21 49,684,206.63

2,257,401.16
37,020,254.19
12,435,180.89 714,872.49
52,427,708.73 54,600,060.73

300,900.00
300,900.00 352,900.00

LIAB ILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Compens ated Abs ences (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated Abs ences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES

80,170.83 83,944.52 11,072.66 20,616.40 81,750.00 2,532,526.27 25,970.62 39,644.75
468,389.53 3,344,085.58
268,089.88
268,089.88 3,612,175.46

36,104.79
1,498,914.02
109,382.17 1,644,400.98
27,233,913.75 27,233,913.75 28,878,314.73

47,337.00
47,337.00 0.00
47,337.00

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

41,811,362.54
387,971.00 1,213,453.59
2,659,244.04 $46,072,031.17

3,236,240.98
6,608,714.00 5,510,633.19
9,837.81 10,356,320.02 $25,721,746.00

300,900.00
4,663.00 $305,563.00

Georgia Southwestern State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENTof REVENUES, EXPENSES, and CHANGES in NETASSETS
for the Year Ended June 30, 2006

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) 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
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of Georgia Southwestern University
Total Operating Expenses Operating Income (loss)

Georgia Southwestern State University

Component Units

Georgia Southwestern Foundation, Inc.

Georgia Southwestern Research and Development Corp.,
Inc.

$6,595,022.98 1,621,918.65
4,346,516.50 249,398.94
2,029,937.46 1,699,017.72
3,901.00
1,606,309.78 1,017,903.84
979,199.55 81,178.18 315,854.65 816,676.89 22,609.57 161,656.13 18,303,264.54

$0.00 1,077,077.00 1,347,508.00
33,468.00 2,458,053.00

5,438,001.65 7,553,965.08 3,926,995.62
263,608.85 2,461,643.76 1,587,703.38 8,570,855.64 1,672,418.73
31,475,192.71 (13,171,928.17)

139,911.34 50,486.08 3,905.18
142.64 184,456.84
3,189.14 1,769,356.78 2,151,448.00
306,605.00

$0.00
219,000.00
219,000.00 160,441.00 55,901.00 16,149.00 240,720.00 473,211.00 (254,211.00)

Georgia Southwestern State University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA SOUTHWESTERN STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Ge orgi a Southwestern State
Un i ve rs i ty

Component Units

Ge orgi a S ou th we s te rn Foundation, Inc.

Ge orgi a S ou th we s te rn Research and De ve l opm e n t
Corp., Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e 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

12,158,474.44 237,771.61 (392,797.07)
12,003,448.98 (1,168,479.19)

0.00 306,605.00

24,827,603.66
24,827,603.66 23,659,124.47

387,694.00 387,694.00 694,299.00

22,412,906.70 0.00
22,412,906.70 $46,072,031.17

25,027,447.00 0.00
25,027,447.00 $25,721,746.00

0.00 (254,211.00)
0.00 (254,211.00)
559,774.00 0.00
559,774.00 $305,563.00

Georgia Southwestern State University Annual Financial Report FY 2006 10

Statement of Cash Flows
G EORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Iss ued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterpris e Charges : Res idence Halls Bo o ks to re 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 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 Purchas es of Capital Ass ets Net Cas h used by Capital and Related Financing A ctivities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Inves tments Net Cas h Provided (us ed) by Investing Activities Net Increase/Decreas e in Cash Cash and Cas h Equivalents - Beginning of year Cash and Cas h Equivalents - End of Year

June 30, 2006
$5,083,434.33
6,713,031.69 1,690,768.26 (14,253,280.08) (12,898,824.23) (2,461,643.76)
12,093.47
1,651,063.50 968,873.32 974,104.05 82,086.18 320,495.29 846,033.17 22,609.57 (25,386.39)
(11,274,541.63)
12,158,474.44 (45,627.14) 0.00
12,112,847.30
(407,293.40) (407,293.40)
9,756.41 237,771.61 247,528.02 678,540.29 4,413,795.18 $5,092,335.47

Georgia Southwestern State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
G EORG IA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($13,171,928.17)
1,672,418.73 (336,695.66) (21,418.07)
1,550.49 12,093.47 144,980.42 356,073.19
4,274.10 64,109.87 ($11,274,541.63)
($24,827,603.66)

Georgia Southwestern State University Annual Financial Report FY 2006 12

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Georgia Southwestern State University is reporting the activity for the Georgia Southwestern Foundation, Inc. and Georgia Southwestern Research and Development Corporation, Inc.
See Note 16, Component Units, for foundation notes.
Georgia Southwestern State University Annual Financial Report FY 2006 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 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
Georgia Southwestern State University Annual Financial Report FY 2006 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 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 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
Georgia Southwestern State University Annual Financial Report FY 2006 15

when complete. For the year ended June 30, 2006, GSFIC transferred capital additions valued at $20,150,626.04 to Georgia Southwestern State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
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 $672,369.54 as of 7-1-2005. For FY2006, $499,865.57 was earned in compensated absences and employees were paid $435,755.70, for a net increase of $64,109.87. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $736,479.41.
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.
Georgia Southwestern State University Annual Financial Report FY 2006 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 Total Res tricted Expendable

June 30, 2006
$151,277.49 784,567.26 277,608.84 $1,213,453.59

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, 2006
$955,251.01 1,003,955.59
38,500.00 661,537.44 $2,659,244.04

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 2006 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.
Georgia Southwestern State University Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $2,603,478.21 and the bank balance was $3,637,110.68. Of the university's deposits, $3,422,076.30 were uninsured. Of these uninsured deposits, $3,412,561.40 were collateralized with securities held by the financial institution's trust department or agent in the university's name, and $9,514.90 were uncollateralized.
Georgia Southwestern State University Annual Financial Report FY 2006 19

B. Investments

Georgia Southwestern 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 of June 30, 2006 are presented below:

INVESTMENTS

Interest Rate Risk

Fair Value

Investment type Debt Securities
Mutual Bond Fund

$234,452.86 $234,452.86

Other Investments Equity Mutual Funds

335,998.51

Investment Pools Office of Treasury and Fiscal Services
Georgia Fund 1

2,483,707.26

Total Investments

$3,054,158.63

Less Than 1 Year
$0.00 $0.00

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$0.00 $0.00

$234,452.86 $234,452.86

$0.00 $0.00

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. Participation in the Georgia Fund 1 Investment Pool is voluntary. 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 28 days.
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.
As previously stated, the Weighted Average Maturity of the Georgia Fund 1 investment pool is 28 days.

Georgia Southwestern State University Annual Financial Report FY 2006 20

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.
Credit Quality Risk

Re late d De bt Inve stm e nts
M utual Bond Fund

Fair Valu e

AAA

AA

$234,452.86 $234,452.86

$0.00 $0.00

$0.00 $0.00

A
$0.00 $0.00

Un rated
$234,452.86 $234,452.86

The Georgia Fund 1 investment pool is rated AAAm by Standard and Poor's.

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$114,080.85 118,181.34
57,081.48 109,382.17 747,450.02 1,146,175.86
18,839.59
$1,127,336.27

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$305,009.23 36,004.87
$341,014.10

Georgia Southwestern State University Annual Financial Report FY 2006 21

Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the University had no allowance for uncollectible loans.
Georgia Southwestern State University Annual Financial Report FY 2006 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$529,207.00 0.00 0.00
529,207.00

Additions
$0.00
2,994,197.13 2,994,197.13

Reductions $0.00
0.00

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

21,822,796.75 234,411.17 169,761.83
22,226,969.75

1,562,690.00 82,004.89 15,482.00
1,660,176.89

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

1,263,700.67 21,388.39
221,373.67
165,956.00
1,672,418.73
20,554,551.02
$23,548,748.15

1,125,622.08 140,005.92 15,482.00
1,281,110.00 379,066.89
$379,066.89

Ending B al anc e 6/30/2006
$529,207.00 0.00
2,994,197.13 3,523,404.13
0.00 51,579,082.71
1,267,167.00 2,940,502.43
0.00 6,188,397.86
0.00 61,975,150.00
0.00 15,113,403.53
1,129,987.53 2,415,464.53
0.00 5,028,336.00
0.00 23,687,191.59
38,287,958.41
$41,811,362.54

Georgia Southwestern State University Annual Financial Report FY 2006 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $1,065,414.73 1,467,111.54 $2,532,526.27

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leas es Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance
July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

672,369.54 672,369.54
$672,369.54

499,865.57 499,865.57
$499,865.57

435,755.70 435,755.70
$435,755.70

736,479.41 736,479.41
$736,479.41

468,389.53 468,389.53
$468,389.53

Note 9. Significant Commitments
Georgia Southwestern State University had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2006.

Note 10. Lease Obligations
CAPITAL LEASES
Georgia Southwestern State University is not obligated under any capital lease or installment purchase agreements.

Georgia Southwestern State University Annual Financial Report FY 2006 24

OPERATING LEASES
Georgia Southwestern State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2007 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 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 (which here and on the Statement of Net Assets include other installment purchase agreements) and/or noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 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

Real Property and Equipment Operating Leas es
$8,862.18 6,940.86 5,285.40 3,492.00 3,104.00
$27,684.44

Georgia Southwestern State University's FY2006 expense for rental of real property and equipment under operating leases was $ 14,908.69.

Georgia Southwestern State University Annual Financial Report FY 2006 25

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 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 2006, 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

2006 2005 2004

100% 100% 100%

$ 672,469.90 $686,260.02 $740,629.03

Employees' Retirement System of Georgia

Georgia Southwestern State University has no participants in 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

Georgia Southwestern State University Annual Financial Report FY 2006 26

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 2006, 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 $403,926.06 (9.65%) and $209,288.63 (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 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 2006 amounted to $25,277.60 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Georgia Southwestern State University Annual Financial Report FY 2006 27

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 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
Georgia Southwestern State University Annual Financial Report FY 2006 28

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, 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, 2006, there were 159 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia Southwestern State University recognized as incurred $ 572,301.94 of expenditures, which was net of $228,705.01of participant contributions.
Georgia Southwestern State University Annual Financial Report FY 2006 29

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses
Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Others Services D e pre c ia tion
Total Expenses

Functional Classification FY2006

In s tru ctio n

Res earch

Public Service

Academic Support

Student Services

In s titu tio n al Support

$5,376,012.15 1,263,200.44 1,645,230.18

$42,167.00 190,660.85 65,255.73

$14,822.50 386,764.74
88,899.07

$2,500.00 1,286,255.73
339,800.57

$2,500.00 1,109,260.85 276,856.29

$0.00 2,065,429.81 1,117,432.28

89,034.51 48,619.00 73,674.14 2,103,866.20

4,889.15 875.00
1,022.59 28,441.49
4,273.81

25,222.79 115,677.14
8,813.68 414,832.21
2,559.59

23,425.02 0.00
21,813.89 261,279.93 185,668.08

60,383.12 46,156.34 25,401.47 393,507.98
1,653.21

42,207.63 107,379.24 29,840.33 853,171.30
40,594.31

$10,599,636.62

$337,585.62

$1,057,591.72

$2,120,743.22

$1,915,719.26

$4,256,054.90

Pla n t Op e ra t io n s & M aintenance

Functional Classification FY2 0 0 6

Scholars hips & Fellows hips

A uxiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 685,572.95 198,974.57 (194,600.47)
2,355.84
1,324,889.88 1,532,110.12
1,334,578.83

$0.00 3,190.57 45,248.33
1,795,731.98 1,890.00

$0.00 563,629.14 149,298.60 194,600.47
16,090.79 347,205.06 102,247.40 2,981,756.41 103,090.90

$0.00

$5,438,001.65 7,553,965.08 3,926,995.62
0.00 263,608.85 2,461,643.76 1,587,703.38 8,570,855.64 1,672,418.73

$4,883,881.72

$1,846,060.88

$4,457,918.77

$0.00

$31,475,192.71

Georgia Southwestern State University Annual Financial Report FY 2006 30

Note 16. Component Units

Georgia Southwestern Foundation, Inc. The 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 six member board of the Foundation is selfperpetuating and consists of graduates and friends of the University, and members of the local community. 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, 2006, the Foundation distributed $1,769,356.78 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Georgia Southwestern State University Business Office 800 Georgia Southwestern State University Drive, Americus, GA 31709.

Investments for Component Units:

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Whole Life Insurance Policy
Total Investments

$482,611.30 15,302,989.54
4,462,327.31 15,278,196.61
90,243.00
$35,616,367.76

$482,611.30 15,293,758.99
4,197,403.93 16,956,236.97
90,243.00
$37,020,254.19

Georgia Southwestern State University Annual Financial Report FY 2006 31

Capital Assets for Component Units:

Georgia Southwestern Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$1,006,964.07 10,804,862.88 11,811,826.95
662,375.24 46,578.30
708,953.54 85,599.60
623,353.94 $12,435,180.89

Long-term Liabilities for Component Units:

The Foundation borrowed $27,365,000 in November 2005 from the Americus-Sumter Payroll Development Authority ("PDA"). The loan proceeds were obtained by the PDA from the issuance of its Revenue Bonds, Series 2005 and are being used to construct 2 student housing buildings and parking facilities for use by the University. Upon completion of construction, the facilities will be leased to the University.

The bonds mature in the year 2037 and have interest rates ranging from 4% to 5.125%.

Long-term liability activity for the year ended June 30, 2006 is as follows:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$0.00 $0.00

$27,233,913.75 $27,233,913.75

$0.00 $0.00

$27,233,913.75 $27,233,913.75

$0.00 $0.00

Georgia Southwestern State University Annual Financial Report FY 2006 32

Debt Service Obligations

Annual debt service requirements to maturity for Georgia Southwestern Foundation, Inc. revenue bonds payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037 through 2041
Bond Discount, net

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

Principal
$0.00 250,000.00
65,000.00 105,000.00 145,000.00 1,450,000.00 3,000,000.00 4,735,000.00 5,980,000.00 7,605,000.00 4,030,000.00 $27,365,000.00 ($131,086.25) $27,233,913.75

Bonds Payable Interest
$1,284,108.00 1,284,108.00 1,274,108.00 1,271,508.00 1,267,308.00 6,209,138.00 5,772,445.00 4,939,288.00 3,738,138.00 2,115,519.00 186,388.00
$29,342,056.00
$29,342,056.00

Total
$1,284,108.00 1,534,108.00 1,339,108.00 1,376,508.00 1,412,308.00 7,659,138.00 8,772,445.00 9,674,288.00 9,718,138.00 9,720,519.00 4,216,388.00
$56,707,056.00 ($131,086.25)
$56,575,969.75

Georgia Southwestern Research and Development Corporation, Inc. Georgia Southwestern Research and Development Corporation, Inc. (the Research Foundation) is a legally separate, tax-exempt component unit of Georgia Southwestern State 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. The fourteen 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 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 Foundation can be obtained from the Administrative Office at 800 Georgia Southwestern State University Drive, Americus, GA 31709.

Georgia Southwestern State University Annual Financial Report FY 2006 33

Capital Assets for Component Units:

Georgia Southwestern Research and Development Corporation, Inc. holds the following Capital Assets as of July 31, 2006:

July 31, 2006

Capital Assets being Depreciated: Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$1,203,600.00 1,203,600.00 902,700.00 300,900.00 $300,900.00

Georgia Southwestern State University Annual Financial Report FY 2006 34

KENNESAW STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Kennesaw State University Atlanta, Georgia

Dr. Daniel S. Papp
President

Dr. Randy Hinds
Interim Vice President for Business & Finance

KENNESAW STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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...................................................................................................... 30 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 35 institutions of higher education of the University System of Georgia. The University, located in Kennesaw, Georgia, was founded in 1963 and is recognized as a highly valued resource for the region's educational, economic, social, and cultural advancement. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a growing student body as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
634 505 444

Students (Headcount)
18,556 17,961 17,485

Students (FTE)
15,931 15,191 14,643

Overview of the Financial Statements and Financial Analysis

Kennesaw State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006
$37,715,020.40 164,833,663.48
5,519,030.25 208,067,714.13
22,756,002.94 49,582,550.18 72,338,553.12
116,527,568.35 739,889.17
3,512,788.39 0.00
14,948,915.10 $135,729,161.01

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 0.00
12,012,696.28 $117,186,081.80

The total assets of the institution increased by $24,899,884.40. The increase was primarily due to an increase of $19,803,630.80 in capital assets net of accumulated depreciation. The student recreation center was completed this year and work has begun on a new Social Sciences building. The University also entered into two additional capital leases with the Kennesaw State University Foundation, Inc. for an office building and vacant land.
The total liabilities for the year increased by $6,356,805.19 primarily due to debt obligations under the capital leases mentioned above. The combination of the increase in total assets of $24,899,884.40 and the increase in total liabilities of $6,356,805.19 yields an increase in total net assets of $18,543,079.21. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $15,093,362.61.

Kennesaw State University Annual Financial Report FY 2006 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, 2006

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

$86,485,545.16 157,305,318.66 (70,819,773.50)
71,939,929.91
1,120,156.41 17,422,922.80 18,543,079.21 117,186,081.80
0.00 117,186,081.80 $135,729,161.01

$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

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$50,871,201.75
12,796,805.84 4,066,877.05
18,068,642.94 682,017.58
86,485,545.16
69,538,087.36 1,761,435.36 1,944,304.79 1,211,230.60
(18,515.33) 74,436,542.78
17,422,922.80
17,422,922.80
$178,345,010.74

June 30, 2005
$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

Kennesaw State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$65,128,565.01 702,825.00
4,363,304.25 18,903,418.59 8,719,304.21 22,392,685.65 16,220,120.38 4,492,213.27 16,382,882.30
157,305,318.66
2,496,612.87
$159,801,931.53

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

Operating revenue increased by $5,683,190.70 reflecting both an increase in tuition and fees and an increase in Auxiliary enterprises. The increase in tuition and fees was attributable to a 5% increase in tuition rates and a 3% increase in enrollment.
The compensation and employee benefits category increased by approximately $10,147,001.56. The increase reflects additional staff and faculty as well as an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $534,382.08 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006 and the effect this had on electricity rates. Also, new buildings completed in the previous year accounted for increased utility demand.
Under non-operating revenues (expenses) state appropriations increased by approximately $8,583,931.07. Kennesaw State University benefited from the effect of a steady increase in enrollment on the formula funding.
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
Kennesaw State University Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($71,955,793.96) 72,527,714.95 (6,588,203.19) 1,439,234.46 (4,577,047.74) 24,268,175.44
$19,691,127.70

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

Capital Assets
Kennesaw State University had $26,224,780.93 in capital asset additions in fiscal year 2006 of which $17,422,922.80 was funded by the Georgia State Finance and Investment Commission (GSFIC), primarily for construction in progress on the Social Science Building. Other additions included the Student Recreation Center which houses Intramurals and Recreations Services along with additional office space at a cost of $2,395,392.59.
Kennesaw State University also entered into two new capital leases with the Foundation. The leases added $5,830,346.07 to capital assets for the Towne Pointe unimproved land and improved land and building.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Kennesaw State University had Long-Term Debt and Liabilities of $52,715,942.39 of which $3,133,392.21 was reflected as current liability at June 30, 2006. This debt is associated with capital leases that the University has with the foundation covering three parking decks and several office facilities.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.

Kennesaw State University Annual Financial Report FY 2006 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 FY2006. The Kennesaw State University Foundation had endowment and other investments of $20.8 million as of June 30, 2006. 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.
Dr. Daniel S. Papp, President KENNESAW STATE UNIVERSITY
Kennesaw State University Annual Financial Report FY 2006 7

Statement of Net Assets

KENNESAW STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

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 - Other Due From Component Units Leas es Receivable Pledges Receivable Due From Primary Government Inventories (note 4) 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 Capital A s s ets , net (note 6) Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Due to Component Units Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Liabilities under Split-Interes t A greements 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

Kennes aw S tate Univers ity
$19,396,754.26 1,000,000.00 1,463,778.41 5,844,978.78 553,707.03
1,134,570.65 8,321,231.27
37,715,020.40
294,373.44 4,801,632.92
423,023.89 164,833,663.48 170,352,693.73 208,067,714.13
4,067,028.96 361,603.24 67,523.43
12,571,414.96 2,481,961.10 1,222,084.19 1,911,308.02 73,079.04
22,756,002.94 47,084,010.94
2,498,539.24
49,582,550.18 72,338,553.12
116,527,568.35 739,889.17
3,512,788.39 14,948,915.10 $135,729,161.01

Component Unit Kennes aw S tate
Univers ity Foundation, Inc.
$2,630,886.00
265,929.96
4,001,315.00 879,557.00 73,079.04
168,693.00 797,754.00 282,553.00 9,099,767.00
22,718,681.00 20,793,027.00
288,256.00 81,741,589.00 106,549,343.00
5,701,637.00 237,792,533.00 246,892,300.00
5,519,606.97
104,965.00 3,529,742.00
553,707.03
3,868,157.00
13,576,178.00
37,103,925.00
181,909,104.00 243,896.00
219,256,925.00 232,833,103.00
(3,427,616.00)
12,337,676.00 5,026,603.00 73,803.00 48,731.00
$14,059,197.00

Kennesaw State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

KENNESAW STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s : Scholars hip A llowances Gifts and Contributions 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
Employee Benefits 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 Kennes aw State Univ.
Total Operating Expens es Operating Income (los s )

Kennes aw S tate Univers ity
$54,913,863.42 4,042,661.67
9,675,331.69 1,952,909.30 1,168,564.85 4,066,877.05
66,864.30
396,962.21 7,899,775.70
401,201.63 3,513,068.97 1,340,939.07 4,282,132.13
234,563.23 615,153.28 86,485,545.16
42,674,576.29 40,535,126.18 19,494,666.12 1,847,546.64 9,563,201.67 3,298,830.46 33,488,736.11 6,402,635.19
157,305,318.66 (70,819,773.50)

Kennes aw S tate Univers ity
Foundation, Inc.
$0.00 1,824,121.00
19,225,668.00
21,049,789.00
873,462.00
1,435,889.00 3,770,589.00 4,334,932.00 4,140,377.00 14,555,249.00 6,494,540.00

Kennesaw State University Annual Financial Report FY 2006 9

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

KENNESAW STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Compone nt Unit

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 St at e 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

Ke nnesaw State Unive rsity

Ke nne saw State Unive rsity
Foundation, Inc.

69,538,087.36
1,167,755.37 14,411.61
579,268.38 1,944,304.79 1,211,230.60 (2,496,612.87)
(18,515.33) 71,939,929.91
1,120,156.41
17,422,922.80
17,422,922.80 18,543,079.21
117,186,081.80 0.00
117,186,081.80 $135,729,161.01

1,727,912.00 (8,425,914.00)
(6,698,002.00) (203,462.00)
2,224,053.00 2,224,053.00 2,020,591.00
12,038,606.00 0.00
12,038,606.00 $14,059,197.00

Kennesaw State University Annual Financial Report FY 2006 10

Statement of Cash Flows
KENNESAW STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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, 2006
$51,991,113.19
12,619,692.42 4,066,877.05
(65,116,944.12) (82,803,799.74)
(9,563,201.67) (266,687.09) 221,021.51
716,769.84 7,681,860.89
401,429.99 3,831,758.13 1,310,303.26 4,571,623.34
234,154.71 (1,851,765.67) (71,955,793.96)
69,538,087.36 (716,112.56) 3,705,740.15
72,527,714.95
(2,971,512.44) (1,120,077.88) (2,496,612.87) (6,588,203.19)
303,821.37 1,135,413.09
1,439,234.46 (4,577,047.74) 24,268,175.44 $19,691,127.70

Kennesaw State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
KENNESAW STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($70,819,773.50)
6,402,635.19 (1,790,041.71)
(292,294.87) (7,701,747.76)
(45,665.58) 1,090,570.82 1,078,150.36 (249,789.54)
372,162.63 ($71,955,793.96)
$5,830,346.07 $75,817.51
($17,422,922.80)

Kennesaw State University Annual Financial Report FY 2006 12

KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Kennesaw State University is reporting the activity for the Kennesaw State University Foundation, Inc. (the "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
Kennesaw State University Annual Financial Report FY 2006 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 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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
Kennesaw State University Annual Financial Report FY 2006 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 grants 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 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. In fiscal year 2006, GSFIC did not transfer any capital additions to Kennesaw State University.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Kennesaw State University had accrued liability for
Kennesaw State University Annual Financial Report FY 2006 15

compensated absences in the amount of $4,037,684.63 as of 7-1-2005. For FY2006, $2,948,764.83 was earned in compensated absences and employees were paid $2,576,602.20, for a net increase of $372,162.63. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $4,409,847.26.
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:

June 30, 2006

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Total Res tricted Expendable

$680,318.83 366,249.09 122,116.29 2,344,104.18 $3,512,788.39

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 2006 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 Res erve Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$563,110.75 4,799,133.35 9,586,671.00 $14,948,915.10

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Kennesaw State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Kennesaw State University Annual Financial Report FY 2006 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.
Kennesaw State University Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $7,577,720.09 and the bank balance was $9,145,960.97. Of the university's deposits, $8,745,960.97 were uninsured. Of these uninsured deposits, $1,900,000.00 were collateralized with securities held by the financial institution's trust department or agent in the university's name, and $6,845,960.97 were uncollateralized.
Kennesaw State University Annual Financial Report FY 2006 19

B. 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 of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Interest Rate Ri sk

Fair Value

Investment Maturity

Less Than

1 Year

1-5 Years

Inves tment type Debt Securities
U.S. Treas uries M oney M arket M utual Fund M utual Bond Fund

$106,056.63 17,910.74 815,796.78
$939,764.15

$42,879.19 17,910.74
$60,789.93

$63,177.44
815,796.78 $878,974.22

Other Inves tments Equity M utual Funds
Inves tment Pools Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund
Total Inves tments

1,610,745.50
13,991,507.61 1,025,285.27 146,137.31 79,700.67
$17,793,140.51

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.

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.

The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the University's total investment of $13,991,507.61 in the Short Term Fund, $13,754,182 is invested in debt securities.
Kennesaw State University Annual Financial Report FY 2006 20

The Weighted Average Maturity of the Legal Fund is 3.1 years. Of the University's total investment of $1,025,285.27 in the Legal Fund, $1,025,178 is invested in debt securities.
The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the University's total investment of $146,137.31 in the Balanced Income Fund, $96,247 is invested in debt securities.
The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $79,700.67 in the Total Return Fund, $25,887 is invested in debt securities.
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, 2006, $15,242,630.86 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. As previously stated, the Board of Regents investment pool funds are not rated.

Credit Quality Risk

Related Debt Investments
M oney M arket M utual Fund M utual Bond Fund

Fair Value
$17,910.74 815,796.78 $833,707.52

AAA

AA

A

Un ra t e d

$0.00 407,898.39
$407,898.39

$0.00 407,898.39
$407,898.39

$0.00 $0.00

$17,910.74 $17,910.74

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. At June 30, 2006 $349,627.20 or 1.96% of Kennesaw State University's investments were invested in international equity mutual funds. Due to the diversity of the fund portfolios and the immateriality of these investments compared to total investments, the University does not consider there to be any significant foreign currency risk. The University does not have a formal policy for managing exposure to foreign currency risk.

Kennesaw State University Annual Financial Report FY 2006 21

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,553,639.02 100,557.68
1,463,778.41 553,707.03
4,848,135.37 8,519,817.51
657,353.29
$7,862,464.22

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Health Clinic
Total

June 30, 2006
$1,102,607.77 31,962.88
$1,134,570.65

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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. As of June 30, 2006, the allowance for uncollectible accounts balance was $.00.

Kennesaw State University Annual Financial Report FY 2006 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$3,520,254.48 2,178,750.86 4,365,098.87 10,064,104.21

Additions
$1,814,401.89 40,760.00
16,630,207.27 18,485,369.16

Reductions
$0.00
2,481,960.28 2,481,960.28

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

209,111.41 3,895,626.37
1,407,214.40 4,015,944.18
693,475.69
10,221,372.05

693,731.68 3,682.00
697,413.68

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

65,491.96 2,274,356.76
152,039.38 1,303,081.74 1,619,683.33
972,571.98 15,410.04
6,402,635.19
3,818,736.86
$22,304,106.02

675,216.35 3,682.39
678,898.74 18,514.94
$2,500,475.22

Ending B al anc e 6/30/2006
$5,334,656.37 2,219,510.86
18,513,345.86 26,067,513.09
2,028,332.41 109,525,520.76
4,240,142.02 12,357,099.54 49,977,660.66 18,751,595.99
616,400.00 197,496,751.38
1,009,667.67 26,471,396.87
2,105,976.47 9,182,361.33 5,326,495.95 14,309,022.49
325,680.21 58,730,600.99
138,766,150.39
$164,833,663.48

Kennesaw State University Annual Financial Report FY 2006 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $10,151,292.31
2,420,122.65 $12,571,414.96

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$43,595,826.94

Additions $5,830,346.07

Reductions

Ending Balance June 30, 2006

$1,120,077.88

$48,306,095.13

Current Portion
$1,222,084.19

Other Liabilities Compensated Absences Total
Total Long TermObligations

4,037,684.63 4,037,684.63
$47,633,511.57

2,948,764.83 2,948,764.83
$8,779,110.90

2,576,602.20 2,576,602.20
$3,696,680.08

4,409,847.26 4,409,847.26
$52,715,942.39

1,911,308.02 1,911,308.02
$3,133,392.21

Note 9. Significant Commitments

The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $105,152.00 as of June 30, 2006. 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.

Kennesaw State University Annual Financial Report FY 2006 24

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2019 and 2030. Expenditures for fiscal year 2006 were $3,783,432.27 of which $2,496,612.87 represented interest and $166,741.52 represented executory costs. Total principal paid on capital leases was $1,120,077.88 for the fiscal year ended June 30, 2006. Interest rates range from 2.00 percent to 9.14 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Land Buildings Total Assets Held Under Capital Lease

$1,814,401.89 44,651,164.71 $46,465,566.60

All capital leases are for one-year terms and provide for renewal options covering the remaining term. Non-renewal is considered a remote possibility.
Kennesaw State University had seven 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, 2006 on this capital lease is $3,718,606.24.
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, 2006 on this capital lease is $21,648,745.89.
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, 2006 on these capital leases is $3,219,123.71.
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, 2006 on this capital lease is $171,687.97.
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
Kennesaw State University Annual Financial Report FY 2006 25

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, 2006 on this capital lease is $13,762,826.48.

In April 2006, the University entered into a capital lease of $4,015,944.18 at 8.22 percent whereby the University leases a portion of an office building for a twenty-four-year period that began April 2006 and expires June 30, 2030. The University is obligated to lease additional space in the building as it becomes available. At the expiration of the lease, ownership of the building transfers to the University. The outstanding liability at June 30, 2006 on this capital lease is $3,979,085.84.

In April 2006, the University entered into a capital lease of $1,814,401.89 at 5.07 percent whereby the University leases 7.242 acres of unimproved land for a twenty-four-year period that began April 2006 and expires June 30, 2030. At the expiration of the lease, ownership of the land transfers to the University. The outstanding liability at June 30, 2006 on this capital lease is $1,806,019.00.

OPERATING LEASES

Kennesaw State University's non-cancelable operating leases ended during Fiscal Year 2006. One lease was converted to a capital lease in April 2006.

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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 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

Real Property Capital Leas es
$4,315,396.38 4,312,014.24 4,311,773.31 4,305,837.51 4,302,496.08
21,427,085.54 21,241,854.06 21,010,778.58
7,710,031.89 92,937,267.59 37,403,638.68 7,227,533.78 $48,306,095.13

Kennesaw State University's FY2006 expense for rental of real property and equipment under operating leases was $1,751,706.78.

Kennesaw State University Annual Financial Report FY 2006 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 2006, 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

2006 2005 2004

100% 100% 100%

$3,772,319.54 $3,491,043.35 $3,306,631.56

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Kennesaw State University Annual Financial Report FY 2006 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, 2006, for employees covered by ERS was $5,435.52. The University's total payroll for all employees was $83,209,702.47.
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, 2006, the ERS employer contribution rate for the University amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above.
Total contributions to the plan made during fiscal year 2006 amounted to $647.38, of which $565.85 was made by the University and $81.53 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, 2006, 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
Kennesaw State University Annual Financial Report FY 2006 28

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 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 2006, 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 $3,186,325.13 (9.65%) and $1,650,962.89 (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 2006 amounted to $416,988.49 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
Kennesaw State University Annual Financial Report FY 2006 29

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. Kennesaw State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Kennesaw State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
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.
Kennesaw State University Annual Financial Report FY 2006 30

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, 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, 2006, there were 209 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Kennesaw State University recognized as incurred $963,955.08 of expenditures, which was net of $300,786.96 of participant contributions.
Kennesaw State University Annual Financial Report FY 2006 31

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$39,815,313.92 7,107,692.31 10,156,323.09

$117,132.55 282,553.43 49,682.09

$597,854.89 1,897,930.69
544,265.55

$1,792,258.06 8,848,986.31 2,303,994.58

($1,549.21) 5,603,621.28 1,250,030.41

$10,345.88 10,586,224.86 3,655,738.56

962,520.12 641,805.00 323,914.96 5,961,015.22 159,980.39

31,327.82 10,000.00
372.00 180,596.32
31,160.79

142,249.83 23,498.38 41,798.86 1,103,470.23 12,235.82

243,178.71
130,286.87 4,175,919.64 1,408,794.42

94,846.70 913.00
78,301.78 1,480,935.82
212,204.43

226,407.90 3,118,589.74
165,747.53 4,244,958.64
384,672.54

$65,128,565.01

$702,825.00

$4,363,304.25

$18,903,418.59

$8,719,304.21

$22,392,685.65

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2006

Scholars hips & Fellowships

A u xiliary Enterpris es

Un a llo c a t e d Exp en s e s

Total Expens es

$0.00 3,365,131.52 847,744.85
(83,734.26) 15,374.33
2,463,913.51 6,389,679.85 3,222,010.58

$0.00 4,492,213.27

$343,220.20 2,842,985.78
686,886.99 83,734.26 131,641.23
1,276,182.28 94,494.95
9,952,160.39 971,576.22

$0.00

$42,674,576.29 40,535,126.18 19,494,666.12 0.00 1,847,546.64 9,563,201.67 3,298,830.46 33,488,736.11 6,402,635.19

$16,220,120.38

$4,492,213.27

$16,382,882.30

$0.00

$157,305,318.66

Kennesaw State University Annual Financial Report FY 2006 32

Note 16. Component Units

The Kennesaw State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Kennesaw State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The Foundation also constructs buildings and facilities for use by the University and then leases the completed buildings to the institution. 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, 2006, the Foundation distributed $4,140,377 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 Road, Mailbox 910, Kennesaw, GA 30144 or from the Foundation's website at www.kennesaw.edu/foundation.

Investments for Component Units:

Kennesaw State University Foundation holds endowment and other investments in the amount of $20.8 million. The $10.6 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation, in conjunction with the donors, has established a spending plan whereby 4% of the scholarship balance, in excess of $400, may be used for academic scholarships. The remaining 96% of the balance is set aside as a reserve.

Investments are comprised of the following amounts at June 30, 2006:

Mutual Funds Total Investments

Cost $16,647,164.00 $16,647,164.00

Fair Value $20,793,027.00 $20,793,027.00

The Foundation also holds a net investment in direct financing leases with the University of $45,674,605 at June 30, 2006.

Kennesaw State University Annual Financial Report FY 2006 33

Capital Assets for Component Units:

Kennesaw State University Foundation holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$8,274,083.00 114,424.00
8,388,507.00
105,301,702.00 3,141,980.00
108,443,682.00 10,282,846.00 98,160,836.00
$106,549,343.00

Long-term Debt for Component Units:
Student Housing Revenue Bonds are issued by the Kennesaw State University Foundation to finance student housing on university property. The bonds mature at term and are secured by pledges of gross receipts from student housing at Kennesaw State University. The interest rate is variable.
Parking Facility Revenue Bonds are issued by the Kennesaw State University Foundation 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.
Teaching and Administrative Revenue Bonds are issued by the Kennesaw State University Foundation 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 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 Foundations interest in the projects and its revenues.

Kennesaw State University Annual Financial Report FY 2006 34

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Short term insurance note Educational Facilities Bonds University Facilities Taxable Senior Series - 2004B Student Housing Series 2004 A, C, D Parking Revenue Bonds University Facilities Lease Revenue Bonds University Facilities Revenue Bonds - 2006A University Facilities Taxable Revenue Bonds - 2006B Unamortized Cost of Issuance (reclassified to Other Assets) Unamortized bond premium Other Liabilities
Total Long Term Debt

$0.00 13,005,000.00 8,050,000.00 102,230,000.00 36,380,000.00
8,400,000.00
(5,542,973.00) 4,279,421.00
$166,801,448.00

$133,157.00
12,810,000.00 2,245,000.00 137,170.00 243,896.00
$15,569,223.00

$0.00 680,000.00
860,000.00
(5,542,973.00) 352,487.00
($3,650,486.00)

$133,157.00 12,325,000.00
8,050,000.00 102,230,000.00
35,520,000.00 8,400,000.00
12,810,000.00 2,245,000.00
4,064,104.00 243,896.00
$186,021,157.00

$133,157.00 715,000.00 770,000.00 930,000.00
1,060,000.00 260,000.00
$3,868,157.00

Annual debt service requirements to maturity for Student Housing, Parking and Teaching and Administrative bonds payable and other long-term debt are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 2037 through 2041

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

Notes Payable & Bonds Payable

Principal

Interest

Total

$3,868,157.00 4,230,000.00 4,400,000.00 4,585,000.00 4,765,000.00
26,695,000.00 30,400,000.00 34,105,000.00 31,725,000.00 29,130,000.00 11,874,104.00

$7,779,646.00 7,823,320.00 7,686,590.00 7,537,475.00 7,436,920.00
34,542,951.00 28,966,291.00 21,373,794.00 12,689,127.00
5,337,479.00 163,391.00

$11,647,803.00 12,053,320.00 12,086,590.00 12,122,475.00 12,201,920.00 61,237,951.00 59,366,291.00 55,478,794.00 44,414,127.00 34,467,479.00 12,037,495.00

$185,777,261.00

$141,336,984.00

$327,114,245.00

Kennesaw State University Annual Financial Report FY 2006 35

MACON STATE COLLEGE
Financial Report
For the Year Ended June 30, 2006

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 2006
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 .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 30 Note 16 Component Units ........................................................................ 31

MACON STATE COLLEGE
Management's Discussion and Analysis

Introduction

Macon State College is one of the 35 institutions of higher education 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 Service Administration, and Health Information Management. Since that time other baccalaureate degrees have been added including a new baccalaureate degree in Early Childhood Education which began Fall Semester 2005. These 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 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 2005 continued to increase with a total enrollment of 6,150 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:

FY2006 FY2005 FY2004

Faculty
159 139 131

Students (Headcount)
6,150 5,733 5,403

Students (FTE)
4,624 4,249 3,918

Overview of the Financial Statements and Financial Analysis

Macon State College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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

Macon State College Annual Financial Report FY 2006 1

purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Macon State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements.

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. 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, 2006
$7,345,393.55 47,989,639.27
1,095,266.63 56,430,299.45
3,653,894.28 529,671.63
4,183,565.91
47,989,639.27
715,620.39 53,430.60
3,488,043.28 $52,246,733.54

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

The total assets of the institution increased by $1,156,462.06 and the total liabilities decreased by $4,144.84. This yields an increase in total net assets of $1,160,606.90.

Macon State College Annual Financial Report FY 2006 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, 2006

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

$12,893,780.91 42,086,506.23 (29,192,725.32) 27,766,594.35
(1,426,130.97) 2,586,737.87 1,160,606.90 51,086,126.64
0.00 51,086,126.64 $52,246,733.54

$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
0.00 30,747,378.73 $51,086,126.64

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$8,075,086.98
630,197.75 495,724.36 3,517,405.29 175,366.53
12,893,780.91
18,543,609.83 8,113,123.10
964,234.32 171,873.30 (26,246.20) 27,766,594.35
1,478,487.87 1,108,250.00 2,586,737.87
$43,247,113.13

June 30, 2005
$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

Macon State College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$17,224,339.77
338,869.64 2,679,030.35 2,730,350.90 4,728,784.10 5,540,943.53 4,743,778.32 3,159,879.44
940,530.18
42,086,506.23
0.00
$42,086,506.23

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

Total revenue decreased by $13,996,700.10. This decrease was primarily in capital gifts from Georgia State Financing & Investment Commission (GSFIC). Macon State College did not have any major building transfers as in fiscal year 2005.
Operating revenues increased by $1,828,344.72. This was due to an increase in tuition and fees revenue and an increase in overall bookstore sales. This has a direct correlation to the 7% increase in enrollment from fall semester of 2004 to fall semester of 2005.
Total expenses increased by $5,181,440.91, or approximately 14%. The increase in Instruction expenditures represented 26% of the total increase. The increase was due to the hiring of new faculty to meet the demands of the enrollment increase. Institutional Support appears to have a significant increase; however this is misleading. The Board of Regents provided health insurance credits during fiscal year 2005 which understated that year's expenditures in the Institutional Support function. The fiscal year 2006 expenditures for Institutional Support are consistent with prior years.
The compensation and employee benefits category increased by $2,904,772.67 due to increased cost of health insurance for employees of the institution as well as new hires within the Instruction function. Utilities increased by $183,748.85 during the past year. The increase was primarily associated with the increased energy costs that were experienced in the last 12 months.
Under non-operating revenues (expenses) state appropriations increased by $2,410,379.02.

Macon State College Annual Financial Report FY 2006 5

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, 2006 and 2005, 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, 2006
($24,900,916.57) 27,278,409.49 (1,831,688.53) 179,410.51 725,214.90 4,193,065.39
$4,918,280.29

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

Capital Assets
The Georgia State Finance and Investment Commission (GSFIC) provided funding of over $1,400,000.00 for renovation of the Library during fiscal year 2006. The renovated Library reopened in August 2006.
The City of Warner Robins donated 71.5 acres of land to the College through the Macon State College Foundation in fiscal year 2006. The land, valued at $1,108,250.00, is to be used for future expansion of the Warner Robins Campus.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Macon State College had Long-Term Debt and Liabilities of $987,617.27 of which $457,945.64 was reflected as current liability at June 30, 2006.

Macon State College Annual Financial Report FY 2006 6

For additional information concerning Long-Term Debt and Liabilities, 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 fiscal year 2006. The Macon State College Foundation, Inc. had endowment and other investments of $6,452,102.00 as of June 30, 2006. 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. David A. Bell, President Macon State College
Macon State College Annual Financial Report FY 2006 7

Statement of Net Assets

MACON STATE COLLEGE STATEMENT OF NET ASSETS
June 30, 2006

Component Unit

AS S ETS Current As sets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Pledges Receivable Inventories (note 4) Prepaid items Other Assets Total Current As sets
Noncurrent Assets Investments (including Real Estate) Notes Receivable, net Pledges Receivable Capital As sets , net (note 6) Other Assets Total Noncurrent Ass ets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET AS S ETS Invested in Capital Ass ets, 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 AS S ETS

Macon State College

Macon State College Foundation,
Inc.

$4,918,280.29 100,000.00
61,010.07 1,700,638.38
461,910.06 103,554.75
7,345,393.55
1,090,910.52 4,356.11
47,989,639.27
49,084,905.90 56,430,299.45

$88,627.00
323,591.00
412,218.00 6,452,102.00
726,964.00 7,179,066.00 7,591,284.00

320,912.25 70,995.28
2,181,270.01 45,748.83
577,022.27 457,945.64 3,653,894.28
529,671.63 529,671.63 4,183,565.91
47,989,639.27
715,620.39 53,430.60
3,488,043.28 $52,246,733.54

59,528.00
59,528.00 0.00
59,528.00
6,227,788.00 801,572.00 502,396.00
$7,531,756.00

Macon State College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
MACON STATE COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

REVENUES

Macon S tate College

Macon S tate Col l e g e
Foundation, Inc.

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) Grants and Contracts Fe d e ra l State Other Sales and Services A uxiliary Enterpris es Books tore Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 M acon State College
Total Operating Expens es Operating Income (los s )

$10,615,182.49 2,540,095.51
(39,750.93) 675,482.95
(5,534.27) 495,724.36
3,479,711.84 37,693.45
175,366.53 12,893,780.91

$0.00 278,897.00 239,337.00
518,234.00

11,763,262.62 7,455,597.95 5,123,328.08 266,685.12 4,751,149.32 1,194,485.27 9,768,041.24 1,763,956.63
42,086,506.23 (29,192,725.32)

162,036.00 22,144.00
3,408.00
74,450.00
1,524,296.00 1,786,334.00 (1,268,100.00)

Macon State College Annual Financial Report FY 2006 9

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

MACON STATE COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Macon State College

C om pon e n t Un i t
Macon State College
Fou n dati on , In c.

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) 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

18,543,609.83
7,752,605.56 60,864.52 299,653.02 964,234.32 171,873.30 (26,246.20)
27,766,594.35 (1,426,130.97)

195,666.00 54,000.00 249,666.00 (1,018,434.00)

1,478,487.87 1,108,250.00
2,586,737.87 1,160,606.90
51,086,126.64 0.00
51,086,126.64 $52,246,733.54

29,085.00 29,085.00 (989,349.00)
8,521,105.00 0.00
8,521,105.00 $7,531,756.00

Macon State College Annual Financial Report FY 2006 10

Statement of Cash Flows
MACON STATE COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Principal Paid on Ins tallment Debt Interes t Paid on Ins tallment Debt 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 Sale 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, 2006 $10,569,152.01
692,857.96 493,640.36 (14,189,025.62) (19,337,843.08) (7,113,656.88)
3,465,902.87
37,486.26 480,569.55 (24,900,916.57) 18,543,609.83
90,227.94 8,644,571.72
27,278,409.49 1,478,487.87 (3,310,176.40)
(1,831,688.53) 818.70
178,591.81 179,410.51 725,214.90 4,193,065.39 $4,918,280.29

Macon State College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
MACON STATE COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($29,192,725.32)
1,763,956.63 1,773,452.23
(70,845.88) 99,016.31 320,131.29 80,401.51 149,296.12 176,400.54 ($24,900,916.57)
($1,108,250.00)

Macon State College Annual Financial Report FY 2006 12

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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 Institution'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 35 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 fiscal year 2006, Macon State College is reporting the activity for the Macon State College Foundation, Inc.
Macon State College Annual Financial Report FY 2006 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 predominant 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 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
Macon State College Annual Financial Report FY 2006 14

Assets. The Board of Regents Total Return Fund and the Board of Regents Diversified 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 grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Resale inventories are valued at cost using the first-in first-out basis.
Non-current Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, GSFIC did not transfer any capital additions to Macon State College.
Macon State College Annual Financial Report FY 2006 15

Deposits Macon State College did not hold any student deposits at June 30, 2006.
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. Macon State College had accrued liability for compensated absences in the amount of $811,216.73 as of 7-1-2005. For FY2006, $1,466,072.46 was earned in compensated absences and employees were paid $1,289,671.92, for a net increase of $176,400.54. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $987,617.27.
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 2006 16

Expendable Restricted Net Assets include the following:

June 30, 2006

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Term Endowments Total Res tricted Expendable

($445.50) 88.58
29,574.02 686,403.29 $715,620.39

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 Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$425,349.35 878,546.94 2,184,146.99 $3,488,043.28

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Macon State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Macon State College Annual Financial Report FY 2006 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.
Macon State College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $4,087,355.71 and the bank balance was $4,827,193.98. Of the College's deposits, $4,613,082.90 were uninsured. Of these uninsured deposits, $4,613,082.90 were collateralized with securities held by the financial institution's trust department or agent in the College's name.
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 to Board of
Macon State College Annual Financial Report FY 2006 19

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, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

Investment type Debt Securities
U.S. Treasuries

$335,889.92

$0.00

$335,889.92

$0.00

$0.00

$335,889.92

$0.00

$335,889.92

$0.00

$0.00

Other Investments Equity Mutual Funds

740,909.52

Investment Pools Board of Regents Short-Term Fund

874,155.04

Total Investments

$1,950,954.48

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.

The Weighted Average Maturity of the Short-Term Fund is 1.3 years. Of the College's total investment of $874,155.04 in the Short-Term Fund, $859,328 is invested in debt securities.

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.

Macon State College Annual Financial Report FY 2006 20

At June 30, 2006, $1,076,799.44 of the College's applicable investments was uninsured and held by the investment's counterparty in the College's name and $874,155.04 was uninsured and held by the investment's counterparty, but not 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 does not have a formal policy for managing credit quality risk.
As previously stated, the Board of Regents Short-Term Fund is not rated.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$240,853.99 237,427.12
61,010.07 77,920.00 1,158,758.71 1,775,969.89 14,321.44
$1,761,648.45

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Total

June 30, 2006 $461,910.06 $461,910.06

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the notes receivable at June 30, 2006. 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, 2006 the College did not have an allowance for uncollectible loans.
Macon State College Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A ss ets, Not Being Depreciated: La n d Capitalized Collections Construction W ork-in-Progress
Total Capital As sets Not Being Depreciated
Capital A ss ets, Being Depreciated: In fra s t ru c t u re Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A ss ets Being Depreciated
Les s: Accumulated Depreciation In fra s t ru c t u re Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A ccumulated Depreciation
Total Capital As sets, Being Depreciated, Net
Capital A ss ets, net

Beginning Balances 7/1/2005
$607,411.84
4,165,012.58 4,772,424.42

Additions
$1,910,650.00
691,677.15 2,602,327.15

Reductions
$0.00
3,950,385.48 3,950,385.48

47,776,829.22 2,457,515.00 2,050,937.20
3,355,145.15
55,640,426.57

4,912,667.20 168,425.13 106,461.70
161,725.39
5,349,279.42

15,500.00 9,899.00 25,399.00

9,578,772.50 672,110.95
1,462,799.14
2,946,793.59
14,660,476.18
40,979,950.39
$45,752,374.81

1,388,593.61 84,562.76 170,176.26
120,624.00
1,763,956.63
3,585,322.79
$6,187,649.94

15,500.00 9,899.00 25,399.00
0.00 $3,950,385.48

Ending Balance 6/30/2006
$2,518,061.84 0.00
906,304.25 3,424,366.09
0.00 52,689,496.42 2,625,940.13 2,141,898.90
0.00 3,506,971.54
0.00 60,964,306.99
0.00 10,967,366.11
756,673.71 1,617,475.40
0.00 3,057,518.59
0.00 16,399,033.81
44,565,273.18
$47,989,639.27

Macon State College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $2,172,715.47
8,554.54 $2,181,270.01

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences Total
Total Long TermObligations

811,216.73 811,216.73
$811,216.73

1,466,072.46 1,466,072.46
$1,466,072.46

1,289,671.92 1,289,671.92
$1,289,671.92

987,617.27 987,617.27
$987,617.27

457,945.64 457,945.64
$457,945.64

Note 9. Significant Commitments

Macon State College did not have any unrecorded significant commitments as of June 30, 2006.

Note 10. Lease Obligations

CAPITAL LEASES

Macon State College had no capital leases or installment purchase agreements for the acquisition of real property during fiscal year 2006.

OPERATING LEASES
Macon State College had one operating lease for copier equipment during FY2006 with a lease expiration in FY2007.

Macon State College's fiscal year 2006 expense for rental of real property and equipment under this operating lease was $88,059.88.

Macon State College Annual Financial Report FY 2006 23

Future commitments for noncancellable operating leases having remaining terms of one year or more as of June 30, 2006, were as follows:

Year Ending June 30: 2007 Total minimum leas e payments

Year 1

Real Property/Equip. Operating Leas es
$86,263.08 $86,263.08

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 2006, 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
2006 2005 2004

Percentage Contributed
100% 100% 100%

Required Contribution
$1,020,940.87 $ 945,644.90 $ 904,218.21

Macon State College Annual Financial Report FY 2006 24

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 60. 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, 2006, for employees covered by ERS was $68,915.76. The College's total payroll for all employees was $19,218,860.57.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the College amounted to 10.41% of
Macon State College Annual Financial Report FY 2006 25

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 2006 amounted to $8,207.88, of which $7,174.14 was made by the College and $1,033.74 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, 2006, 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 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 2006, 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.
Total contributions to the plan made during fiscal year 2006 amounted to $880,545.91 of which $580,017.59 was made by the College and $300,528.32 was made by employees. These contributions met the requirements of the plan.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Macon State College Annual Financial Report FY 2006 26

Georgia Defined Contribution Plan
Plan Description Macon State College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are 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 2006 amounted to $56,290.06 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
Macon State College Annual Financial Report FY 2006 27

employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Macon State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
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, 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
Macon State College Annual Financial Report FY 2006 28

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, 2006, 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, 2006, Macon State College recognized as incurred $418,104.41 of expenditures, which was net of $133,168.66 of participant contributions.
Macon State College Annual Financial Report FY 2006 29

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$11,698,627.09 898,796.65
2,908,581.43

$0.00

$25,247.82 69,309.21 23,985.21

$3,000.00 1,441,878.54 376,886.42

$36,137.71 1,575,687.47
420,793.37

$0.00 2,502,968.96 1,095,950.41

172,933.43
75,565.43 1,424,537.30
45,298.44

2,143.16
3,927.84 214,256.40

23,961.18
50,843.59 496,582.96 285,877.66

28,002.14 7,371.00 26,655.76 629,035.79 6,667.66

26,990.10
62,545.32 1,057,230.30
(16,900.99)

$17,224,339.77

$0.00

$338,869.64

$2,679,030.35

$2,730,350.90

$4,728,784.10

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary Enterpris es

Unallocated Exp en s es

Total Exp en s es

$250.00 711,647.07 242,866.67
4,992.72
970,759.58 3,117,811.58 492,615.91

$0.00 4,743,778.32

$0.00 255,310.05 54,264.57
7,662.39
4,187.75 2,828,586.91
9,867.77

$0.00 940,530.18

$11,763,262.62 7,455,597.95 5,123,328.08 0.00 266,685.12 4,751,149.32 1,194,485.27 9,768,041.24 1,763,956.63

$5,540,943.53

$4,743,778.32

$3,159,879.44

$940,530.18

$42,086,506.23

Macon State College Annual Financial Report FY 2006 30

Note 16. Component Units
Macon State College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Macon State College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The twenty-four-member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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, 2006, the Foundation distributed $1,524,296 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Development & Alumni Affairs Office at 100 College Station Drive, Macon, GA 31206 or from the Foundation's website at http://www.maconstate.edu/alumnifriends/.
Investments for Component Units:
Macon State College Foundation holds endowment and other investments in the amount of $6,452,102. The $6.2 million corpus of the endowment portion 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 three-year rolling average may be expended. The remaining percentage stays in tact.
Investments are comprised of the following amounts at June 30, 2006:

Equity Securities Georgia Investment Pools
BOR Diversified Fund
Total Inves tments

Co s t $1.00
6,366,294.00 $6,366,295.00

Fair Value $1.00
6,452,101.00 $6,452,102.00

Macon State College Annual Financial Report FY 2006 31

MEDICAL COLLEGE OF GEORGIA
Financial Report
For the Year Ended June 30, 2006

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 2006
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.................................................................................... 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 ................................................................................................. 30 Note 12 Risk Management................................................................................................ 35 Note 13 Contingencies...................................................................................................... 36 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 36 Note 15 Natural Classifications With Functional Classifications..................................... 37 Note 16 Component Units ........................................................................ 38

MEDICAL COLLEGE OF GEORGIA
Management's Discussion and Analysis

Introduction

Medical College of Georgia (MCG), the oldest school of medicine in Georgia, was incorporated in 1828 as the Medical Academy of Georgia and is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Augusta, Georgia, has become known for its world-class 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.

FY2006 FY2005 FY2004

Faculty
575 590 418

Students (Headcount)
2,585 2,556 2,526

Students (FTE)
2,522 2,475 2,443

Overview of the Financial Statements and Financial Analysis
Medical College of Georgia is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.
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.

Medical College of Georgia Annual Financial Report FY 2006 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 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, 2006
$89,481,806.21 252,298,971.62
45,692,755.28 387,473,533.11
73,979,853.28 39,890,121.27 113,869,974.55
223,465,189.42 1,649,071.97
58,886,167.70 437,593.75
(10,834,464.28) $273,603,558.56

June 30, 2005
$96,966,290.04 222,875,170.17
43,855,716.79 363,697,177.00
79,863,004.95 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

The total assets of the institution increased by $23,776,356.11. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $29,423,801.45 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 $20,614,417.68. The primary cause for the increase was in noncurrent liabilities, primarily $25,794,368.60 in lease purchase obligations. The combination of the increase in total assets of $23,776,356.11 and the increase in total liabilities of $20,614,417.68 yields an increase in total net assets of $3,161,938.43. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $3,345,816.01.

Medical College of Georgia Annual Financial Report FY 2006 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, 2006

June 30, 2005

Operat ing Revenues
Operat ing Expenses Operat ing Loss
Nonoperat ing Revenues and Expenses
Income (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

$372,787,988.87 513,463,624.73 (140,675,635.86) 139,292,217.86
(1,383,418.00) 4,545,356.43 3,161,938.43 270,441,620.13
0.00 270,441,620.13 $273,603,558.56

$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

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

Operating Revenue T uition and Fees 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

$18,542,837.07 337,007,319.31
7,897,214.39 6,697,596.51 2,643,021.59
372,787,988.87
126,086,056.41 10,392,398.67 988,067.59 3,887,445.42 (1,043,140.29)
140,310,827.80
2,496,616.49 2,048,739.94 4,545,356.43
$517,644,173.10

June 30, 2005
$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

Medical College of Georgia Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

Operating Expenses Inst ruct ion Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Patient Care (MCG only)
T otal Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)
T otal Expenses

June 30, 2006
$99,355,862.63 47,496,383.84 91,190,447.64 15,779,782.64 2,196,680.77 38,478,262.10 29,329,980.76 544,450.53 7,241,752.28
181,850,021.54 513,463,624.73
1,018,609.94
$514,482,234.67

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

Non-operating grants and contracts increased in the amount of $2,893,718.55. This is primarily a result of the increase in grant awards in the current year.
The compensation and employee benefits category increased by approximately $20,170,816.97. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by approximately $105,197.10 during the past year. The increase was primarily associated with the increased utility costs that were experienced in fiscal year 2006.
Under non-operating revenues (expenses) state appropriations increased by approximately $14,447,121.42. Regular and Special Funding Initiative state appropriations increased in the current fiscal year. It appears that the economy continues to be on an upward trend and there were no budget cuts in fiscal year 2006.
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 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

Medical College of Georgia Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($132,801,159.12) 134,693,320.98 (15,035,540.55) 1,902,617.55 (11,240,761.14) 48,457,948.79
$37,217,187.65

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

Capital Assets
The College had capital asset additions for buildings and building improvements in fiscal year 2006. Numerous projects were completed during the fiscal year totaling $28,901,796.72.
Medical College of Georgia also completed the Cancer Research Center and the Satellite Energy Plant in fiscal year 2006. A total of $15,290,730.82 for these projects was funded by Georgia State Financing and Investment Commission (GSFIC). Other on-going projects funded by the GSFIC included $2,814,046.52. Projected funding by GSFIC for fiscal year 2007 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 and Liabilities
Medical College of Georgia had Long-Term Debt and Liabilities of $55,525,369.73 of which $15,635,248.46 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. Medical College of Georgia is reporting the activity for MCG Health, Inc., Medical College of Georgia Foundation, Inc., Medical College of Georgia Physicians Practice Group Foundation, Medical College of Georgia Research Institute, Inc. and Medical College of Georgia Dental Foundation. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.

Medical College of Georgia Annual Financial Report FY 2006 6

Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Daniel W. Rahn, M.D., President Medical College of Georgia
Medical College of Georgia Annual Financial Report FY 2006 7

Statement of Net Assets

MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

ASS ETS C u rre 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 Margin Allocat ion Funds Receivables - Ot her Due From Component Unit s Leases Receivable Due From P rimary Government Invent ories (not e 4) Prepaid it ems Not es and Mort gages Receivable Ot her Asset s T ot al Current Asset s
Noncurre n t Asse ts Due From P rimary Government Invest ment s (including Real Est at e) Not es Receivable, net Leases Receivable Capit al Asset s, net (not e 6) Ot her Asset s T ot al Noncurrent Asset s TO TAL ASSETS
LIAB ILITIES C u rre nt Li abi l i ti e s Account s P ayable Salaries Payable Cont ract s Payable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Due t o Primary Government Lease Purchase Obligat ions (current port ion) Est imat ed T hird-Part y Payor Set t lement s Compensat ed Absences (current port ion) Due t o Component Unit s Not es and Loans P ayable (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 ) Liabilit ies under Split -Int erest Agreement s Ot her Long-T erm Liabilit ies Not es and Loans P ayable (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 Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET ASS ETS

Pri m a ry Gove rnme nt

C ompon e n t Un i ts

MC G He al th In c.

Me di cal C ol l e ge of Ge orgi a
Foun dati on, In c.

$37,217,187.65
4,219,270.01 9,222,551.00 21,420,857.67 8,379,186.85

$60,202,156.00 20,678,381.00
81,796,399.00 53,012.00

505,432.46 8,517,320.57
89,481,806.21

5,983,540.00
831,804.00 169,545,292.00

$16,334,609.00
187,036.00 56,572.00
16,578,217.00

41,194,404.86 4,498,350.42
252,298,971.62
297,991,726.90 387,473,533.11

56,821,054.00
65,118,333.00 526,171.00
122,465,558.00 292,010,850.00

109,917,975.00 116,256.00
4,124,798.00 292,873.00
114,451,902.00 131,030,119.00

31,007,457.56 1,330,216.23 427,793.57
23,400,301.30 2,023,064.03 1,163,101.96
14,472,146.50 155,772.13
73,979,853.28 27,670,680.24 12,219,441.03
39,890,121.27 113,869,974.55

9,933,342.00 4,604,529.00
2,139,000.00 11,991,044.00
2,353,836.00 15,543,000.00
9,731,260.00 134,474.00
56,430,485.00 6,278,650.00
6,416,000.00 12,694,650.00 69,125,135.00

223,465,189.42

56,485,847.00

1,649,071.97 58,886,167.70
437,593.75 (10,834,464.28) $273,603,558.56

166,399,868.00 $222,885,715.00

0.00
2,291,825.00
2,291,825.00 2,291,825.00 4,124,798.00 101,162,885.00 15,419,645.00 8,030,966.00 $128,738,294.00

Medical College of Georgia Annual Financial Report FY 2006 8

Statement of Net Assets, Continued
MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Margin Allocation Funds Receivables - Other Due From Component Units Leases Receivable Due From Primary Government Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets
Noncurrent Assets Due From Primary Government Investments (including Real Estate) Notes Receivable, net Leases Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Estimated Third-Party Payor Settlements Compensated Absences (current portion) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Liabilities under Split-Interest Agreements Other Long-Term Liabilities Notes and Loans Payable (noncurrent) 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

Medical College of Georgia PPG Foundation

Component Units
Medical College of Georgia Research
Institute, Inc.

$18,100,759.00 24,838,093.00

$5,677,198.00

344,139.00 134,474.00 2,175,624.00 143,158.00

4,294,187.00

45,736,247.00
17,562,055.00 62,005,284.00
4,322,749.00 1,812,327.00 85,702,415.00 131,438,662.00
3,342,224.00
941,973.00 2,063,957.00
454,406.00
53,012.00 650,000.00 7,505,572.00
34,786,702.00
505,990.00 32,699,307.00 67,991,999.00 75,497,571.00
4,322,749.00

9,971,385.00 12,614.00
22,463.00 35,077.00 10,006,462.00 48,583.00
6,000.00 7,755.00 4,892,910.00
4,955,248.00
0.00 4,955,248.00
22,463.00

51,618,342.00 $55,941,091.00

5,028,751.00 $5,051,214.00

Medical College of Georgia Dental Foundation $62,914.00 3,614,810.00 14,487.00 606,030.00 78,888.00 4,377,129.00
0.00 4,377,129.00 4,244,055.00
4,244,055.00
0.00 4,244,055.00
133,074.00 $133,074.00

Medical College of Georgia Annual Financial Report FY 2006 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, 2006

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) 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 Other Organizations Clinical and Patient Fees Net patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend income Other Operating Revenues T otal Operating Revenues
EXPENSES Operating Expenses
Salaries: Facult y St aff
Employee Benefits Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat ion Payments to or on behalf of Medical College of Georgia
T otal Operating Expenses Operating Income (loss)

Pri m ary Gove rn m e n t

Component Units

MCG Health In c.

Medical College of Georgia
Foundation, Inc.

$19,422,480.54 879,643.47

$0.00

47,651,356.25 157,131,887.15 132,224,075.91
7,897,214.39 425,767.65
777,947.95 1,401,100.41
(4,801.83) 1,172,198.05
925,448.79 2,425,703.14

5,082,982.10 705,961.90
323,524,888.00

2,217,253.94 372,787,988.87

329,313,832.00

$0.00 4,444,657.00 1,308,672.00
1,051,709.00
(13,730.00) 1,689,465.00
119,478.00 8,600,251.00

102,810,792.74 166,864,622.42
72,720,620.57 0.00
2,489,977.96 1,120,484.08 6,768,518.16 145,885,453.58 14,803,155.22
513,463,624.73 (140,675,635.86)

142,078,277.00
37,554,174.00 35,634,632.00
525,208.00
4,271,095.00 113,048,948.00
14,888,630.00
348,000,964.00 (18,687,132.00)

487,132.00 207,098.00
372,123.00 72,111.00
9,067,607.00 10,206,071.00 (1,605,820.00)

Medical College of Georgia Annual Financial Report FY 2006 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, 2006

Component Unit

Component Unit

Primary Government

MCG Health Inc.

Medical College of Georgia
Foundation, Inc.

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal 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 losses 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

126,086,056.41
190,320.00 10,202,078.67
988,067.59 3,887,445.42
(1,018,609.94)
(1,043,140.29) 139,292,217.86
(1,383,418.00)
14,850.00 2,496,616.49 2,033,889.94
4,545,356.43 3,161,938.43
270,441,620.13 0.00
270,441,620.13 $273,603,558.56

31,510,080.00 4,946,835.00
4,266,432.00 (565,085.00) (10,070,214.00) (23,336.00) 30,064,712.00 11,377,580.00
0.00 11,377,580.00 211,508,135.00
0.00 211,508,135.00 $222,885,715.00

8,289,512.00
8,289,512.00 6,683,692.00
666,536.00 666,536.00 7,350,228.00 121,388,066.00
0.00 121,388,066.00 $128,738,294.00

Medical College of Georgia Annual Financial Report FY 2006 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, 2006

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) 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 Other Organizations Clinical and Patient Fees Net patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend income Other Operating Revenues T otal Operating Revenues
EXPENSES Operating Expenses
Salaries: Facult y St aff
Employee Benefits Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat ion Payments to or on behalf of Medical College of Georgia
T otal Operating Expenses Operating Income (loss)

Medical College of Georgia PPG
Fou n dati on

Component Units
Medical College of Georgia Re s e arch
Institute, Inc.

Medical College of Georgia Dental
Fou n dati on

$0.00

$0.00

$0.00

128,937.00

44,174,069.00 34,812.00
8,173,516.00 79,478.00
409,806.00

86,771,062.00

4,586,633.00

86,899,999.00

52,871,681.00

4,586,633.00

8,492,207.00 14,237,370.00
1,326,706.00 474,950.00 64,920.00
8,915,246.00 682,138.00
51,429,977.00 85,623,514.00
1,276,485.00

2,330,431.00 5,735.00
49,694,858.00 52,031,024.00
840,657.00

479,217.00 371,751.00
8,602.00
2,597,329.00 1,157,959.00 4,614,858.00
(28,225.00)

Medical College of Georgia Annual Financial Report FY 2006 12

Statement of Revenues, Expenses and Changes in Net Assets, Continued
MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS
for the Year Ended June 30, 2006

NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal 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 losses 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

Medical College of Georgia PPG
Foundation

Component Units
Medical College of Georgia Research
Institute, Inc.

Medical College of Georgia Dental
Foundation

3,194,592.00 945,774.00
(1,424,910.00)
159,232.00 2,874,688.00 4,151,173.00

156,418.00
156,418.00 997,075.00

161,299.00
161,299.00 133,074.00

0.00 4,151,173.00
51,789,918.00 0.00
51,789,918.00 $55,941,091.00

0.00 997,075.00
4,054,139.00 0.00
4,054,139.00 $5,051,214.00

0.00 133,074.00
0.00 0.00 0.00 $133,074.00

Medical College of Georgia Annual Financial Report FY 2006 13

Statement of Cash Flows

MEDICAL COLLEGE OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2006

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 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 Other Nonoperating Receipts 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 m ent 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, 2006
$19,243,249.52
337,364,256.25 7,750,109.72
(236,160,597.66) (269,332,864.77)
(1,120,484.08) (1,191,181.75) 1,338,971.13
760,422.10 1,401,448.41
(4,801.83) 1,172,198.05
909,721.79
2,456,514.60 2,611,879.40 (132,801,159.12)
126,086,056.41 34,396.60
9,616,008.26 (1,043,140.29) 134,693,320.98
2,322,074.81 (14,676,658.08)
(1,662,347.34) (1,018,609.94) (15,035,540.55)
1,902,617.55
1,902,617.55 (11,240,761.14) 48,457,948.79 $37,217,187.65

Medical College of Georgia Annual Financial Report FY 2006 14

Statement of Cash Flows, Continued
MEDICAL COLLEGE OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2006
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 reciat io n Change in Asset s and Liabilit ies:
Receivables, net Invent ories P repaid Items Not es Receivable, Net 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 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

June 30, 2006
($140,675,635.86)
14,803,155.22 (2,279,014.91)
(78,657.93) 112,276.52 147,789.38 (5,381,787.61) 3,156,024.05 (2,785,167.29) 179,859.31 ($132,801,159.12)
$27,740,332.78 $1,984,827.87 ($4,545,356.43)

Medical College of Georgia Annual Financial Report FY 2006 15

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Medical College of Georgia is reporting the activity for MCG Health, Inc., Medical College of Georgia Foundation, Inc., the Medical College of Georgia Physicians Practice Group Foundation, Medical College of Georgia Research Institute, Inc. and Medical College of Georgia Dental Foundation. See Note 16, Component Units, for foundation notes.
Medical College of Georgia Annual Financial Report FY 2006 16

Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia 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 predominant 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.
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' Total Return Fund is included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and
Medical College of Georgia Annual Financial Report FY 2006 17

local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
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 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 Medical College of Georgia when complete. For the year ended June 30, 2006, GSFIC did not transfer any capital additions 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.
Medical College of Georgia Annual Financial Report FY 2006 18

Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Medical College of Georgia had accrued liability for compensated absences in the amount of $26,511,728.22 as of July 1, 2005. For fiscal year 2006, $18,474,672.02 was earned in compensated absences and employees were paid $18,294,812.71, for a net increase of $179,859.31. The ending balance as of June 30, 2006 in accrued liability for compensated absences was $26,691,587.53.

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:

June 30, 2006

June 30, 2005

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

$46,489,122.60 5,247,217.91 1,777,585.36 5,372,241.83
$58,886,167.70

$48,123,744.60 6,010,244.39 1,588,509.80 5,372,129.59
$61,094,628.38

Medical College of Georgia Annual Financial Report FY 2006 19

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 $437,593.75 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, which will be capitalized when completed. Expected date of completion is 2007.

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, 2006
$1,423,410.99 7,833,902.75 86,562.52
(20,178,340.54) ($10,834,464.28)

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.

Medical College of Georgia Annual Financial Report FY 2006 20

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.
Medical College of Georgia Annual Financial Report FY 2006 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'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, 2006, the carrying value of deposits was $36,940,593.92 and the bank balance was $42,209,179.02. Of the College's deposits, $42,209,179.02 were uninsured. Of these uninsured deposits, $1,095,932.00 were collateralized with securities held by the financial institution's trust department or agent in the College's name and $41,113,247.02 were 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 2006 22

B. 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 to 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, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Fair Value

Investment type Debt Securities
U.S. Treasuries U.S. Agencies
Explicitly Guaranteed Implicitly Guaranteed Mutual Bond Fund Repurchase Agreements

$157,262.40
491,718.24 7,999,685.73 11,339,967.94 1,833,000.00

21,821,634.31

Other Investments Equity Mutual Funds Real Estate Investment Fund

9,097,655.83 2,157,868.92

Investment Pools Board of Regents Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1

7,021,313.80 1,363,382.73

Total Investments

$41,461,855.59

Less Than 1 Year
$0.00
3,553,822.34 1,833,000.00 $5,386,822.34

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$157,262.40
491,718.24 4,445,863.39 11,339,967.94
$16,434,811.97

$0.00 $0.00

$0.00 $0.00

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.
The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the College's total investment of $7,021,313.80 in the Total Return Fund, $2,280,531.00 is invested in debt securities.

Medical College of Georgia Annual Financial Report FY 2006 23

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 28 days.

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 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, 2006, $21,821,634.31 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.

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 the fixed income (bond portion) of debt instruments have quality ratings no lower than BAA.

Related Debt Investments U. S. Agencies Mutual Bond Fund Repurchase Agreements - Underlying U. S. Agency Securities
Total by Ratings

Fair Value

AAA

$8,491,403.97 11,339,967.94
1,833,000.00
$21,664,371.91

$2,662,582.95 11,339,967.94
1,833,000.00
$15,835,550.89

Unrated $5,828,821.02
$5,828,821.02

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. More than 5 percent of the College's

Medical College of Georgia Annual Financial Report FY 2006 24

investments are in the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These investments are 9.22% and 6.96% respectively of the College's total investments. 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 2006 25

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2006:

June 30, 2006

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Georgia St at e Financing and Invest m ent Com m ission M argin Allocat ion Funds Due from Com ponent Unit s Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$50,574.40 65,105.75
4,219,270.01 122,240.45
9,222,551.00 8,379,186.85 21,198,211.47 43,257,139.93
15,274.40
$43,241,865.53

Note 4. Inventories

Inventories consisted of the following at June 30, 2006:

June 30, 2006

Bookst ore Other
T otal

$387,888.72 117,543.74
$505,432.46

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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.

Medical College of Georgia Annual Financial Report FY 2006 26

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

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

Beginning Bal an ce s 7/1/2005
$8,998,281.93
28,736,818.88 37,735,100.81

Addi ti o n s
$208,000.00
8,796,388.07 9,004,388.07

Re du cti on s
$0.00
29,454,136.50 29,454,136.50

En di n g B al an ce 6/30/2006
$9,206,281.93 0.00
8,079,070.45 17,285,352.38

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

253,802,353.54 2,339,679.00
56,864,937.96 4,345,135.80
15,057,540.38
332,409,646.68

29,188,224.67
8,481,682.72 27,740,332.78
1,036,199.96
66,446,440.13

845,775.00
5,880,124.82 403,109.90 433,342.80
7,562,352.52

0.00 282,144,803.21
2,339,679.00 59,466,495.86 31,682,358.68 15,660,397.54
0.00 391,293,734.29

Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation

97,869,786.51 1,428,259.61
36,427,050.48 1,556,657.37 9,987,823.35
147,269,577.32

6,518,541.55 88,748.23
6,079,519.12 1,266,098.62
850,247.70
14,803,155.22

675,382.02
4,302,039.26 381,853.41 433,342.80
5,792,617.49

0.00 103,712,946.04
1,517,007.84 38,204,530.34
2,440,902.58 10,404,728.25
0.00 156,280,115.05

T otal Capital Assets, Being Depreciated, Net 185,140,069.36

51,643,284.91

1,769,735.03

235,013,619.24

Capital Assets, net

$222,875,170.17 $60,647,672.98 $31,223,871.53 $252,298,971.62

Medical College of Georgia Annual Financial Report FY 2006 27

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2006:

P repaid T uit ion and Fees Research Ot her Deferred Revenue
T otals

June 30, 2006
$4,693,855.66 11,004,564.39
7,701,881.25
$23,400,301.30

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Le as e s Lease Obligations

Beginning Balance
July 1, 2005

Addi ti on s

$2,755,796.76 $27,740,332.78

Re du cti on s

En di n g Balance June 30, 2006

$1,662,347.34 $28,833,782.20

C u rre n t Portion
$1,163,101.96

O ther Liabilities Compensated Absences T ot al

26,511,728.22 26,511,728.22

18,474,672.02 18,474,672.02

18,294,812.71 18,294,812.71

26,691,587.53 26,691,587.53

14,472,146.50 14,472,146.50

Total Long Term O bligations

$29,267,524.98 $46,215,004.80

$19,957,160.05 $55,525,369.73

$15,635,248.46

Note 9. Significant Commitments

The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,083,934.30 as of June 30, 2006. 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 and the use of several floors of the Cancer Research Center building.
CAPITAL LEASES
Capital leases are generally payable in monthly installments and have terms expiring in various years between 2006 and 2036. Expenditures for fiscal year 2006 were $2,680,957.28 of which $1,018,609.94 represented interest. Total principal paid on capital leases was $1,662,347.34 for the fiscal year ended June 30, 2006. 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, 2006:
Medical College of Georgia Annual Financial Report FY 2006 28

Buildings Equipment Total Assets Held Under Capital Lease

$26,713,903.50 2,527,552.60
$29,241,456.10

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 with an outstanding balance at June 30, 2006 in the amount of $28,833,782.20.

OPERATING LEASES

Medical College of Georgia's noncancellable operating leases have remaining terms of one year or less. 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 2006 were $15,015.22 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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 t hrough 2016 2017 t hrough 2021 2022 t hrough 2026 2027 t hrough 2031 2032 t hrough 2036 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

Real P roperty

Capit al Leases

Operat ing Leases

$3,079,722.54 2,577,747.07 2,222,677.40 2,186,648.62 2,179,157.54
10,878,120.00 10,878,120.00 10,878,120.00 10,878,120.00
9,790,308.00 65,548,741.17
36,714,958.97

$3,507.50 $3,507.50

$28,833,782.20

Medical College of Georgia Annual Financial Report FY 2006 29

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 2006, 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

2006 2005 2004

100% 100% 100%

$13,331,269.35 $12,643,828.09 $12,164,375.94

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Medical College of Georgia Annual Financial Report FY 2006 30

Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2006, for employees covered by ERS was $357,896.62. The College's total payroll for all employees was $269,675,415.16.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the College amounted 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 2006 amounted to $42,756.25, of which $37,387.69 was made by the College and $5,368.56 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, 2006, financial report, which may be obtained through ERS.
Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-
Medical College of Georgia Annual Financial Report FY 2006 31

21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $7,580,601.21 (9.65%) and $3,927,772.91 (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 credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are
Medical College of Georgia Annual Financial Report FY 2006 32

credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2006 amounted to $348,243.82 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 initial funding period of the annuity was 15 years; however, effective January 1, 2004, the remaining amortization period was extended 4 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 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 2006 33

Annual Pension Cost and Net Pension Obligation

The ERP's annual pension cost and net pension obligation for Fiscal Year 2006 was as follows:

Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Contribution

Total $12,490,037.00
(673,038.99) 1,057,096.33

MCG $6,744,619.98 (614,400.25)
964,996.47

Other Units $5,745,417.02
(58,638.74) 92,099.86

Annual Pension Cost

$12,874,094.34

$7,095,216.20

$5,778,878.14

Contribution Made

$12,905,079.00

$6,795,548.36

$6,109,530.64

Increase (Decrease) in Net Pension Obligation Net Pension Obligation Beginning of Year

$(30,984.66) (8,973,853.25)

$299,667.84 (8,192,003.34)

$(330.652.50) (781,849.90)

Net Pension Obligation End of Year

$(9,004,837.91)

$(7,892,335.50) $(1,112,502.40)

Three-Year Trend Information

FY 2006

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year
Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation

Total $12,874,094.34
97.02% $(9,004,837.91)
FY 2005
Total $12,948,606.64
97.24% $(8,973,853.25)

MCG $7,095,216.20
95.06% $(7,892,335.50)
MCG $7,121,684.38
95.42% $(8,192,003.34)

Other Units $5,778,878.14
99.42% $(1,112,502.40)
Other Units $5,826,922.26
99.47% $(781,849.90)

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation

FY 2004
Total $15,762,607.99
100.54% $(9,331,115.89)

MCG $8,703,107.02
98.97% $(8,518,139.36)

Other Units $7,059,500.97
102.49% $(812,976.53)

Medical College of Georgia Annual Financial Report FY 2006 34

The annual required contribution for the current year was determined as part of the July 13, 2005 actuarial valuation using the Entry Age Actuarial cost method. The remaining amortization period is 13 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 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.
Medical College of Georgia Annual Financial Report FY 2006 35

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 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, 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, 2006, there were 2,013 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Medical College of Georgia recognized as incurred $6,444,522.18 of expenditures, which was net of $2,366,854.23 of participant contributions.
Medical College of Georgia Annual Financial Report FY 2006 36

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Instruction

Research

Functional Classification FY2006

Public Service

Academic Support

Student Services

Institutional Support

$ 47,256,774.20 24,251,917.11
18,483,552.08

$ 14,481,576.69 13,934,378.90 5,855,846.52

$ 36,277,755.35 32,373,970.38 12,171,114.46

$ 2,204,800.75 7,062,824.71 4,155,185.36

$ 959.13 1,297,201.80 346,939.64

$ 22,707.14 14,240,467.31 12,105,028.75

793,268.29 466,616.88 774,643.55 3,623,044.81 3,706,045.71

505,370.15 7,442.31
28,500.59 11,844,044.67
839,224.01

536,307.04 25,933.40 253,247.14 8,931,295.82 620,824.05

117,578.37 4,595.50
100,619.03 955,257.75 1,178,921.17

28,324.72
15,099.55 467,725.16 40,430.77

233,582.94 70,566.52 158,771.90 4,775,901.93 6,871,235.61

$ 99,355,862.63

$ 47,496,383.84

$ 91,190,447.64

$ 15,779,782.64

$ 2,196,680.77

$ 38,478,262.10

Plant Operations & Maintenance

Scholarships & Fellowships

Functional Classification FY2006

Auxiliary Enterprises

Unallocated Expenses

MCG only Patient Care

Total Expenses

$ 0.00 4,015,726.36 1,235,782.95
(491,016.18) 17,809.31
5,038,246.94 18,337,809.75
1,175,621.63

$ 0.00 544,450.53

$ 68,549.59 2,089,929.48
726,351.78 491,016.18 16,735.70
878.94 72,629.97 3,404,808.37 370,852.27

$ 0.00

$ 2,497,669.89 67,598,206.37 17,640,819.03
241,001.44
326,759.49 93,545,565.32

$ 102,810,792.74 166,864,622.42 72,720,620.57
0.00 2,489,977.96 1,120,484.08 6,768,518.16 145,885,453.58 14,803,155.22

$ 29,329,980.76

$ 544,450.53

$ 7,241,752.28

$ 0.00

$ 181,850,021.54

$ 513,463,624.73

Medical College of Georgia Annual Financial Report FY 2006 37

Note 16. Component Units
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 mission 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 issued after November 30, 1989, that do not conflict with or contradict GASB pronouncements. The Company's fiscal year is July 1 through June 30.
Complete financial statements for the Company can be obtained from the Administrative Office at 1120 15th Street, Augusta, Georgia 30912.
Deposits and Investments At June 30, 2006, $62,482,586 of MCG Health, Inc.'s deposits was uninsured and collateralized by securities held by the pledging institution in the Company's name.
At June 30, 2006, MCG 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 policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
Medical College of Georgia Annual Financial Report FY 2006 38

A summary of investments follows:

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

Investment type Debt Securities
U.S. Treasuries U.S. Agencies
Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage/Asset Backed Securities (Corporate)

$9,945,241.00
20,690,248.00 0.00
17,116,228.00 11,055,360.00 $58,807,077.00

$1,161,144.00 448,953.00
1,259,621.00 $2,869,718.00

$8,784,097.00
17,947,158.00
15,856,607.00 3,869,316.00 $46,457,178.00

$0.00 207,734.00
1,677,358.00 $1,885,092.00

$0.00 2,086,403.00
5,508,686.00 $7,595,089.00

Other Investments Equity Securities - Domestic Equity Securities - International Joint Venture Real Estate Investment Fund

17,646,518.00 162,145.00 883,695.00
$77,499,435.00

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.

As of June 30, 2006, none of MCG Health, Inc.'s investments are subject to Custodial Credit 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 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 Poor's and/or Moody's.

Medical College of Georgia Annual Financial Report FY 2006 39

The investments subject to credit quality risk at June 30, 2006 are rated as follows:

Related Debt Investments
U. S. Agencies Corporate Debt Mortgage/Asset Backed Securities (Corporate)

Fair Value

AAA

AA

A

Unrated

$20,690,248.00 17,116,228.00 11,055,360.00

$20,690,248.00 1,250,737.00 8,830,722.00

$0.00 6,865,206.00

$0.00 8,508,867.00

$0.00 491,418.00 2,224,638.00

$48,861,836.00

$30,771,707.00

$6,865,206.00

$8,508,867.00

$2,716,056.00

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 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.

As of June 30, 2006, none of MCG Health, Inc.'s applicable investments exceed 5% of its total investment balance.

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.

MCG Health, Inc. holds investments totaling $162,145, or 0.2% in International equity securities. Foreign currency risk is considered negligible related to this holding in comparison to total investments.

Medical College of Georgia Annual Financial Report FY 2006 40

Capital Assets for Component Units: MCG Health, Inc.'s capital asset activity for the year ending June 30, 2006 was as follows:

Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress
Total Capital Assets Not Being Depreciated

Beginning Balances 7/1/2005
$2,978,188.00 5,529,336.00 8,507,524.00

Additions
$1,766,090.00 5,871,002.00 7,637,092.00

Reductions
$0.00 3,862,055.00 3,862,055.00

Ending Balance 6/30/2006
$4,744,278.00 7,538,283.00
12,282,561.00

Capital Assets, Being Depreciated: Building and Building Improvements Equipment Leasehold Improvements Capital Leases Total Assets Being Depreciated

3,551,922.00 113,201,406.00
12,343,253.00 6,902,737.00
135,999,318.00

208,466.00 5,304,197.00 3,994,640.00 6,838,963.00 16,346,266.00

123,241.00 572,909.00 251,898.00
948,048.00

3,637,147.00 117,932,694.00
16,085,995.00 13,741,700.00 151,397,536.00

Less: Accumulated Depreciation Buildings Equipment Leasehold Improvements Capital Leases Total Accumulated Depreciation

73,502.00 80,036,503.00
2,986,994.00 1,142,132.00 84,239,131.00

133,522.00 11,015,028.00
1,905,693.00 1,834,387.00 14,888,630.00

9,202.00 556,795.00
565,997.00

197,822.00 90,494,736.00
4,892,687.00 2,976,519.00 98,561,764.00

Total Capital Assets, Being Depreciated, Net

51,760,187.00

1,457,636.00

382,051.00

52,835,772.00

Capital Assets, net

$60,267,711.00

$9,094,728.00 $4,244,106.00

$65,118,333.00

Long-term Liabilities for Component Units:

MCG Health, Inc. is the lessee of certain equipment under noncancellable leases expiring in various years through 2011. Interest rates range from 4.99% 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, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Compensated Absences Capital Lease Obligations Professional Liabilities
Total Long Term Debt

$8,892,686.00 3,734,546.00 8,826,000.00
$21,453,232.00

$12,309,635.00 6,838,963.00 92,895.00
$19,241,493.00

$11,471,061.00 1,941,023.00 363,895.00
$13,775,979.00

$9,731,260.00 8,632,486.00 8,555,000.00
$26,918,746.00

$9,731,260.00 2,353,836.00 2,139,000.00
$14,224,096.00

Medical College of Georgia Annual Financial Report FY 2006 41

Debt Service Obligations:

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

Year Ending June 30:
2007 2008 2009 2010 2011

Year
1 2 3 4 5

Principal
$2,353,836.00 2,012,251.00 1,954,206.00 1,782,545.00 529,648.00
$8,632,486.00

Interest
$438,677.00 315,444.00 200,532.00 85,297.00 8,416.00
$1,048,366.00

Total
$2,792,513.00 2,327,695.00 2,154,738.00 1,867,842.00 538,064.00
$9,680,852.00

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 fundraising 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 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, 2006, the Foundation distributed $9.1 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, Georgia 30912 or from the Foundation's website at www.mcgfoundation.org.

Medical College of Georgia Annual Financial Report FY 2006 42

Investments for Component Units:

Investments are comprised of the following amounts at June 30, 2006:

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate
Total Investments

Cost
$858,330.00 554,500.00 25,000.00
7,480,360.00 84,826,885.00
1,064,409.00
$94,809,484.00

Fair Value
$858,330.00 537,959.00 24,998.00
8,886,624.00 98,545,655.00
1,064,409.00
$109,917,975.00

Capital Assets for Component Units:

Medical College of Georgia Foundation, Inc. held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$6,676,594.00 325,545.00
7,002,139.00
2,877,341.00
4,124,798.00 $4,124,798.00

Long-term Liabilities for Component Units:
At June 30, 2006, Medical College of Georgia Foundation, Inc. long-term liabilities consisted of a $2,291,825 liability due under a split-interest agreement.
The 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 Medical College of Georgia (College). PPG acts primarily as a non-profit 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. 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
Medical College of Georgia Annual Financial Report FY 2006 43

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 a sole partner and has sole voting control of each LLC. Because 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.
PPG is a private non-profit 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. 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 funded for 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 the 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, 2006, the PPG distributed $51.4 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.
Investments for Component Units:
PPG invests in mutual funds, equity securities and debt securities, which are measured at fair value. For investments other than common stock and mutual funds, classification between current and non-current is determined based upon individual investment maturity dates. Investments in common stock and mutual funds are actively traded and are classified as current. Investment income or loss (including realized gains and losses, interest and dividends) is included in revenues collected in excess of (less than) expenses paid.
Medical College of Georgia Annual Financial Report FY 2006 44

Investments are comprised of the following amounts at June 30, 2006:

Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Joint Venture Venture Capital
Total Investments

Cost
$11,354,661.00 8,709,351.08 9,452,764.52 9,362,035.12 585,000.00 62,500.00
$39,526,311.72

Fair Value
$11,354,661.00 8,325,514.00
12,515,460.00 9,557,013.00 585,000.00 62,500.00
$42,400,148.00

In addition, PPG holds a Net Investment in a direct financing lease with the College in the amount of $27,517,640 as of June 30, 2006.

Capital Assets for Component Units:

PPG held the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$885,901.00
885,901.00
2,364,064.00 5,769,846.00 8,133,910.00 4,697,062.00 3,436,848.00 $4,322,749.00

Long-Term Liabilities for Component Units:

Deferred Compensation - PPG administers a deferred compensation plan for various current and former MCG faculty members. Deferred Compensation represents the accounts held on behalf of these members and was ($505,990) at June 30, 2006.

Loan Payable - During 2004, the MCG-PPG Cancer Research Center, LLC (CRC) entered into a loan agreement with the Development Authority of Richmond County (the Authority), whereby the Authority issued bonds in the aggregate amount of $32,870,000 plus a premium of $498,784 and lent the proceeds thereof to CRC for the purpose of providing funds to finance the cost of construction of a portion of a cancer research center building on the campus of MCG. The loan agreement provides for semi-annual interest payments at interest rates ranging from 2.5 percent

Medical College of Georgia Annual Financial Report FY 2006 45

to 5.0 percent. Principal payments are due annually beginning December 2006 and continuing through December 2034.

Changes in long-term liabilities for component units for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Notes and Loans Payable Loan Premium Other Long Term Debt
Total Long Term Debt

$32,870,000.00 498,784.00 471,830.00
$33,840,614.00

$0.00 34,160.00 $34,160.00

$0.00 19,477.00
$19,477.00

$32,870,000.00 479,307.00 505,990.00
$33,855,297.00

$650,000.00 $650,000.00

Debt Service Obligations

Annual debt service requirements to maturity for the loan payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Note Payable

Principal

Interest

Total

$650,000.00 670,000.00 685,000.00 705,000.00 725,000.00
3,965,000.00 4,735,000.00 5,865,000.00 7,460,000.00 7,410,000.00

$1,416,172.81 1,400,183.94 1,384,150.48 1,365,797.53 1,344,952.71 6,335,375.20 5,489,086.08 4,308,754.07 2,724,843.30 738,162.78

$2,066,172.81 2,070,183.94 2,066,172.81 2,070,183.94 2,069,150.48
10,300,375.20 10,224,086.08 10,173,754.07 10,184,843.30
8,148,162.78

$32,870,000.00

$26,507,478.90

$55,236,728.66

Medical College of Georgia Research Institute, Inc. 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

Medical College of Georgia Annual Financial Report FY 2006 46

relationship, the Institute is considered a component unit of the College and is discretely presented in the College's financial statements.
The Institute's financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board ("GASB"), in order to be consistent with the accounting principles followed by its primary government, the Medical College of Georgia. The Institute's fiscal year is July 1 through June 30.
During the year ended June 2006, the Institute sub-contracted approximately $50 million of research projects to the College. Complete financial statements for the Institute can be obtained from the Medical College of Georgia's Division of Sponsored Program Administration at Medical College of Georgia, Augusta, Georgia 30912.
Deposits and Investments
As of June 30, 2006, $5,948,040 of the Institute's bank balance was exposed to custodial credit risk. $200,000 was uninsured and collateralized by the pledging bank's trust department, but not in the Institute's name and $5,748,040 was uninsured and uncollateralized.
The Institute had no investments as of June 30, 2006.
Capital Assets for Component Units:
The Institute's Capital Asset activity for the year ending June 30, 2006 was as follows:

Capital A ssets , Being Depreciated: Eq u ip me n t Total A ssets Being Depreciated
Les s: A ccumulated Depreciation Eq u ip me n t Total A ccumulated Depreciation
Total Capital As sets, Being Depreciated, Net
Capital A ssets , net

Beginning Balances 7/1/2005
$28,676.00 28,676.00
478.00 478.00 28,198.00 $28,198.00

Additions
$0.00 0.00

Reductions
$0.00 0.00

5,735.00 5,735.00 (5,735.00) ($5,735.00)

0.00 0.00 $0.00

Ending Balance 6/30/2006
$28,676.00 28,676.00
6,213.00 6,213.00 22,463.00 $22,463.00

Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of the Medical College of Georgia (College). The objectives and purposes of the Dental Foundation are to acquire and administer funds and property which are derived from fees charged for services rendered in the practice of dentistry at the School of Dentistry at the Medical College of Georgia by members of the faculty, residents and hygienists of the School of Dentistry. Dental Foundation funds are used to maintain and improve the high standard of

Medical College of Georgia Annual Financial Report FY 2006 47

instruction at the Medical College of Georgia Dental School for advanced study by members of the School's student body and faculty and for research in the dental health field. 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.

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 from March 1, 2005 through February 28, 2006. 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.

During the year ended February 28, 2006, the Foundation distributed $1.2 million to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office of Medical College of Georgia, School of Dentistry, AD 1104, Augusta, Georgia 30912.

The Foundation's investments are comprised of the following amounts at February 28, 2006:

Certificates of Deposit U. S. Treasury Obligations Annuities Index Funds Cash Management Funds Domestic Equities
Total Investments

Cost
$1,042,000.00 751,537.00 200,000.00 400,000.00 201,360.00 987,399.00
$3,582,296.00

Fair Value
$993,989.00 725,717.00 242,355.00 378,600.00 201,680.00 1,072,469.00
$3,614,810.00

Medical College of Georgia Annual Financial Report FY 2006 48

MIDDLE GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2006

Middle Georgia College Cochran, Georgia

Richard J. Federinko
President

Lynn E. Hobbs
Vice President for Fiscal Affairs

MIDDLE GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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 ................................................................................................. 26 Note 12 Risk Management................................................................................................ 28 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

MIDDLE GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

Middle Georgia College is one of thirty-five institutions of higher education operating within the University System of Georgia. The College, located in Cochran, Georgia, was founded in 1884 and is dedicated to providing a caring, dynamic, learning-centered, and technologically advanced environment of excellence. As a comprehensive and residential institution, the College pursues innovative opportunities to provide services to its traditional and non-traditional students primarily from rural areas of south central Georgia and will maintain a recognized legacy of affordable higher education and community support services of the highest quality. The College provides a main campus in Cochran serving commuting and residential students. It's Dublin Center and other off-campus sites provide educational opportunities for those commuting students from central Georgia. These facilities meet the associate-degree and targeted baccalaureate degree level program needs throughout the regional service area. The state College provides access to higher education and undergraduate degrees that will address the economic development needs of Georgia's heartland, and, in limited cases, the economic development of the state at large. Popular programs include Business Administration, Education, Nursing, Engineering, and the Georgia Academy of Mathematics, Engineering and Science. The institution's continued growth and excellence in academic instruction are reflected in the numbers throughout this report.

FY2006 FY2005 FY2004

Faculty
77 82 80

Students (Headcount)
2,677 2,627 2,517

Students (FTE)
2,274 2,189 2,074

Overview of the Financial Statements and Financial Analysis

Middle Georgia College is proud to present its financial statements for fiscal year 2006. 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 provide an overview of its financial activities for the year. Comparative data is provided for FY 2005 and FY 2006.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the Institution 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

Middle Georgia College Annual Financial Report FY 2006 1

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.

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, 2006
$4,155,773.38 31,646,909.39
1,134,857.06 36,937,539.83
1,840,726.34 334,372.69
2,175,099.03
31,644,525.15 2,483.44
1,198,117.69
1,917,314.52 $34,762,440.80

June 30, 2005
$4,624,212.30 28,316,387.46
1,106,616.91 34,047,216.67
2,587,183.57 324,330.33
2,911,513.90
28,308,464.24 31,698.12
1,169,668.62
1,625,871.79 $31,135,702.77

The total assets of the institution increased by $2,890,323.16. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,330,521.93 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 ($736,414.87). The primary cause for the decrease was due to a change in the College's academic calendar. The combination of the increase in total assets of $2,890,323.16 and the decrease in total liabilities of ($736,414.87) yields an increase in

Middle Georgia College Annual Financial Report FY 2006 2

total net assets of $3,626,738.03. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $3,336,060.91.
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2006

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

$12,316,073.42 23,561,317.48 (11,245,244.06) 11,957,606.34
712,362.28 2,914,375.75 3,626,738.03 31,135,702.77
0.00 31,135,702.77 $34,762,440.80

$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
0.00 30,054,659.09 $31,135,702.77

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a year of growth with an increase in the net assets of the institution. A summary of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets is as follows:

Middle Georgia College Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and 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

June 30, 2006
$3,107,106.08
3,416,373.02 37,040.00
5,635,426.12 120,128.20
12,316,073.42
11,527,167.20 239,815.86 41,937.17 161,305.42 (12,370.64)
11,957,855.01
2,914,375.75 0.00
2,914,375.75
$27,188,304.18

June 30, 2005
$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 0.00
3,059,850.03
$23,619,116.68

Middle Georgia College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$7,400,011.54
1,836,618.16 2,108,029.96 2,333,315.30 3,661,730.56 1,319,761.94 4,901,850.02
23,561,317.48
248.67 $23,561,566.15

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

Total Operating Revenue increased by $1,633,049.55. The increase is mainly due to a $602,097.22 increase in Auxiliary Revenue and a $933,317.62 increase in student tuition and fees, net of allowance for doubtful accounts. Revenues associated with Stores and Shops, Food Services, and Intercollegiate Athletics increased during the fiscal year. This increase, along with the increase in Student Tuition and Fees, resulted from a change in the academic calendar for summer semesters as well as increased enrollment.
Total Operating Expenses increased by $1,024,080.03. This increase is due primarily to a $435,964.94 increase in Plant Operations & Maintenance. Academic Support increased by $102,370.35, Student Services by $162,046.98 and Institutional Support by $217,849.07. These increases are associated with summer semester sessions included in the current year financials, rising energy costs, and increased student enrollment. Additionally, as growth occurs in enrollment and new facilities, Plant Operations & Maintenance increases as a net effect.
In the Non-Operating Revenues section, state appropriations increased by $1,443,324.73. This increase has created more opportunities for Middle Georgia College in the current fiscal year to grow. The College is hopeful that this trend will continue as the state of Georgia's economic outlook improves.
In the prior fiscal year, an impairment loss was recorded to the financial statements 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 under construction renovation for Fall Semester 2005 occupancy. The renovation is a project funded by the Georgia State Finance and Investment Commission (GSFIC).

Middle Georgia College Annual Financial Report FY 2006 5

Currently, the claim is tied up in litigation, as a result of the subcontractor who the claim was filed against declaring bankruptcy. The College has proceeded with the renovation of Browning Hall with the remaining allotment at GSFIC for this project. The anticipated date of completion for the renovation is Fall Semester 2007. However, final completion is dependent upon the resolution of the insurance claims.

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. Phase I of housing construction will be completed for Fall Semester 2006 and is anticipated to be one hundred percent occupied. This new complex will provide housing for two hundred ninety six new residents. The assets will be maintained by the Foundation with a rental agreement between the LLC and the College. Opportunities for growth in the new fiscal year will be numerous as well as challenges to such an increase in on-campus residents. Phase II of the housing complex will be complete for Fall Semester 2007 and will provide a net of two hundred sixty new beds.

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.

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($10,221,273.53) 11,674,913.08 (1,780,486.66) 243,229.61 (83,617.50) 2,877,863.77
$2,794,246.27

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

Middle Georgia College Annual Financial Report FY 2006 6

Capital Assets
The College had three significant capital asset additions for facilities in fiscal year 2006. The Russell Hall renovation was completed and placed into service during the fiscal year. Pool and Pavilion improvements were completed in the early part of the fiscal year. Sodexho Management, Inc. and Middle Georgia College entered into a Food Service Contract for physical renovations to the Dining Hall. These improvements were completed in Georgia Hall in accordance with the contract entered into in fiscal year 2005. Equipment was also provided for this project completed during the fiscal year.
The campus loop project started in the prior fiscal year is still in progress. This $16.3 million project funded by GSFIC 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 and Liabilities
Middle Georgia College had Long-Term Debt and Liabilities of $616,782.52 of which $282,409.83 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. 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 stable. Middle Georgia College anticipates major growth in the next fiscal year. In June 2006, the Board of Regents approved the College to begin offering four year programs in the field of aviation. There is a possibility of a merger between the College and the Georgia School of Aviation and Technical College currently located in Eastman, Georgia. As these events unfold, Middle Georgia College will react to each new opportunity for growth with fiscal responsibility and the highest quality of academic excellence.
Richard J. Federinko, President Middle Georgia College
Middle Georgia College Annual Financial Report FY 2006 7

Statement of Net Assets

MIDDLE G EORG IA COLLEG E STATEMENT OF NET ASSETS
June 30, 2006

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 - Other Due From Component Units Inventories (note 4) Prepaid items Other As sets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Capital A s s ets , net (note 6) Other As sets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (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

Middle Georgia Col l e g e
$2,792,646.27
246,980.41 539,760.18
1,000.00 533,359.79
11,164.27 30,862.46 4,155,773.38
1,600.00 985,747.59 147,509.47 31,646,909.39
32,781,766.45 36,937,539.83
245,015.63 139,893.37 134,787.55 908,853.33
319.53 129,447.10
2,384.24 280,025.59 1,840,726.34
334,372.69
334,372.69 2,175,099.03
31,644,525.15
2,483.44 1,198,117.69
1,917,314.52 $34,762,440.80

Component Unit Middle Georgia College Foundation,
Inc.
$144,300.00 300,000.00
66,500.00
510,800.00
20,412,196.00 638,718.00
10,281,800.00 662,867.00
31,995,581.00 32,506,381.00
4,509,599.00
1,000.00
4,510,599.00
26,850,000.00 26,850,000.00 31,360,599.00
4,506,863.00 787,333.00 327,950.00 1,568.00
(4,477,932.00) $1,145,782.00

Middle Georgia College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
MIDDLE G EORG IA COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

REVENUES

Middle Georgia College

Middle Georgia College Foundation,
Inc.

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) Fe d e ra l State Other Sales and Services Rents and Royalties A uxiliary Enterpris es Res idence Halls Books tore Food Services 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
Employee Benefits 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 M iddle Georgia College
Total Operating Expens es Operating Income (los s )

$5,147,838.04 2,040,731.96
3,384,567.36 23,407.00 8,398.66 37,040.00 3,392.00
1,518,670.79 1,552,586.37 1,837,418.99
41,113.97 401,493.33 284,142.67 116,736.20 12,316,073.42
4,703,628.96 4,924,430.52 2,989,793.06
149,336.73 1,483,505.98 1,111,133.28 6,819,912.98 1,379,575.97
23,561,317.48 (11,245,244.06)

$0.00 82,678.00 12,682.00
95,360.00
38,657.00 26,145.00 29,435.00 94,237.00 1,123.00

Middle Georgia College Annual Financial Report FY 2006 9

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, 2006
Component Unit

Middle Georgia College

Middle Georgia College
Foundation, Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts 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 St at e 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

11,527,167.20
37,444.58 202,371.28
41,937.17 161,305.42
(248.67) (12,370.64) 11,957,606.34 712,362.28
2,914,375.75
2,914,375.75 3,626,738.03
31,135,702.77 0.00
31,135,702.77 $34,762,440.80

0.00 1,123.00
1,650.00 1,650.00 2,773.00
1,143,009.00 0.00
1,143,009.00 $1,145,782.00

Middle Georgia College Annual Financial Report FY 2006 10

Statement of Cash Flows
MIDDLE G EORG IA COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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 Sale 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, 2006
$4,672,331.85
3,526,777.95 35,726.25
(10,882,815.63) (9,564,246.45) (3,524,237.94)
(9,991.00) 13,447.10
1,481,191.43 1,480,406.08 2,025,628.86
40,183.03 363,923.96 115,125.05
5,275.93 (10,221,273.53)
11,527,167.20 (139,007.15) 286,753.03
11,674,913.08
2,914,375.75
(4,689,074.76) (5,538.98) (248.67)
(1,780,486.66)
21,766.20 221,463.41
243,229.61 (83,617.50) 2,877,863.77 $2,794,246.27

Middle Georgia College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
MIDDLE G EORG IA COLLEG E STATEMENT OF CASH F LOWS F or the Year Ended June 30, 2006
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 Prepaid Items 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

June 30, 2006
($11,245,244.06)
1,379,575.97 112,864.24 (147,172.33) 36,607.35 375,922.16 (58,967.66) (672,682.28) (654.73) (1,522.19)
($10,221,273.53)
($60,157.99)

Middle Georgia College Annual Financial Report FY 2006 12

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five 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 2005. 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 FY2006, 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
Middle Georgia College Annual Financial Report FY 2006 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 predominant 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Middle Georgia College Annual Financial Report FY 2006 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 grants and contracts. Accounts receivable is 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 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, 2006, GSFIC did not transfer any capital additions to Middle Georgia College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall.
Middle Georgia College Annual Financial Report FY 2006 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. Middle Georgia College had accrued liability for compensated absences in the amount of $615,920.47 as of 7-1-2005. For FY2006, $343,950.68 was earned in compensated absences and employees were paid $345,472.87, for a net decrease of $(1,522.19). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $614,398.28.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed 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.
Middle Georgia College Annual Financial Report FY 2006 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, 2006
$74,061.79 167,228.59
4,840.06 639,683.11 312,304.14 $1,198,117.69

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, 2006
$975,273.85 1,904,415.99
8,582.10 (970,957.42) $1,917,314.52

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 2006 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 Colleges 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 2006 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, 2006, the carrying value of deposits was $2,067,548.05 and the bank balance was $2,410,976.78. Of the College's deposits, $2,308,568.12 were uninsured. Of these uninsured deposits, $2,214,489.69 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $94,078.43 were uncollateralized.
Middle Georgia College Annual Financial Report FY 2006 19

B. Investments

Middle Georgia College maintains an investment policy which fosters sound and prudent judgment in the management of assets. This policy ensures safety of capital consistent with the fiduciary responsibility of each institution to the citizens of Georgia as well as 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, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Interest Rate Risk
Investment type Debt Securities
U.S. Agencies Implicitly Guaranteed
Corporate Debt
Other Investments Equity Mutual Funds Equity Securities - Domestic

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$0.00 74,450.08 58,221.61 $132,671.69
85,923.93 625,000.64

$0.00 59,820.43 29,970.10 $89,790.53

$0.00

$0.00

$0.00

14,629.65

28,251.51

$0.00

$42,881.16

$0.00

Investment Pools Board of Regents Short-Term Fund Balanced Income Fund
Total Investments

718,200.22 142,151.33
$1,703,947.81

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.

The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the College's total investment of $718,200.22 in the Short Term Fund, $706,018 is invested in debt securities.

Middle Georgia College Annual Financial Report FY 2006 20

The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the College's total investment of $142,151.33 in the Balanced Income Fund, $93,621 is invested in debt securities.
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, 2006, $551,176.33 of the College's applicable investments were uninsured and held by the investment's counterparty in the College's name and $860,351.55 were uninsured and held by the investment's counterparty's trust department or agent, but not 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 similar pool with "like" risks. The College policy for managing credit quality risk for investments for the College's Cook endowment investments is that the overall portfolio rating must be maintained at a minimum level of "A".
The Board of Regents Investment pool funds are not rated.
Credit Quality Risk

Related Debt Investments
U. S. Agencies Corporate Debt

Fair Value
$74,450.08 58,221.61 $132,671.69

AAA

AA

$74,450.08 29,970.10
$104,420.18

$0.00 28,251.51
$28,251.51

A $0.00 $0.00

Unrated $0.00 $0.00

Middle Georgia College Annual Financial Report FY 2006 21

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 total investments in Coca-Cola stock with a fair market value of $206,496. This stock is part of the Harris Endowment and it was donated to the College in 1966.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$20,971.35 233,288.91 246,980.41
36,111.60 1,000.00 302,261.37 840,613.64 52,873.05
$787,740.59

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

June 30, 2006

Books tore Phys ical Plant
Total

$520,639.47 12,720.32
$533,359.79

Note 5. Notes/Loans Receivable

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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. The College had no allowance for uncollectible loans at June 30, 2006.

Middle Georgia College Annual Financial Report FY 2006 22

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$2,020,094.93 0.00
726,605.10 2,746,700.03

Additions
$0.00
3,195,904.02 3,195,904.02

Reductions
$0.00
1,594,065.49 1,594,065.49

524,691.00 38,548,249.57
2,576,233.50 2,086,024.00
16,251.37 2,293,089.45
0.00 46,044,538.89

2,332,703.21 296,350.00 420,968.18
67,231.84
3,117,253.23

130,724.80
69,101.68 16,251.37 45,676.00
261,753.85

396,187.31 14,607,634.23
1,976,131.78 1,471,927.73
4,875.41 2,018,095.00
0.00 20,474,851.46
25,569,687.43
$28,316,387.46

163,328.69 1,128,779.98
30,868.60 7,527.70
49,071.00
1,379,575.97
1,737,677.26
$4,933,581.28

2,001.13 129,677.45
70,530.00 4,875.41 45,676.00
252,759.99
8,993.86
$1,603,059.35

Ending B al anc e 6/30/2006
$2,020,094.93 0.00
2,328,443.63 4,348,538.56
524,691.00 40,750,227.98 2,872,583.50
2,437,890.50 0.00
2,314,645.29 0.00
48,900,038.27
557,514.87 15,606,736.76 2,007,000.38
1,408,925.43 0.00
2,021,490.00 0.00
21,601,667.44
27,298,370.83
$31,646,909.39

Middle Georgia College Annual Financial Report FY 2006 23

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $116,537.98 792,315.35 $908,853.33

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$7,923.22

Additions $0.00

Reductions

Ending Balance June 30, 2006

$5,538.98

$2,384.24

Current Portion
$2,384.24

615,920.47 615,920.47
$623,843.69

343,950.68 343,950.68
$343,950.68

345,472.87 345,472.87
$351,011.85

614,398.28 614,398.28
$616,782.52

280,025.59 280,025.59
$282,409.83

Note 9. Significant Commitments
The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2006.

Note 10. Lease Obligations
CAPITAL LEASES
The Capital lease agreement is payable in monthly installments and expires in fiscal year 2007. Expenditures for fiscal year 2006 were $5,787.68 of which $248.67 represented interest. Total principal paid on capital leases was $5,539.01 for the fiscal year ended June 30, 2006. The interest rate was 4.60 percent. The carrying value of the vehicle held under capital lease at June 30, 2006 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 2006 24

OPERATING LEASES
Middle Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2007 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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2 3

Real Property and Equipment

Capital Leas es

Operating Leas es

$2,411.50

$15,984.00 2,850.00

2,411.50 27.26 0.00
$2,384.24

$18,834.00

Middle Georgia College had operating lease expenditures for fiscal year 2006 of $11,568.00.

Middle Georgia College Annual Financial Report FY 2006 25

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 2006, 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

2006 2005 2004

100% 100% 100%

$631,254.37 $644,234.60 $629,787.72

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 2006 26

with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $149,513.76 (9.65%) and $77,468.31 (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 2006 amounted to $32,673.69 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.
Middle Georgia College Annual Financial Report FY 2006 27

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. 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.
Middle Georgia College Annual Financial Report FY 2006 28

Litigation, claims and assessments filed against Middle Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 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, 2006, there were 117 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Middle Georgia College recognized as incurred $396,948.93 of expenditures, which was net of $168,655.02 of participant contributions.
Middle Georgia College Annual Financial Report FY 2006 29

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

In s t ru ct io n

Res e arch

Pu b lic Se rv ic e

A c ad emic Su p p o rt

Student Se rv ic e s

Ins titutional Su p p o rt

$4,838,356.17 500,327.06 1,234,186.77

$0.00

$0.00

$4,000.00 889,563.97 275,458.59

($133,672.05) 1,007,875.83
266,530.74

($5,055.16) 1,155,226.51 750,360.24

39,594.91
52,918.72 (291,278.30) 1,025,906.21

27,799.54
9,818.11 541,031.88 88,946.07

51,952.08 8,063.56 12,978.11 774,244.48 120,057.21

17,685.54 59,699.62 18,066.65 320,092.35 17,239.55

$7,400,011.54

$0.00

$0.00

$1,836,618.16

$2,108,029.96

$2,333,315.30

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 FY2006

Scholars hips & Fellows hips

A u xilia ry Enterpris es

Un a llo c a t e d Expens es

$0.00 1,006,374.85
357,866.45 (342,521.14)
4,181.01
1,010,601.27 1,601,592.15
23,635.97

$0.00 1,319,761.94

$0.00 365,062.30 105,390.27 342,521.14
8,123.65 95,980.86
6,750.42 3,874,230.42
103,790.96

$0.00

$3,661,730.56

$1,319,761.94

$4,901,850.02

$0.00

Total Expens es
$4,703,628.96 4,924,430.52 2,989,793.06 0.00 149,336.73 1,483,505.98 1,111,133.28 6,819,912.98 1,379,575.97
$23,561,317.48

Middle Georgia College Annual Financial Report FY 2006 30

Note 16. Component Units

Middle Georgia College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Middle Georgia College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. 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, 2006, the Foundation distributed $29,435 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Fiscal Affairs Office at 1100 Second Street, Cochran, GA 31014.

Investments for Component Units:

Middle GA College Foundation holds endowment investments in the amount of $638,718 as of June 30, 2006, detailed as follows:

Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds
Total Investments

Cost
$1,568.00 74,948.00 71,436.00 416,230.00 110,034.00
$674,216.00

Fair Value
$1,568.00 74,105.00 68,593.00 390,400.00 104,052.00
$638,718.00

Middle Georgia College Annual Financial Report FY 2006 31

Capital Assets for Component Units:

Middle Georgia College Foundation, Inc. holds Capital Assets as of June 30, 2006 as follows:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$79,482.00 10,202,318.00 10,281,800.00
0.00 0.00 $10,281,800.00

Long-term Liabilities for Component Units:

On November 1, 2005, the Bleckley-Cochran Development Authority (the "Authority) issued certain bonds totaling $26,850,000. Proceeds of the sale of the bonds will be loaned to MGC Real Estate Foundation, LLC whose sole member is Middle Georgia College Foundation, Inc.

Proceeds will be used to finance student housing on college property. The interest rates are as follows: Series 2005A, 3.5-3.75%; Series 2005A, 5.0%; Series 2005A, 4.125-4.625%; Series 2005B, 5.25%.

Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Total Long Term Debt

$0.00 $0.00

$26,850,000.00 $26,850,000.00

$0.00 $0.00

$26,850,000.00 $26,850,000.00

$0.00 $0.00

Middle Georgia College Annual Financial Report FY 2006 32

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing (Real Estate Foundation) revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Principal

Bonds Payable Interest

$0.00 0.00
40,000.00 80,000.00 120,000.00 1,320,000.00 2,875,000.00 5,105,000.00 7,625,000.00 9,685,000.00

$1,292,460.00 1,292,460.00 1,292,460.00 1,290,360.00 1,287,560.00 6,317,902.00 5,898,444.00 5,011,595.00 3,545,219.00 1,499,745.00

Total
$1,292,460.00 1,292,460.00 1,332,460.00 1,370,360.00 1,407,560.00 7,637,902.00 8,773,444.00
10,116,595.00 11,170,219.00 11,184,745.00

$26,850,000.00

$28,728,205.00

$55,578,205.00

Middle Georgia College Annual Financial Report FY 2006 33

NORTH GEORGIA COLLEGE & STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

North Georgia College & State University Dahlonega, Georgia

David Potter
President

Frank J. (Mac) McConnell
Vice President for Business and Finance

NORTH GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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............................................................................................ 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 .................................. 28 Note 15 Natural Classifications With Functional Classifications..................................... 29 Note 16 Component Units ........................................................................ 30

NORTH GEORGIA COLLEGE & STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

North Georgia College & State University is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
144 147 153

Students (Headcount)
4,765 4,552 4,517

Students (FTE)
4,222 4,060 3,990

Overview of the Financial Statements and Financial Analysis

North Georgia College & State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of North Georgia College & State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

North Georgia College and State University Annual Financial Report FY 2006 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, 2006
$12,586,241.56 51,240,346.33 3,678,705.28 67,505,293.17
4,430,865.50 707,542.58
5,138,408.08
51,240,346.33 2,616,537.69 1,452,952.01
7,057,049.06 $62,366,885.09

June 30, 2005
$10,978,921.64 52,433,994.54 3,579,038.29 66,991,954.47
4,138,719.23 600,110.20
4,738,829.43
52,433,994.54 620,692.26
3,395,200.06
5,803,238.18 $62,253,125.04

The total assets of the institution increased by $513,338.70. 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 $399,578.65. The combination of the increase in total assets of $513,338.70 and the increase in total liabilities of $399,578.65 yields an increase in total net assets of $113,760.05.

North Georgia College and State University Annual Financial Report FY 2006 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, 2006

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

$26,200,250.04 51,581,163.99 (25,380,913.95) 25,201,296.59
(179,617.36) 293,377.41 113,760.05 62,253,125.04
0.00 62,253,125.04 $62,366,885.09

$24,438,814.35 47,005,397.52 (22,566,583.17) 22,510,425.42
(56,157.75) 6,192,160.95 6,136,003.20 56,117,121.84
0.00 56,117,121.84 $62,253,125.04

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

North Georgia College and State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$12,107,083.63
2,076,610.05 715,893.78
11,035,550.35 265,112.23
26,200,250.04
22,329,411.68 2,010,537.23
243,474.69 607,596.22
10,276.77 25,201,296.59
293,377.41
293,377.41
$51,694,924.04

June 30, 2005
$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

North Georgia College and State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$21,573,298.17
4,066,525.43 3,271,889.67 5,584,588.02 5,347,823.55 1,071,318.52 10,665,720.63
51,581,163.99
0.00 $51,581,163.99

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
0.00 $47,005,397.52

Nongovernmental grants and contracts increased in the amount of approximately $334,624.00.
The compensation and employee benefits category increased by approximately $3,160,840.52. The increase reflects an increased cost of health insurance for the employees of the institution, and a four percent salary increase.
Utilities increased by approximately $474,168.10 during the past year. The increase was primarily associated with the increased natural gas and electric costs that were experienced in the winter of fiscal year 2006. The post Katrina affects on utility costs have been substantial.
Under non-operating revenues (expenses) state appropriations increased by approximately $2,441,412.17.
Statement of Cash Flows
The final statement presented by the North Georgia College & State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.
North Georgia College and State University Annual Financial Report FY 2006 5

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($22,674,223.13) 24,666,007.76 (814,303.21) 500,356.55 1,677,837.97 8,161,104.46
$9,838,942.43

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

Capital Assets
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
North Georgia College & State University had Long-Term Debt and Liabilities of $1,309,353.45 of which $601,810.87 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006.
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 and State University Annual Financial Report FY 2006 6

Statement of Net Assets

NORTH G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

Component Unit

North Georgia College & S tate Univers ity

North Georgia College & S tate Univers ity Foundation, Inc.

AS S ETS Current As s ets Cas h and Cas h Equiv alen ts Short-term Inves tments A ccounts Receivable, net (no te 3) Receivables - Federal Finan cial A s s is tance Receivables - State General A ppropriations A llotmen t M argin A llocation Funds Receivables - Other Due From Component Units Leas es Receivable Pledg es Receivable Inventories (note 4) Prepaid items Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Inves tments (including Real Es tate) Notes Receivable, net Pledg es Receivable Capital A s s ets , net (no te 6) Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organization s Due to Primary Government Compens ated A bs ences (current portion) Revenu e/M ortg age Bond s Payable (current) Notes and Loan s Pay able (current po rtion) Total Current Liabilities Noncurrent Liabilities Compens ated A bs ences (non current) Revenu e/M ortg age Bond s Payable (noncurrent) Liabilities under Split-Interes t A greements 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 Expend able Capital Projects Unres tricted
TOTAL NET AS S ETS

$8,918,470.51 50,000.00 60,924.21
997,473.44 454,932.85
1,303,603.99 800,836.56
12,586,241.56
920,471.92 1,646,065.77 1,112,167.59 51,240,346.33 54,919,051.61 67,505,293.17
514,109.18 161,211.87
10,187.00 595,391.57 2,361,272.63 186,882.38 601,810.87
4,430,865.50 707,542.58
707,542.58 5,138,408.08
51,240,346.33 2,616,537.69 1,452,952.01 7,057,049.06
$62,366,885.09

$543,967.00
272,187.00
1,117.00 78,466.00 895,737.00
1,810,586.00 17,199,185.00
146,756.00 7,969,418.00
555,900.00 27,681,845.00 28,577,582.00
368,280.15
125,237.00 41,767.00 52,115.00
454,932.85 100,000.00 1,147,382.00 2,289,714.00
10,600,000.00 24,940.00
10,624,940.00 12,914,654.00
(419,798.00) 11,633,309.00
4,230,867.00 218,550.00
$15,662,928.00

North Georgia College and State University Annual Financial Report FY 2006 7

Statement of Revenues, Expenses and Changes in Net Assets
NORTH G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006

Component Unit

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) Grants and Contracts Fe d e ra l 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
Employee Benefits 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 North Georgia College & State Univers ity
Total Operating Expens es Operating Income (los s )

North Georgia College & S tate Univers ity

North Georgia College & S tate Univers ity Foundation, Inc.

$13,342,899.37 1,235,815.74
2,076,610.05 715,893.78
2,705,719.72 2,830,781.07 2,601,264.32
363,790.18 605,785.07 1,572,723.33 355,486.66 265,112.23 26,200,250.04
13,120,721.26 12,029,354.91
6,899,234.75 532.55
492,212.60 1,671,714.22 2,458,653.76 12,603,031.20 2,305,708.74
51,581,163.99 (25,380,913.95)

$0.00 948,825.00 647,416.00
1,595,676.00
246,565.00 3,438,482.00
402,451.00
67,797.00 219,586.00 1,338,125.00 278,670.00 201,464.00 751,345.00 3,259,438.00 179,044.00

North Georgia College and State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets, Continued
NORTH GEORGIA COLLEGE & STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Component Unit

North Georgia College & State Univers ity

North Georgia College & State University 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 St at e 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

22,329,411.68
626,317.93 159,378.50 1,224,840.80 243,474.69 607,596.22
10,276.77 25,201,296.59
(179,617.36)
293,377.41
293,377.41 113,760.05
62,253,125.04 0.00
62,253,125.04 $62,366,885.09

647,417.00 (533,388.00) 581,885.00 695,914.00 874,958.00
327,687.00 327,687.00 1,202,645.00
14,460,283.00 0.00
14,460,283.00 $15,662,928.00

North Georgia College and State University Annual Financial Report FY 2006 9

Statement of Cash Flows
NORTH G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Sale of Capital A s s ets Purchas es of Capital A s s ets 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, 2006
$12,336,619.17
2,559,836.37 638,702.01
(22,333,614.37) (25,067,787.95)
(1,671,714.22) (93,448.69) 52,668.00
2,729,743.90 2,744,507.46 2,595,685.44
361,402.38 599,603.70 1,206,830.50 345,886.47 320,856.70 (22,674,223.13)
22,329,411.68 76,687.30
2,259,908.78 24,666,007.76
8,188.67 (822,491.88) (814,303.21)
26,282.95 599,073.60 (125,000.00) 500,356.55 1,677,837.97 8,161,104.46 $9,838,942.43

North Georgia College and State University Annual Financial Report FY 2006 10

Statement of Cash Flows, Continued
NORTH G EORG IA COLLEG E & STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($25,380,913.95)
2,305,708.74 225,619.82 (125,790.47) 19,042.07 (40,780.69) 208,081.87 45,919.73 (3,699.39) 72,589.14
($22,674,223.13)
$8,522.62 ($293,377.41)

North Georgia College and State University Annual Financial Report FY 2006 11

NORTH GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, North Georgia College & State University is reporting the activity for the North Georgia College & State University Foundation, Inc.
See Note 16, Component Units, for foundation notes.
North Georgia College and State University Annual Financial Report FY 2006 12

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 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
North Georgia College and State University Annual Financial Report FY 2006 13

Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 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, 2006, GSFIC did not transfer any capital additions 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 and State University Annual Financial Report FY 2006 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 $1,236,764.31 as of 7-1-2005. For FY2006, $886,301.58 was earned in compensated absences and employees were paid $813,712.44, for a net increase of $72,589.14. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,309,353.45.
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 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 and State University Annual Financial Report FY 2006 15

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Total Res tricted Expendable

June 30, 2006
$42,412.73 692,080.84 718,458.44 $1,452,952.01

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, 2006
$6,814,526.25 1,965,733.16
42,984.03 (1,766,194.38) $7,057,049.06

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 and State University Annual Financial Report FY 2006 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.
North Georgia College and State University Annual Financial Report FY 2006 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 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, 2006, the carrying value of deposits was $9,297,372.57 and the bank balance was $10,072,894.14. Of the university's deposits, $9,822,894.14 were uninsured. Of these uninsured deposits, $1,119,233.65 were collateralized with securities held by the financial institution's trust department or agent in the University's name and $8,703,660.49 were collateralized with securities held by the financial institution, by its trust department or agent, but not in the University's name.
North Georgia College and State University Annual Financial Report FY 2006 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 of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

INVESTMENTS Interest Rate Risk
Investment type Debt Securities
General Obligation Bonds
Other Investments Stock
Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Total Investments

Fair Value

Less Than 1 Year

Investment Maturity 1-5 Years 6-10 Years

More Than 10 Years

$1,057,413.90 $1,057,413.90
588,651.87

$0.00 $0.00

$144,229.65 $144,229.65

$122,398.90 $122,398.90

$790,785.35 $790,785.35

574,569.86 $2,220,635.63

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. Participation in the Georgia Fund 1 Investment Pool is voluntary. 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 28 days.
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.
The Weighted Average Maturity of the Georgia Fund is 28 days.

North Georgia College and State University Annual Financial Report FY 2006 19

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.

Credit Qual ity Risk

Fair Value

AAA

Related Debt Investments
General Obligation Bonds

$1,057,413.90

$1,057,413.90

Total

$1,057,413.90

$1,057,413.90

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. As of June 30, 2006, North Georgia College and State University had six investments that exceed 5% of total investments and are subject to concentration of credit risk as shown below:
Stock: Bell South, $127,568.80 Citigroup, $167,910.00
Bonds: DeKalb County Bldg Auth, $143,926.50 Gwinnett County Water & Sewer Revenue, $138,045.60 Gwinnett County GA Water & Sewer Auth, $312,403.00 Gilmer County Bldg Auth, $145,914.00

North Georgia College and State University Annual Financial Report FY 2006 20

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$313,212.10 143,809.02
60,924.21 75,191.82 454,932.85 679,829.83 1,727,899.83 214,569.33
$1,513,330.50

Note 4. Inventories

Inventories consisted of the following at June 30, 2006.

Books tore Other
Total

June 30, 2006
$1,253,423.95 50,180.04
$1,303,603.99

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 North Georgia College and State University had no allowance for uncollectible loans.

North Georgia College and State University Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$2,988,757.61 0.00
1,430,018.29 4,418,775.90

Additions
$0.00
74,405.76 74,405.76

Reductions
$0.00
1,450,023.24 1,450,023.24

Ending B al anc e 6/30/2006
$2,988,757.61 0.00
54,400.81 3,043,158.42

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

1,400,034.04 338,797.61 305,869.28 446,785.84
2,491,486.77

191,147.25 23,003.00 214,150.25

3,883,833.04 63,763,797.70
2,939,355.00 4,457,442.76
0.00 4,364,123.19
0.00 79,408,551.69

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

52,159.78 1,622,816.23
52,616.56 374,934.17
203,182.00
2,305,708.74
185,778.03
$260,183.79

187,338.49 23,003.00
210,341.49 3,808.76
$1,453,832.00

2,235,419.13 20,774,926.40
1,781,689.94 3,468,901.31
0.00 2,950,427.00
0.00 31,211,363.78
48,197,187.91
$51,240,346.33

North Georgia College and State University Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $2,103,641.13
257,631.50 $2,361,272.63

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

1,236,764.31 1,236,764.31
$1,236,764.31

886,301.58 886,301.58
$886,301.58

813,712.44 813,712.44
$813,712.44

1,309,353.45 1,309,353.45
$1,309,353.45

601,810.87 601,810.87
$601,810.87

Note 9. Significant Commitments The University had no significant commitments at June 30, 2006. Note 10. Lease Obligations
North Georgia College & State University had no capital or operating lease agreements as of June 30, 2006. North Georgia College & State University had no expense for rental of real property and equipment under operating leases.

North Georgia College and State University Annual Financial Report FY 2006 23

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,292,601.00 $1,244,900.65 $1,896,346.17

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

North Georgia College and State University Annual Financial Report FY 2006 24

Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2006, for employees covered by ERS was $157,453.70. The University's total payroll for all employees was $25,150,076.17.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $18,827.82, of which $16,465.88 was made by the University and $2,361.94 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, 2006, financial report, which may be obtained through ERS.
North Georgia College and State University Annual Financial Report FY 2006 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 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 2006, 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 $755,257.24 (9.65%) and $391,324.99 (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 North Georgia College & State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
North Georgia College and State University Annual Financial Report FY 2006 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 2006 amounted to $65,930.46 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.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the
North Georgia College and State University Annual Financial Report FY 2006 27

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, 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, 2006, there were 208 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, North Georgia College and State University recognized as incurred $1,201,288.51 of expenditures, which was net of $288,030.76 of participant contributions.
North Georgia College and State University Annual Financial Report FY 2006 28

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

$12,716,481.59 2,258,942.95 3,375,464.09

$0.00

$0.00

$156,530.45 2,198,147.87
505,241.06

$30,355.76 1,850,190.08 457,058.27

239,521.74 93,980.81 133,845.13 2,587,520.08 167,541.78

97,328.99
175,482.09 670,603.82 263,191.15

35,046.10 5,717.65 41,419.03 840,913.60 11,189.18

$21,573,298.17

$0.00

$0.00

$4,066,525.43

$3,271,889.67

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary Enterpris es

Unallocated Exp en s es

$0.00 1,765,637.44
583,760.66 (771,542.36)
4,613.38
1,881,129.36 611,113.59
1,273,111.48

$0.00
1,071,193.52 125.00

$183,598.46 1,225,944.95
308,881.30 771,542.36 52,902.22 340,694.83 182,500.39 7,046,351.61 553,304.51

$0.00

$5,347,823.55

$1,071,318.52

$10,665,720.63

$0.00

Institutional Support
$33,755.00 2,730,491.62 1,668,829.37
532.55 62,800.17 160,127.41 44,277.76 846,403.50 37,370.64
$5,584,588.02
Total Exp en s es
$13,120,721.26 12,029,354.91 6,899,234.75
532.55 492,212.60 1,671,714.22 2,458,653.76 12,603,031.20 2,305,708.74
$51,581,163.99

North Georgia College and State University Annual Financial Report FY 2006 29

Note 16. Component Units
North Georgia College & State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt 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, 2006, the Foundation distributed $751,345 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the NGCSU Office of Advancement at 70 Alumni Drive, Dahlonega, GA 30533 or from the Foundation's page on the College's website at www.ngcsu.edu.
Investments for Component Units:
North Georgia College & State University Foundation holds endowment investments in the amount of $15.86 million. 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 $1,339,154.
North Georgia College and State University Annual Financial Report FY 2006 30

Investments are comprised of the following amounts at June 30, 2006:

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

Cost
$54,608.00 235,185.00 700,221.00
4,685.00 14,865,332.00
1,339,154.00
$17,199,185.00

Fair Value
$54,608.00 235,185.00 700,221.00
4,685.00 14,865,332.00
1,339,154.00
$17,199,185.00

Capital Assets for Component Units:

North Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$8,319,938.00 707,631.00
9,027,569.00
1,058,151.00
7,969,418.00 $7,969,418.00

Long-Term Liabilities for Component Units:

Student Housing Bonds were 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 effective interest rate, due to an interest rate swap agreement, is 4.25% until June 2007 and 4.28% effective June 2007 through maturity in June 2028. The estimated fair value of the interest rate swap was a liability of $52,115 at June 30, 2006 and is reported as an "other" current liability on the Statement of Net Assets.

Changes in long-term liabilities for the year ended June 30, 2006 are as follows:

Revenue/Mortgage Bonds Payable Other Long Term Liabilities
Total Long Term Liabilities

Beginning Balance July 1, 2005
$10,800,000.00 28,584.00
$10,828,584.00

Additions
$0.00
$0.00

Reductions
$100,000.00 3,644.00
$103,644.00

Ending Balance June 30, 2006
$10,700,000.00 24,940.00
$10,724,940.00

Amounts due within
One Year
$100,000.00
$100,000.00

North Georgia College and State University Annual Financial Report FY 2006 31

Debt Service Obligations:

Annual debt service obligations to maturity for the Student Housing Bonds are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031

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

Bonds Payable

Principal

Interest

Total

$100,000.00 100,000.00 100,000.00 200,000.00 200,000.00
1,700,000.00 2,800,000.00 3,700,000.00 1,800,000.00

$450,500.00 446,250.00 442,000.00 433,500.00 425,000.00
1,938,000.00 1,419,500.00
709,750.00 38,250.00

$550,500.00 546,250.00 550,500.00 546,250.00 542,000.00
3,638,000.00 4,219,500.00 4,409,750.00 1,838,250.00

$10,700,000.00

$6,302,750.00

$15,744,250.00

North Georgia College and State University Annual Financial Report FY 2006 32

SAVANNAH STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

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 2006
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............................................................................................ 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

SAVANNAH STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Savannah State University is one of the 35 institutions of higher education of the University System of Georgia. The University, located in Savannah, Georgia, was founded in 1890 as a department of the State University for the education and training of Negro students. Savannah State University now serves a diverse student population as a senior University of the University System of Georgia. The University serves a primarily African American student population, enriched be 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 3,000 students each year. The institution continues to grow as shown by the comparison numbers that follows:

FY2006 FY2005 FY2004

Faculty
120 123 123

Students (Headcount)
3,091 2,800 2,752

Students (FTE)
2,853 2,564 2,580

Overview of the Financial Statements and Financial Analysis
Savannah State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.
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 2006 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

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, 2006
$7,528,387.70 50,705,415.28
3,150,016.53 61,383,819.51
3,165,535.23 674,671.00
3,840,206.23
50,705,415.28 1,034,603.30 1,184,490.35 0.00 4,619,104.35
$57,543,613.28

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 0.00
2,419,340.47
$54,549,490.63

The total assets of the institution increased by $3,092,862.88. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,835,237.69 and $1,189,258.23 in cash and cash equivalents and investments respectively. 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 institution increased by $98,740.23. The combination of the increase in total assets of $3,092,862.88 and the increase in total liabilities of $98,740.23 yields an increase in total net assets of $2,994,122.65. The increase in total net assets is primarily in the category of unrestricted assets in the amount of $2,199,763.88.

Savannah State University Annual Financial Report FY 2006 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, 2006

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

$27,042,961.03 45,560,682.04 (18,517,721.01) 19,543,706.73
1,025,985.72 1,775,031.00 2,801,016.72 54,549,490.63
193,105.93 54,742,596.56 $57,543,613.28

$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 0.00
55,211,959.56 $54,549,490.63

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

Savannah State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
Jun e 3 0 , 2 0 0 6

Op erat ing Rev en ue T uit io n and Fees Federal A p p ro p riat io n s Gran t s an d Co n t ract s Sales an d Serv ices Aux iliary Other
T o t al Op erat in g Rev en ue
No n o perat in g Rev enue St at e A p p ro p riat io n s Gran t s an d Co n t ract s Gift s In vest m ent Inco m e Other
T o t al No n o p erat in g Rev en ue
Cap it al Gift s an d Gran t s St at e O t h er Cap it al Gift s an d Gran t s
T o t al Cap it al Gift s an d Gran t s
T o t al Rev en ues

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

June 3 0 , 20 0 5
$ 4 ,7 7 0 ,0 2 4 .2 9 1 3 ,8 7 7 ,5 7 4 .6 5
5 0 ,6 1 2 .8 2 6 ,9 0 3 ,1 9 6 .8 8
1 6 2 ,0 4 3 .2 6
2 5 ,7 6 3 ,4 5 1 .9 0
1 5 ,4 7 7 ,8 3 9 .2 3 1 7 1 ,5 7 5 .9 1
1 ,5 5 4 ,6 6 9 .0 9 2 3 ,1 3 7 .2 4
1 8 0 ,9 8 7 .6 5 1 7 ,4 0 8 ,2 0 9 .1 2
5 3 6 ,8 3 3 .4 9
5 3 6 ,8 3 3 .4 9 $ 4 3 ,7 0 8 ,4 9 4 .5 1

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

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, 2006
$12,807,464.43 1,454,993.78 2,182,563.58 4,680,972.29 2,815,832.93 6,648,194.50 5,344,945.83 933,897.83 5,704,493.69 2,987,323.18
45,560,682.04

Nonoperat ing Expenses Int erest Expense (Capit al Asset s)
T ot al Expenses

0.00 $45,560,682.04

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

Savannah State University Annual Financial Report FY 2006 4

The compensation and employee benefits category increased by $1,195,861.10. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by $552,063.24 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006.

Under non-operating revenues (expenses), state appropriations increased by $1,935,712.77. The increase of state appropriations can be attributed to Savannah State University's increased student enrollment.

Statement of Cash Flows

The final statement presented by 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.

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($15,662,225.60) 18,316,374.22 (980,524.88) 161,613.95 1,835,237.69 1,343,441.44
$3,178,679.13

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

Capital Assets
The University did not add any capital assets for facilities in fiscal year 2006.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Savannah State University Annual Financial Report FY 2006 5

Long Term Debt and Liabilities Savannah State University had Long-Term Debt and Liabilities of $1,209,462.00 of which $534,791.00 was reflected as current liability at June 30, 2006. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Component Units Savannah State University does not have any foundations or affiliated organizations that qualify as component units as of June 30, 2006. 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. 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 and new academic programs is a large challenge facing the University in years to come. Various committees and individuals are assessing the University's performance toward identified goals, use of energy resources and ways to achieve greater efficiencies and reduce expenses in an effort to assist in meeting those future challenges.
Carlton E. Brown, President Savannah State University
Savannah State University Annual Financial Report FY 2006 6

Statement of Net Assets
SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006
AS S ETS Curre nt Asse ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Inventories (note 4) Prepaid items T otal Current Assets
Noncurre nt Asse ts Noncurrent Cash Short-term Investments (Non-current portion) Investments (including Real Estate) Notes Receivable, net Capital Assets, net (note 6) T otal Noncurrent Assets TO TAL ASSETS
LIABILITIES Curre nt Liabilitie s Accounts Payable Salaries Payable Dep o sit s Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Compensated Absences (current portion) T otal Current Liabilities Noncurre nt Liabilities Compensated Absences (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES
NET AS S ETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrest rict ed TO TAL NET ASSETS

June 30, 2006
$3,119,941.01 408,457.65
1,243,263.38 2,687,777.57
43,403.20 25,544.89 7,528,387.70
58,738.12 826,182.98 1,452,951.07 812,144.36 50,705,415.28 53,855,431.81 61,383,819.51
622,819.23 240,547.00 133,921.39 418,614.73 226,868.55 987,973.33 534,791.00 3,165,535.23
674,671.00 674,671.00 3,840,206.23
50,705,415.28
1,034,603.30 1,184,490.35
0.00 4,619,104.35 $57,543,613.28

Savannah State University Annual Financial Report FY 2006 7

Statement of Revenues, Expenses and Changes in Net Assets

S AVANNAH S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS
for the Year Ended June 30, 2006

REVENUES

June 30, 2006

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
Employee Benefits T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Depreciat ion
T ot al Operat ing Expenses Operat ing Income (loss)

$9,615,471.06 5,276,084.05
13,529,770.41 86,908.66
493,539.41 118,193.08
8,925.00
2,574,932.93 99,162.40
3,273,168.94 8,095.97
416,018.40 1,949,511.91
66,920.13 78,426.78 27,042,961.03
7,571,741.69 11,988,590.64
5,571,950.12 618,632.50
2,604,226.50 2,741,459.87 11,819,863.49 2,644,217.23 45,560,682.04 (18,517,721.01)

Savannah State University Annual Financial Report FY 2006 8

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

S AVANNAH S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS
for the Year Ended June 30, 2006
June 30, 2006

NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest m ent Incom e (endowm ent s, auxiliary and ot her) 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 St at e 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

17,413,552.00 806,871.71 154,809.08
1,168,473.94 19,543,706.73
1,025,985.72
1,775,031.00 1,775,031.00 2,801,016.72
54,549,490.63 193,105.93
54,742,596.56 $57,543,613.28

Savannah State University Annual Financial Report FY 2006 9

Statement of Cash Flows
S AVANNAH S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2006
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 P urchases of Capit al Asset s 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 Int erest on 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, 2006
$3,796,352.07
14,668,856.50 83,677.40
(20,987,652.14) (19,533,487.29)
(2,604,226.50) (13,065.11)
2,578,561.70 99,162.40
3,184,786.54 8,095.97
418,808.98 1,959,136.83
66,920.13 611,846.92 (15,662,225.60)
17,413,552.00 95,950.51
806,871.71 18,316,374.22
(980,524.88) (980,524.88)
161,613.95 161,613.95 1,835,237.69 1,343,441.44 $3,178,679.13

Savannah State University Annual Financial Report FY 2006 10

Statement of Cash Flows, Continued
S AVANNAH S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2006
RECO NCILIATIO N O F O PERATING LO SS TO NET C ASH PRO VIDED (USED) BY O PERATING AC TIVITIES:
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 Invent ories Prepaid Items Notes Receivable, Net 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

June 30, 2006
($18,517,721.01)
2,644,217.23 274,410.72 14,802.12 23,933.28 (44,447.62) 36,901.24 (6,761.06) (91,482.87) 3,922.37
($15,662,225.60)
$6,804.87 ($1,775,031.00)

Savannah State University Annual Financial Report FY 2006 11

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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 those throughout the country.
Reporting Entity Savannah State University is one of thirty-five (35) 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 2005. 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 FY2006, 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 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
Savannah State University Annual Financial Report FY 2006 12

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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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
Savannah State University Annual Financial Report FY 2006 13

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 are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, GSFIC transferred capital additions for renovation projects to Savannah State University for $1,775,031.
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
Savannah State University Annual Financial Report FY 2006 14

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 $1,205,538.93 as of 7-1-2005. For FY2006, $787,327.07 was earned in compensated absences and employees were paid $783,404.00, for a net increase of $3,923.07. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $1,209,462.00.
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 classification 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 2006 15

Expendable Restricted Net Assets include the following:

June 30, 2006

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans T erm Endowments T otal Restricted Expendable

$38,860.22 858,435.91
21,562.22 265,632.00 $1,184,490.35

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 Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s

June 30, 2006
$1,071,244.15 1,748,996.09 1,798,864.11
$4,619,104.35

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.

Savannah State University Annual Financial Report FY 2006 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.
Restatement of Prior Year Net Assets
Savannah State University has a restatement of prior year net assets that increases beginning net assets by $193,105.93. This restatement is attributed to an asset being manually added to the AM module in a previous fiscal year. The asset was retired and re-added in the AM module. This restatement reflects the original depreciation amount that was incorrectly reported in the University's 2005 AFR.
Savannah State University Annual Financial Report FY 2006 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 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, 2006, the carrying value of deposits was $4,411,760.76 and the bank balance was $5,649,323.15. Of the University's deposits, $5,324,472.57 were uninsured. Of these uninsured deposits, $5,293,398.71 were collateralized with securities held by the financial institution's trust department or agent in the University's name, and $31,073.86 were uncollateralized.
Savannah State University Annual Financial Report FY 2006 18

B. Investments

Savannah 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 of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Other Investments Equity Securities - Domestic
Investment Pools Board of Regents Short-T erm Fund Balanced Income Fund
T otal Investments

$410,855.22
182.00 1,042,095.85 $1,453,133.07

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 1.3 years. Of the University's total investment of $182.00 in the Short-Term Fund, $179.00 is invested in debt securities.
The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the university's total investment of $1,042,095.85 in the Balanced Income Fund, $686,329.00 is invested in debt securities.
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.

Savannah State University Annual Financial Report FY 2006 19

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 investments 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, 2006, $410,855.22 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $1,042,277.85 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, 2006:

June 30, 2006

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$1,287,607.00 416,994.00
1,243,263.38 1,366,237.57 4,314,101.95
383,061.00
$3,931,040.95

Note 4. Inventories

Inventories consisted of the following at June 30, 2006:

June 30, 2006

P hysical P lant Other
T otal

$39,531.89 3,871.31
$43,403.20

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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.
Savannah State University Annual Financial Report FY 2006 20

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land
Total Capital Assets Not Being Depreciated

(Restated) Beginning Balances 7/1/2005
$575,975.16 575,975.16

Additions
$0.00 0.00

Reductions
$0.00 0.00

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

63,869,000.50 2,520,259.00 6,532,517.76 6,546,290.51 55,285.00
79,523,352.77

1,806,568.54
780,783.63 222,460.59
2,809,812.76

106,428.80 6,045.58
112,474.38

Less: Accumulated Depreciation

Buildings

19,270,707.84

1,658,910.23

Facilities and Other improvements

1,166,811.07

103,112.77

Equipment

4,210,736.97

510,616.03

Library Collections

4,792,984.28

370,352.33

Capitalized Collections

5,793.64

1,225.87

Total Accumulated Depreciation

29,447,033.80

2,644,217.23

0.00

Total Capital Assets, Being Depreciated, Net

50,076,318.97

165,595.53

112,474.38

Capital Assets, net

$50,652,294.13

$165,595.53

$112,474.38

Ending Balance 6/30/2006
$575,975.16 575,975.16
65,675,569.04 2,520,259.00 7,206,872.59 6,762,705.52 55,285.00
82,220,691.15
20,929,618.07 1,269,923.84 4,721,353.00 5,163,336.61 7,019.51
32,091,251.03
50,129,440.12
$50,705,415.28

Savannah State University Annual Financial Report FY 2006 21

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2006.

Ot her Deferred Revenue T otals

June 30, 2006 $418,614.73 $418,614.73

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Other Liabilities Compensated Absences
Total Long Term Obligations

Beginning Balance July 1, 2005
$1,205,538.93 $1,205,538.93

Additions
$787,327.07 $787,327.07

Reductions
$783,404.00 $783,404.00

Ending Balance June 30, 2006
$1,209,462.00 $1,209,462.00

Current Portion
$534,791.00 $534,791.00

Note 9. Significant Commitments
The University did not have unearned, outstanding, construction or renovation contracts at June 30, 2006.
Note 10. Lease Obligations
Savannah State University had no expense for rental of real property and equipment under operating leases.

Savannah State University Annual Financial Report FY 2006 22

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,147,045.76 $1,138,813.05 $1,157,294.27

Employees' Retirement System of Georgia

Plan Description Savannah 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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Savannah State University Annual Financial Report FY 2006 23

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, 2006, for employees covered by ERS was $40,000.00. The University's total payroll for all employees was $20,154,089.55.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $4,764.00, of which $4,164.00 was made by the University and $600.00 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2006, financial report, which may be obtained through ERS.
Savannah State University Annual Financial Report FY 2006 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 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 2006, 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 $501,274.94 (9.65%) and $259,025.20 (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.
Savannah State University Annual Financial Report FY 2006 25

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 2006 amounted to $47,466.36 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. 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 Well Point, 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
Savannah State University Annual Financial Report FY 2006 26

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.
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, 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, 2006, there were 168 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Savannah State University recognized as incurred $781,073.66 of expenditures, which was net of $322,653.17of participant contributions.
Savannah State University Annual Financial Report FY 2006 27

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

Functional Classification FY2006

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

$7,283,408.75 1,617,552.70 2,155,486.14
70,832.69 364,376.18 92,501.25 1,130,196.50 93,110.22

$193,551.43 97,596.64 54,417.18

$48,981.54 1,110,744.04
206,831.66

$33,299.97 2,321,496.14
574,008.95

$12,500.00 1,421,038.29
376,652.66

80,154.26 366,563.42
3,216.23 610,370.14 49,124.48

33,237.97 148,779.80 23,243.40 610,986.49
(241.32)

114,607.22 9,806.00 63,627.18
1,131,235.90 432,890.93

56,099.65 18,223.00 32,991.62 886,879.62 11,448.09

$0.00 3,023,257.54 1,565,276.16
179,040.12 277,934.11 76,001.59 1,409,112.86 117,572.12

Total Expenses

$12,807,464.43 $1,454,993.78 $2,182,563.58 $4,680,972.29 $2,815,832.93 $6,648,194.50

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

Plant Operations & Maintenance

Functional Classification FY2006

Scholarships & Fellowships

Auxiliary Enterprises

Unallocated Expenses

$0.00 1,302,155.13
402,220.72 (294,524.93)
3,740.15
2,263,060.03 1,592,742.92
75,551.81

$0.00
932,897.83 1,000.00

$0.00 1,094,750.16
237,056.65 294,524.93
80,920.44 485,646.16 186,818.57 3,514,420.42 (189,643.64)

$0.00
932,918.64 2,054,404.54

$5,344,945.83

$933,897.83 $5,704,493.69 $2,987,323.18

Total Expenses
$7,571,741.69 11,988,590.64
5,571,950.12 0.00
618,632.50 2,604,226.50 2,741,459.87 11,819,863.49 2,644,217.23
$45,560,682.04

Savannah State University Annual Financial Report FY 2006 28

SKIDAWAY INSTITUTE OF OCEANOGRAPHY
Financial Report
For the Year Ended June 30, 2006

Skidaway Institute of Oceanography Savannah, Georgia

James G. Sanders
Director

Marc Mascolo
Assistant Director, Business Affairs

SKIDAWAY INSTITUTE OF OCEANOGRAPHY ANNUAL FINANCIAL REPORT FY 2006
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 ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ..................................................... 12 Note 2 Deposits and Investments.................................................................................... 17 Note 3 Accounts Receivable............................................................................................ 18 Note 4 Inventories............................................................................................................ 18 Note 5 Notes/Loans Receivable....................................................................................... 18 Note 6 Capital Assets....................................................................................................... 19 Note 7 Deferred Revenue................................................................................................. 20 Note 8 Long-Term Liabilities .......................................................................................... 20 Note 9 Significant Commitments.................................................................20 Note 10 Lease Obligations................................................................................................ 20 Note 11 Retirement Plans ................................................................................................. 22 Note 12 Risk Management................................................................................................ 23 Note 13 Contingencies...................................................................................................... 24 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 24 Note 15 Natural Classifications With Functional Classifications..................................... 25

SKIDAWAY INSTITUTE OF OCEANOGRAPHY
Management's Discussion and Analysis
Introduction
The 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
The Skidaway Institute of Oceanography is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the Institute as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the Skidaway Institute of Oceanography. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's
Skidaway Institute of Oceanography Annual Financial Report FY 2006 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, 2006 $1,157,915.74
5,782,840.09 6,940,755.83
908,019.26 184,064.48 1,092,083.74
5,600,067.71
248,604.38 $5,848,672.09

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

The total assets of the institution increased by $247,847.45. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $502,156.87 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 ($387,546.83). This was the primarily the result of paying payroll-related liabilities before June 30th which normally occur in the beginning of July and a significant decrease in deferred revenue. This decrease in deferred revenue was a result of better managing grant expenditures and collection for the awarding agencies. The combination of the increase in total assets of $247,847.45 and the decrease in total liabilities of ($387,546.83) yields an increase in total net assets of $635,394.28. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $595,672.47.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 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, 2006

June 30, 2005

Operating Revenues
Operating Expenses Operating Loss
Nonoperating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or los ses
Other revenues , expens es, gains or losses
Increas e in Net As sets
Net Ass ets at beginning of year, as originally reported Prior Year Adjustments Net Ass ets at beginning of year, restated
Net Ass ets at End of Year

$5,521,546.17 8,108,863.20 (2,587,317.03) 2,529,279.78
(58,037.25) 693,431.53 635,394.28 5,213,277.81
0.00 5,213,277.81 $5,848,672.09

$6,137,764.88 8,325,881.28 (2,188,116.40) 2,144,567.32
(43,549.08) 0.00
(43,549.08) 5,256,826.89
0.00 5,256,826.89 $5,213,277.81

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. Operating Revenue decreased approximately 10%. The decreases were largely a result of decreased expenditures from federal funding sources, caused by static or declining federal support for environmental and ocean research, and in particular by reduced operating support for the oceanographic research vessel fleet. Nonoperating Revenue increased $384,412.46 (18%) as a result of securing additional MRR funding this year for several critical infrastructure needs. Approximately $110,000 in funding was also secured from GRA for the purchase of a WERA radar system.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005

Operating Revenue Grants and Contracts Sales and Services A u xiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants State
Total Capital Gifts and Grants
Total Revenues

June 30, 2006
$4,898,913.63 49,645.40 61,468.50
511,518.64
5,521,546.17
2,149,045.00 389,817.96 20,563.56 (12,255.66)
2,547,170.86
693,431.53 693,431.53 $8,762,148.56

June 30, 2005
$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

Skidaway Institute of Oceanography Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

Operating Expens es Ins truction Res e arch Academic Support Ins titutional Support Plant Operations and Maintenance Auxiliary Enterprises
Total Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)
Total Expenses

June 30, 2006
$136,062.51 4,139,483.01 1,137,930.05 1,296,203.05 1,358,279.23
40,905.35 8,108,863.20
17,891.08
$8,126,754.28

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

The compensation and employee benefits category increased by $146,607.41. The increase reflects an increased cost of health insurance for the employees of the institution and the impact of a 4% merit pay increase.
Utilities increased by approximately $19,061.30 during the past year. The increase was due to the unprecedented increase in electrical rates which have negatively impacted all customers of Georgia Power.
Under non-operating revenues (expenses), state appropriations increased by approximately $157,494.00. The increase was due to the allocation for additional funds for startup funding of new faculty members.
The $693,431.53 presented as Capital Gifts and Grants was funding secured for two projects. The first amount of $268,705.53 was funded by the State Americans with Disabilities Act (ADA) for the installation of a handicapped accessible marsh boardwalk and nature trail. The project allows access to the marsh environment for people with disabilities and was completed this fiscal year. The project was paid for directly by ADA but will be maintained as an asset of the Skidaway Institute of Oceanography. The second amount of $424,726.00 was for the replacement of the campus-wide electrical system.
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

Skidaway Institute of Oceanography Annual Financial Report FY 2006 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, 2006 and 2005, Condensed

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

June 30, 2006
($1,982,859.59) 2,963,588.96 (932,070.28) 20,563.56 69,222.65 366,145.68 $435,368.33

June 30, 2005
($1,542,542.66) 2,192,440.12 (395,780.30) 14,953.11 269,070.27 97,075.41 $366,145.68

Capital Assets
The Institute had several significant capital asset additions in fiscal year 2006. The completion of the aforementioned ADA Marsh Boardwalk and Nature Trail for $268,705.53. The campuswide electrical grid was replaced by Georgia Power this fiscal year at a cost of $424,726.00. The new electrical grid was designed to supply power to all of the buildings along a loop to ensure that power interruptions to the various research buildings were as reliable as possible. The new grid also restructured the metering of electricity on campus so that the Institute could consolidate rates resulting in lower electricity costs.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
Skidaway Institute of Oceanography had Long-Term Debt and Liabilities of $543,747.96 of which $359,683.48 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
The Skidaway Institute of Oceanography does not have a foundation that meets the criteria set forth in GASB Statement No. 39.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 6

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. Even with a relatively flat funded year, the Institute was able to generate a modest increase in Net Assets. Federal funding programs will likely remain flat for the coming year and competition will remain high. However, 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. Dr. James Sanders Director Skidaway Institute of Oceanography
Skidaway Institute of Oceanography Annual Financial Report FY 2006 7

Statement of Net Assets
SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF NET ASSETS June 30, 2006

AS S ETS Current Ass ets Cash and Cash Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Prepaid items Total Current A ssets
Noncurrent As sets Capital Ass ets, net (note 6) Total Noncurrent As sets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Deferred Revenue (note 7) Lease Purchase Obligations (current portion) Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, 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 Un re s t ric t ed
TOTAL NET ASSETS

June 30, 2006
$435,368.33
462,071.84 256,201.57
4,274.00 1,157,915.74
5,782,840.09 5,782,840.09 6,940,755.83
119,383.25 428,952.53 100,743.44 258,940.04 908,019.26
82,028.94 102,035.54 184,064.48 1,092,083.74
5,600,067.71
248,604.38 $5,848,672.09

Skidaway Institute of Oceanography Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

REVENUES
Operating Revenues Grants and Contracts Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Other Organizations Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Employee Benefits T ravel Ut ilit ies Supplies and Other Services Depreciat ion
T otal Operating Expenses Operating Income (loss)
NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 St at e 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

June 30, 2006
$4,418,068.19 240,127.29 240,718.15 49,645.40 414,338.00
52,408.00 9,060.50
97,180.64 5,521,546.17
968,599.87 2,695,685.96 1,020,170.64
175,328.34 286,018.46 2,388,103.33 574,956.60 8,108,863.20 (2,587,317.03)
2,149,045.00 389,817.96 20,563.56 (17,891.08) (12,255.66)
2,529,279.78 (58,037.25)
693,431.53 693,431.53 635,394.28
5,213,277.81 0.00
5,213,277.81 $5,848,672.09

Skidaway Institute of Oceanography Annual Financial Report FY 2006 9

Statement of Cash Flows
SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
CASHFLOWS FROMOPERATINGACTIVITIES
Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Auxiliary Enterprise Charges:
Residence Halls Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASHFLOWS FROMNON-CAPITALFINANCINGACTIVITIES State Appropriations Gifts and Grants Received for Other Than Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities CASHFLOWS FROMCAPITALANDRELATEDFINANCINGACTIVITIES Capital Grants and Gifts Received Proceeds fromSale 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 CASHFLOWS FROMINVESTINGACTIVITIES Interest on 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, 2006
$4,982,312.35 49,052.00
(3,945,135.67) (3,649,223.17)
52,509.00 4,177.50 523,448.40 (1,982,859.59)
2,149,045.00 814,543.96
2,963,588.96
(820,663.60) (93,515.60) (17,891.08) (932,070.28)
20,563.56 20,563.56 69,222.65 366,145.68 $435,368.33

Skidaway Institute of Oceanography Annual Financial Report FY 2006 10

Statement of Cash Flows, Continued
SKIDAWAY INSTITUTE OF OCEANOG RAPHY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006

RECONCILIATION OFOPERATINGLOSS 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 Prepaid Items Accounts Payable Deferred Revenue Compensated Absences
Net Cash Provided (used) by Operating Activities
** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCINGTRANSACTIONS
Gift of capital assets reducing proceeds of capital grants and gifts

($2,587,317.03)
574,956.60 316,977.71
6,554.36 (75,514.90) (233,578.99) 15,062.66 ($1,982,859.59)
($268,705.53)

Skidaway Institute of Oceanography Annual Financial Report FY 2006 11

SKIDAWAY INSTITUTE OF OCEANOGRAPHY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations The Skidaway Institute of Oceanography serves the state, national and international communities by providing research and instruction that advances fundamental knowledge and by disseminating that knowledge to the people of Georgia and throughout the country.
Reporting Entity The Skidaway Institute of Oceanography is a unique, multidisciplinary Institute within 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. The Skidaway Institute of Oceanography does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the 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 the 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 2005. 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 FY2006, 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 2006 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.
Basis of Accounting For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated.
The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The Institute 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 Institute's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Skidaway Institute of Oceanography Annual Financial Report FY 2006 13

Inventories The Institute maintains no inventories on hand.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 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 Skidaway Institute of Oceanography when complete. For the year ended June 30, 2006, GSFIC did not transfer any capital additions to the 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. The Skidaway Institute of Oceanography had accrued liability for compensated absences in the amount of $345,912.92 as of 7-1-2005. For FY2006, $267,919.88 was earned in compensated absences and employees were paid $252,857.22, for a
Skidaway Institute of Oceanography Annual Financial Report FY 2006 14

net increase of $15,062.66. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $360,975.58.
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 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 include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Restricted net assets expendable Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.
Skidaway Institute of Oceanography Annual Financial Report FY 2006 15

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erve Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$47,500.06 2,978.07
198,126.25 $248,604.38

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 The Skidaway Institute of Oceanography, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues The Institute has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 16

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 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, 2006, the carrying value of deposits was $433,368.33 and the bank balance was $840,517.94. Of the Institute's deposits, $740,517.94 were uninsured and 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 2006 17

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts Net A ccounts Receivable

$462,071.84 256,201.57 718,273.41 0.00
$718,273.41

Note 4. Inventories The Institute did not have any inventories at June 30, 2006.

Note 5. Notes/Loans Receivable The Institute did not have any notes or loans receivable at June 30, 2006.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 18

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 7/1/2005
$449,460.00 0.00 0.00
449,460.00

Additions $0.00

Reductions $0.00

0.00

0.00

Ending Balance 6/30/2006
$449,460.00 0.00 0.00
449,460.00

0.00 4,525,125.35
335,818.00 4,388,743.15
594,986.38 174,907.46
10,019,580.34

424,726.00 268,705.53 391,937.60
4,000.00
1,089,369.13

30,335.00 30,335.00

0.00 4,949,851.35
604,523.53 4,750,345.75
594,986.38 178,907.46
0.00 11,078,614.47

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

140,040.10 13,583.44 358,198.42 59,498.64 3,636.00
574,956.60
514,412.53
$514,412.53

18,079.34
18,079.34 12,255.66 $12,255.66

0.00 2,090,705.71
161,295.40 3,025,527.34
302,451.41 165,254.52
0.00 5,745,234.38
5,333,380.09
$5,782,840.09

Skidaway Institute of Oceanography Annual Financial Report FY 2006 19

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Res earch T o t a ls

June 30, 2006 $428,952.53 $428,952.53

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$276,287.98

Additions $0.00

Reductions

Ending Balance June 30, 2006

$93,515.60

$182,772.38

Current Portion
$100,743.44

Other Liabilities Compensated Absences Total

345,912.92 345,912.92

267,919.88 267,919.88

252,857.22 252,857.22

360,975.58 360,975.58

258,940.04 258,940.04

Total Long TermObligations

$622,200.90

$267,919.88

$346,372.82

$543,747.96

$359,683.48

Note 9. Significant Commitments

The institute had no significant commitments at June 30, 2006.

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 2006 were $111,406.68 of which $17,891.08 represented interest. Total principal paid on the capital lease was $93,515.60 for the fiscal year ended June 30, 2006. The interest rate associated with the capital lease was 8 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Equipment Total Assets Held Under Capital Lease

$594,986.38 $594,986.38

Skidaway Institute of Oceanography Annual Financial Report FY 2006 20

OPERATING LEASES
The 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 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 2006 were $8,099.76 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, 2006, were as follows:

Year Ending June 30: 2007 2008 Total minimum leas e payments
Les s : Interes t Les s : Executory cos ts (if paid) Principal Outs tanding

Year 1 2

Capital Leas es

Real Property Operating Leas es

$111,406.68 88,019.07
199,425.75 16,653.37 0.00
$182,772.38

$8,099.76 3,347.92
$11,447.68

The Skidaway Institute of Oceanography's FY2006 expense for rental of real property and equipment under operating leases was $8,099.76.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 21

Note 11. Retirement Plans

Teachers Retirement System of Georgia

Plan Description The 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 the Skidaway Institute of Oceanography who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The 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 2006, 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

2006 2005 2004

100% 100% 100%

$ 228,045.81 $ 230,078.02 $ 221,851.53

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.

Skidaway Institute of Oceanography Annual Financial Report FY 2006 22

Funding Policy The 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 year 2006, 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 Skidaway Institute of Oceanography and the covered employees made the required contributions of $86,141.66 (9.65%) and $44,633.04 (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. The Skidaway Institute of Oceanography and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-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. The 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.
Skidaway Institute of Oceanography Annual Financial Report FY 2006 23

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 Skidaway Institute of Oceanography expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the 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, 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, 2006, 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, 2006, the Skidaway Institute of Oceanography recognized as incurred $109,963.69 of expenditures, which was net of $46,194.97 of participant contributions.
Skidaway Institute of Oceanography Annual Financial Report FY 2006 24

Note 15. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY2006 are shown below:

Natural Classification
Faculty Staff Benefits Travel U tilitie s Supplies and Others Services D e pre c ia tion
Total Expenses
N a tu r a l C la s s if ic a tio n
F a c u lty S ta ff B e n e f its Travel U tilitie s S u p p lie s a n d O th e r s S e r v ic e s D e p r e c ia tio n
T ota l E xpe nses

Functional Classification FY2 0 0 6

Ins truction

Res earch

A cademic Su p p o rt

Ins titutional Su p p o rt

$89,558.64 19,641.64 26,862.23

$881,592.55 1,136,104.56 468,896.19
139,355.13 24,049.35 1,354,568.00 134,917.23

$0.00 553,980.31 132,320.04
11,089.21 5,956.15 349,145.68 85,438.66

($2,551.32) 569,045.72 265,946.47
23,714.06 42.85
111,926.53 328,078.74

$136,062.51

$4,139,483.01

$1,137,930.05

$1,296,203.05

Functio nal Classificatio n FY2 0 0 6

P la n t

O p e ra t io n s

A u xilia ry

& M a in te n a n c e

En t e rp ris e s

T o tal Exp e n s e s

$ 0 .0 0 4 15 ,3 0 5 .5 6 12 5 ,7 7 5 .2 2
1,16 9 .9 4 2 4 8 ,9 0 8 .0 0 5 4 8 ,8 0 6 .2 9
18 ,3 14 .2 2

$ 0 .0 0 1,6 0 8 .17
3 7 0 .4 9
7 ,0 6 2 .11 2 3 ,6 5 6 .8 3
8 ,2 0 7 .7 5

$ 9 6 8 ,5 9 9 .8 7 2 ,6 9 5 ,6 8 5 .9 6 1,0 2 0 ,17 0 .6 4
17 5 ,3 2 8 .3 4 2 8 6 ,0 18 .4 6 2 ,3 8 8 ,10 3 .3 3 5 7 4 ,9 5 6 .6 0

$ 1,3 5 8 ,2 7 9 .2 3

$ 4 0 ,9 0 5 .3 5

$ 8 ,10 8 ,8 6 3 .2 0

Skidaway Institute of Oceanography Annual Financial Report FY 2006 25

SOUTH GEORGIA COLLEGE
Financial Report
For the Year Ended June 30, 2006

Dr. Torri Lilly
President

South Georgia College Douglas, Georgia
Wanda E. Lloyd
Vice President for Business Affairs

SOUTH GEORGIA COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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 ................................................................................................. 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

SOUTH GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

South Georgia College is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
36 34 36

Students (Headcount)
1,504 1,443 1,431

Students (FTE)
1,319 1,213 1,105

Overview of the Financial Statements and Financial Analysis

South Georgia College is proud to present its financial statements for fiscal year 2006. The emphasis of discussions about these statements will be on current year data. Three financial statements are 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 provide an overview of its financial activities for the year. Comparative data are provided for FY 2005 and FY 2006.

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 in 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 2006 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, 2006
$953,956.31 9,535,679.77
53,070.84 10,542,706.92
350,538.40 48,609.55
399,147.95
9,535,679.77 153,798.12 111,682.97
492,398.11
$10,293,558.97

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

The total assets of the institution decreased by ($2,791,212.54). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($2,754,351.34) 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 mission of the institution.
The total liabilities for the year decreased by ($83,982.21). The combination of the decrease in total assets of ($2,791,212.54) and the decrease in total liabilities of ($83,982.21) yields a decrease in total net assets of ($2,707,230.33). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($2,754,351.34).

South Georgia College Annual Financial Report FY 2006 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, 2006

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

$5,431,984.17 14,062,053.21 (8,630,069.04)
6,893,458.87
(1,736,610.17) 81,486.60
(1,655,123.57) 13,000,789.30 (1,052,106.76) 11,948,682.54 $10,293,558.97

$5,055,008.33 11,376,332.55 (6,321,324.22)
6,096,668.98
(224,655.24) 0.00
(224,655.24) 12,699,391.16
526,053.38 13,225,444.54 $13,000,789.30

The Statement of Revenues, Expenses, and Changes in Net Assets reflects an increase in total revenues for 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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$1,120,424.45
2,303,550.72 214,914.60
1,715,874.45 77,219.95
5,431,984.17
5,834,756.30
968,557.92 28,561.18 61,583.47
6,893,458.87
81,486.60
81,486.60 $12,406,929.64

June 30, 2005
$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

South Georgia College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$3,903,585.09
568,441.72 888,027.30 2,116,637.15 2,816,349.08 644,834.32 2,773,911.73 350,266.82
14,062,053.21
0.00 $14,062,053.21

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
0.00 $11,376,332.55

The compensation and employee benefits category increased by $549,619.54. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities decreased by ($8,360.64) during the past year. The decrease was primarily associated with energy conservation measures which included load shedding during peak hours and alternative scheduling of class and work schedules.

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 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.

South Georgia College Annual Financial Report FY 2006 5

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($6,989,336.20) 6,798,431.97 (10,191.46) (121,438.82) (322,534.51) 363,349.67
$40,815.16

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

Capital Assets
There was a decrease in Capital Assets due to a reclassification on some items that should not have been capitalized. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
South Georgia College had Long-Term Debt and Liabilities of $240,641.47 of which $192,031.92 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
In compliance with GASB Statement No. 39, South Georgia College has included the financial statements and notes for all required component units for FY2006. The South Georgia College Foundation, Inc. had net assets of approximately $2.7 million as of June 30, 2006. Details of the financial position of the Foundation are included as part of these statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. 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. Torri Lilly, President South Georgia College

South Georgia College Annual Financial Report FY 2006 6

Statement of Net Assets

SOUTH G EORG IA COLLEG E STATEMENT OF NET ASSETS
June 30, 2006

Component Unit

AS S ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Inventories (note 4) Prepaid items Other Assets Total Current A s s ets
Noncurrent As s ets Noncurrent Cas h Short Term Inves tments Inves tments (including Real Es tate) Notes Receivable, net Capital A s s ets , net (note 6) Other Assets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Deferred Revenue (note 7) Depos its Held for Other Organizations Compens ated A bs ences (current portion) Total Current Liabilities 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

S outh Georgia Col l e g e

S outh Georgia College Foundation,
Inc.

$37,017.04
125,863.51 617,224.72 164,340.54
9,510.50
953,956.31
3,798.12 150,000.00
49,272.72 9,535,679.77
9,738,750.61 10,692,706.92

$94,684.19
94,684.19 30,500.00 2,531,470.78 2,561,970.78 2,656,654.97

54,142.69 750.00
103,613.79 192,031.92 350,538.40
48,609.55 48,609.55 399,147.95
9,535,679.77
153,798.12 111,682.97
0.00 492,398.11 $10,293,558.97

0.00
0.00 0.00
0.00
2,130,932.22 140,961.56 0.00 384,761.19
$2,656,654.97

South Georgia College Annual Financial Report FY 2006 7

Statement of Revenues, Expenses and Changes in Net Assets
SOUTH G EORG IA COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

S outh Georgia College

S outh Georgia Col l e g e
Foundation, Inc.

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) Grants and Contracts Fe d e ra l State Other Sales and Services A uxiliary Enterpris es Res idence Halls Books tore Food Services Intercollegiate A thletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 South Georgia College
Total Operating Expens es Operating Income (los s )

$2,487,361.67 1,366,937.22
2,297,987.90
5,562.82 214,914.60
600,611.60 642,701.54 256,257.50 202,989.86 13,313.95 77,219.95 5,431,984.17

$0.00 68,426.82 78,446.15
146,872.97

2,252,231.28 2,916,627.25 1,735,687.40
68,177.93 776,779.30 777,980.02 3,679,063.92 1,855,506.11
14,062,053.21 (8,630,069.04)

23,924.43
195,917.13 219,841.56 (72,968.59)

South Georgia College Annual Financial Report FY 2006 8

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

STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2006

South Georgia College

C om pon e n t Un i t
South Ge orgia College Fou n dati on ,
In c.

NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal St at e Ot her Loss on Bond Retirement 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

5,834,756.30

968,557.92 28,561.18 61,583.47
6,893,458.87 (1,736,610.17)

0.00 (72,968.59)

81,486.60

81,486.60 (1,655,123.57)
13,000,789.30 (1,052,106.76) 11,948,682.54 $10,293,558.97

44,838.34 44,838.34 (28,130.25)
2,684,785.22 0.00
2,684,785.22 $2,656,654.97

South Georgia College Annual Financial Report FY 2006 9

Statement of Cash Flows
SOUTH G EORG IA COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 A uxiliary Enterpris e Charges : Res idence Halls Books tore Food 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 Purchas es of Capital A s s ets Net Cas h us ed by Capital and Related Financing A ctivities
CAS H FLOWS FROM INVES TING ACTIVITIES 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, 2006
$1,127,097.80
2,175,886.16 214,914.60
(6,279,239.85) (5,225,492.01)
(776,779.30) 482.00
603,876.46 639,836.95 251,640.07 202,957.80 13,313.95 62,169.17 (6,989,336.20)
5,834,756.30 (4,882.25)
968,557.92 6,798,431.97
(10,191.46) (10,191.46)
28,561.18 (150,000.00) (121,438.82) (322,534.51) 363,349.67 $40,815.16

South Georgia College Annual Financial Report FY 2006 10

Statement of Cash Flows, Continued
SOUTH G EORG IA COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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, 2006
Gift of capital as s ets reducing proceeds of capital grants and gifts

June 30, 2006
($8,630,069.04)
1,855,506.11 (148,048.21)
12,445.86 (552.96) 482.00
(60,997.47) (2,250.00) 3,125.72
(18,978.21) ($6,989,336.20)
$81,486.60

South Georgia College Annual Financial Report FY 2006 11

SOUTH GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, South Georgia College is reporting the activity for the South Georgia College Foundation, Inc.
See Note 16, Component Units, for foundation notes.
South Georgia College Annual Financial Report FY 2006 12

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 predominant 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
South Georgia College Annual Financial Report FY 2006 13

Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 South Georgia College has no consumable supplies reported as inventory. Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 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, 2006, GSFIC did not transfer any capital additions to South Georgia College.
South Georgia College Annual Financial Report FY 2006 14

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. South Georgia College had accrued liability for compensated absences in the amount of $259,619.68 as of 7-1-2005. For FY2006, $961,664.31 was earned in compensated absences and employees were paid $980,642.52, for a net decrease of ($18,978.21). The ending balance as of 6-30-2006 in accrued liability for compensated absences was $240,641.47.
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.
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 2006 15

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Ins titutional Loans Total Res tricted Expendable

June 30, 2006
$60,152.14 51,530.83
$111,682.97

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 Res erve Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$218,413.71 129,636.83 144,347.57 $492,398.11

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes South Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

South Georgia College Annual Financial Report FY 2006 16

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.
Restatement of Prior Year Net Assets Beginning of Year In the prior fiscal year, the College failed to properly record all of its depreciable capital assets and associated depreciation in accordance with the College's asset capitalization policies. As a result of adjustments made to depreciable capital assets, net assets as July 1, 2005 were decreased by $1,052,106.76.
South Georgia College Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $186,540.16 and the bank balance was $239,447.21. Of the College's deposits, $50,000.00 were uninsured. Of these uninsured deposits, $50,000.00 were collateralized with securities held by the financial institution's trust department or agent in the College's name.
B. Investments
South Georgia College had no investments at June 30, 2006.
South Georgia College Annual Financial Report FY 2006 18

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$34,432.59 27,259.29
125,863.51 574,532.84 762,088.23
19,000.00
$743,088.23

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Total

June 30, 2006 $164,340.54 $164,340.54

Note 5. Notes/Loans Receivable
Institutional Loans comprise substantially all of the loans receivable at June 30, 2006. 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, 2006 the allowance for uncollectible loans was $.00.

South Georgia College Annual Financial Report FY 2006 19

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital As s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total As s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A ccumulated Depreciation
Total Capital As s ets , Being Depreciated, Net
Capital A s s ets , net

Beginning B al anc e s 7/1/2005
$197,146.48 0.00 0.00
197,146.48

Additions $0.00

Reductions $0.00

0.00

0.00

1,293,392.00 20,887,418.24 1,239,613.00 1,047,394.05
0.00 1,254,229.99
0.00 25,722,047.28

81,486.60 10,216.46 91,703.06

68,395.05 68,395.05

298,773.54 11,368,604.04
907,488.74 926,344.19
0.00 1,180,058.90
0.00 14,681,269.41
11,040,777.87
$11,237,924.35

51,735.68 1,718,339.81
25,876.40 44,888.22
14,666.00
1,855,506.11
(1,763,803.05)
($1,763,803.05)

29,992.15 22,494.60 12,390.47 65,076.30
129,953.52 (61,558.47) ($61,558.47)

Ending B al anc e 6/30/2006
$197,146.48 0.00 0.00
197,146.48
1,293,392.00 20,887,418.24 1,239,613.00 1,060,485.60
0.00 1,264,446.45
0.00 25,745,355.29
320,517.07 13,064,449.25
920,974.67 906,156.11
0.00 1,194,724.90
0.00 16,406,822.00
9,338,533.29
$9,535,679.77

South Georgia College Annual Financial Report FY 2006 20

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $0.00
750.00 $750.00

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

Other Liabilities Compensated Absences Total
Total Long TermObligations

259,619.68 259,619.68
$259,619.68

961,664.31 961,664.31
$961,664.31

980,642.52 980,642.52
$980,642.52

240,641.47 240,641.47
$240,641.47

192,031.92 192,031.92
$192,031.92

Note 9. Significant Commitments

South Georgia College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2006.

Note 10. Lease Obligations

South Georgia College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment. South Georgia College had no capital leases as of June 30, 2006.
OPERATING LEASES

South Georgia College'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 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.

South Georgia College Annual Financial Report FY 2006 21

Future commitments for non-cancelable operating leases having remaining terms in excess of one year as of June 30, 2006 are as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 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

Real Property and Equipment Operating Leas es
$57,822.84 52,722.84 52,722.84 49,913.67 9,717.00
$222,899.19

South Georgia College's FY2006 expense for rental of real property and equipment under operating leases was $72,888.84.

South Georgia College Annual Financial Report FY 2006 22

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 2006, 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

2006 2005 2004

100% 100% 100%

$321,012.54 $308,137.24 $324,941.52

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.

South Georgia College Annual Financial Report FY 2006 23

Funding Policy South Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $97,372.18 (9.65%) and $50,452.19 (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 2006 amounted to $7,626.14 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.
South Georgia College Annual Financial Report FY 2006 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. 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.
South Georgia College Annual Financial Report FY 2006 25

Litigation, claims and assessments filed against South Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 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, 2006, there were 81 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, South Georgia College recognized as incurred $294,575.55 of expenditures, which was net of $96,396.40 of participant contributions.
South Georgia College Annual Financial Report FY 2006 26

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

In s tru ctio n

Res earch

Public Service

Academic Support

Student Services

In s t itu t io n al Support

$2,117,142.54 361,399.60 657,840.29

$0.00

$0.00

$0.00 348,524.84 108,550.21

$0.00 561,539.18 171,958.82

$133,672.11 743,147.55 518,544.79

24,156.03
34,936.30 374,675.81 333,434.52

1,179.87
3,832.14 91,688.66 14,666.00

18,696.39
8,286.81 123,041.08
4,505.02

18,065.58 96,244.98
11,665.14 594,510.00
787.00

$3,903,585.09

$0.00

$0.00

$568,441.72

$888,027.30

$2,116,637.15

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary En t erp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 830,810.61 269,591.43 (264,096.50)
4,022.32
707,609.16 1,261,783.26
6,628.80

$0.00 644,834.32

$1,416.63 71,205.47
9,201.86 264,096.50
2,057.74 35,700.00 11,650.47 1,233,365.11 1,145,217.95

$0.00 350,266.82

$2,252,231.28 2,916,627.25 1,735,687.40 0.00 68,177.93 776,779.30 777,980.02 3,679,063.92 1,855,506.11

$2,816,349.08

$644,834.32

$2,773,911.73

$350,266.82

$14,062,053.21

South Georgia College Annual Financial Report FY 2006 27

Note 16. Component Units
South Georgia College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of South Georgia College (College). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. The 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, 2006, the Foundation distributed $195,917.13 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, in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships.
South Georgia College Foundation also holds investments in real property valued at $13,500.
South Georgia College Annual Financial Report FY 2006 28

South Georgia College Foundation Investments are comprised of the following amounts at June 30, 2006:

Cash held by investment organization Equity Securities Mutual Funds Real Estate Georgia Investment Pools
BOR Short Term Fund BOR Balanced Income Fund BOR Total Return Fund
Total Inves tments

Co s t
$358.16 140,720.00 16,000.00
13,500.00
957.00 96,092.00 2,520,876.00
$2,788,503.16

Fair Value
$358.16 142,531.00 15,094.00 13,500.00
332.14 91,087.22 2,268,568.26
$2,531,470.78

South Georgia College Annual Financial Report FY 2006 29

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

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 2006
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 ................................................................................................. 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

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Southern Polytechnic State University is one of the 35 institutions of higher education 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 198 acres and contains 32 buildings.

Southern Polytechnic State University offers baccalaureate and masters degrees that contain a balance of technical, professional, and liberal arts courses with an emphasis on relevant, application-oriented teaching. The University's unique mission attracts a highly qualified faculty and 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.

FY2006 FY2005 FY2004

Faculty
144 120 136

Students (Headcount)
3,807 3,803 3,770

Students (FTE)
3,184 3,157 3,103

Overview of the Financial Statements and Financial Analysis

Southern Polytechnic State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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 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 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 University but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

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, 2006
$5,564,148.53 81,858,014.26
3,253,328.91 90,675,491.70
5,091,906.36 32,506,450.09 37,598,356.45
48,854,109.20 1,448,575.76 2,119,975.67
654,474.62 $53,077,135.25

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

The total assets of the institution increased by $34,390,859.32. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $34,615,834.89 in Capital Assets, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the University.
The total liabilities for the year increased by $33,031,418.68. The primary reason for the increase in liabilities was due to the reorganization of the Housing function and the associated Capital Leases that the University acquired. The combination of the increase in total assets of $34,390,859.32 and the increase in total liabilities of $33,031,418.68 yields an increase in total net assets of $1,359,440.64.

Southern Polytechnic State University Annual Financial Report FY 2006 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, 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, 2006

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

$21,808,120.18 42,586,381.62 (20,778,261.44) 18,858,541.76
(1,919,719.68) 3,279,160.32 1,359,440.64 51,717,694.61
0.00 51,717,694.61 $53,077,135.25

$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
0.00 50,793,388.53 $51,717,694.61

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:
Grants and Contracts revenue increased significantly during the fiscal year, especially in the category of Federal Grants largely due to reclassifying many grants as Operating.

Southern Polytechnic State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$11,561,953.69
2,537,119.49 913,174.47
6,411,786.03 384,086.50
21,808,120.18
19,819,607.30 102,335.45 503,332.03 106,609.14 (1,630.00)
20,530,253.92
1,512,232.95 1,766,927.37 3,279,160.32
$45,617,534.42

June 30, 2005
$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 0.00 95330 14,993.53
21,243,428.14
1,441,460.37 120,480.49
1,561,940.86
$36,124,523.56

Southern Polytechnic State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$20,053,341.83 141,366.42 306.62
2,991,562.16 3,268,583.35 6,270,644.19 5,494,314.02 1,351,408.29 3,014,854.74
42,586,381.62
1,671,712.16
$44,258,093.78

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
0.00 $35,200,217.48

The compensation and employee benefits category increased by approximately $2,121,403.16. The increase is largely due to the benefits category and reflects an increased cost of health insurance for the employees of the institution.
Utilities increased by approximately $357,885.73 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006. As expected, due to the reorganization of the Housing Operations, Auxiliary Enterprise expenses also increased significantly.
Under non-operating revenues (expenses) interest expense increased greatly due to the reorganization of the Housing Operations and the expenses associated with the Housing Capital Leases.
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 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
Southern Polytechnic State University Annual Financial Report FY 2006 5

related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($18,162,358.65) 19,876,003.05 (1,675,014.23) 106,649.94 145,280.11 2,473,119.51
$2,618,399.62

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

Capital Assets
The University had one significant capital asset addition for facilities in fiscal year 2006. Capital Leases for four Residence Halls totaling $33,792,317.80 were added due to the reorganization of the Housing Operations.
Southern Polytechnic State University also expended $1,512,232.95 of capital projects utilizing funding from 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 Debt and Liabilities
Southern Polytechnic State University had Long-Term Debt and Liabilities of $33,981,463.37 of which $1,475,013.28 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 has included the financial statements and notes for all required component units for FY2006. The Southern Polytechnic State University Foundation, Inc. had endowment and other investments of $3 million as of June 30, 2006.

Southern Polytechnic State University Annual Financial Report FY 2006 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. Lisa A. Rossbacher, President Southern Polytechnic State University
Southern Polytechnic State University Annual Financial Report FY 2006 7

Statement of Net Assets
SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

AS S ETS Current As s ets Cas h and Cas h Equivalents A ccounts Receivable, net (note 3) Receivables - Federal Financial A s s is tance Receivables - Other Leas es Receivable Pledges Receivable Prepaid items 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 (note 6) Other As s ets Total Noncurrent A s s ets
TOTAL AS S ETS
LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (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

S outhern Polytechnic S tate Univers ity
$2,618,399.62 241,174.34
1,966,507.19
738,067.38 5,564,148.53
2,859,184.95 394,143.96
81,858,014.26 85,111,343.17 90,675,491.70
212,587.95 130,221.87
12,766.99 2,480,384.83
223,811.04 557,120.40 828,749.48 646,263.80 5,091,906.36 32,175,155.58 331,294.51 32,506,450.09 37,598,356.45
48,854,109.20 1,448,575.76 2,119,975.67 654,474.62
$53,077,135.25

Component Unit S outhern Polytechnic
S tate Univers ity Foundation, Inc.
$669,098.00
417,003.00 2,429,316.00
87,551.00 3,239.00
3,606,207.00
3,726,801.00 3,026,306.00 52,375,384.00
155,610.00 574,590.00 59,858,691.00 63,464,898.00
500,964.00
1,700,000.00 376,128.00
810,000.00 3,387,092.00
21,742,428.00 34,382,327.00 56,124,755.00 59,511,847.00
1,759,206.00 842,692.00
1,351,153.00 $3,953,051.00

Southern Polytechnic State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006

Component Unit

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) Grants and Contracts Fe d e ra l State Other Sales and Services 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
EXP ENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 Southern Polytechnic State Univers ity
Total Operating Expens es Operating Income (los s )

S outhern Polytechnic S tate Univers ity

S outhern Polytechnic S tate Univers ity Foundation, Inc.

$12,392,032.09 830,078.40
2,288,832.51 175,874.31 72,412.67 913,174.47
4,319,493.20 112,111.34 690,617.82 196,936.00 207,762.08 770,170.99 114,694.60 384,086.50
21,808,120.18
9,396,893.87 11,638,427.64 5,934,548.87
251,857.97 1,577,019.07 1,533,580.53 9,162,282.30 3,091,771.37
42,586,381.62 (20,778,261.44)

$0.00 1,212,980.00
22,862.00
2,087,148.00
3,322,990.00
286,786.00 61,592.00
870,687.01 321,089.00 1,540,154.01 1,782,835.99

Southern Polytechnic State University Annual Financial Report FY 2006 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, 2006

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 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

S ou th e rn Polytechnic State
Unive rsity

Compone nt Unit
S ou th e rn Polytechnic State
Un i ve rs i ty Foundation, Inc.

19,819,607.30
50,119.48 35,107.91 17,108.06 503,332.03 106,609.14 (1,671,712.16) (1,630.00) 18,858,541.76 (1,919,719.68)
1,512,232.95 1,766,927.37
3,279,160.32 1,359,440.64
51,717,694.61 0.00
51,717,694.61 $53,077,135.25

433,040.00 163,061.00 (1,628,147.00)
(1,032,046.00) 750,789.99
891,837.00 891,837.00 1,642,626.99
1,038,803.01 1,271,621.00 2,310,424.01 $3,953,051.00

Southern Polytechnic State University Annual Financial Report FY 2006 10

Statement of Cash Flows
SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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 Sale 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 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, 2006
$12,082,844.66
2,355,183.81 912,834.23
(18,553,981.87) (20,992,688.49)
(1,577,019.07) 127,630.94
4,369,497.01 113,974.62 689,236.07 205,982.32 208,950.51 773,938.55 109,897.62
1,011,360.44 (18,162,358.65)
19,819,607.30 (638,620.31) 695,016.06
19,876,003.05
785,110.67 (788,412.74) (1,671,712.16) (1,675,014.23)
40.80 106,609.14 106,649.94 145,280.11 2,473,119.51 $2,618,399.62

Southern Polytechnic State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Other Assets Prepaid Items Notes Receivable, Net 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

June 30, 2006
($20,778,261.44)
3,091,771.37 393,654.88 95,874.33 127,630.94 (51,413.28)
(1,562,233.93) 482,374.52 (41,144.66) 79,388.62
($18,162,358.65)
($33,792,317.80) ($3,279,160.32)

Southern Polytechnic State University Annual Financial Report FY 2006 12

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
The Board of Regents of the University System of Georgia (and thus Southern Polytechnic State University) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 2005. 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 FY2006, Southern Polytechnic State University is reporting the activity for the Southern Polytechnic State University Foundation, Inc.
See Note 16, Component Units, for foundation notes.
Southern Polytechnic State University Annual Financial Report FY 2006 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 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, including the Board of Regents Short-Term Investment Pool.
Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, 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, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Southern Polytechnic State University Annual Financial Report FY 2006 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 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, 2006, GSFIC did not transfer any capital additions to Southern Polytechnic State University.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net
Southern Polytechnic State University Annual Financial Report FY 2006 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 $898,169.69 as of 7-1-2005. For FY2006, $778,738.80 was earned in compensated absences and employees were paid $699,350.18, for a net increase of $79,388.62. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $977,558.31.
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.
Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Quas i-Endowments Total Res tricted Expendable

June 30, 2006
$1,313,014.55 425,770.60 141,796.15 239,394.37
$2,119,975.67

Southern Polytechnic State University Annual Financial Report FY 2006 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 Res erve Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$1,121,435.36 1,594,375.90 (2,061,336.64) $654,474.62

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 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.

Southern Polytechnic State University Annual Financial Report FY 2006 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 2006 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, 2006, the carrying value of deposits was $2,098,989.84 and the bank balance was $3,296,261.92. Of the University's deposits, $3,196,261.92 were uninsured and uncollateralized. It should be noted that the State Depository Board has waived the requirement that state deposits be collateralized for the financial institution that the University utilizes.
Southern Polytechnic State University Annual Financial Report FY 2006 19

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 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, 2006 are presented below. All investments are presented by investment type.

IN VESTM EN TS
Interest Rate Ri sk
Other Inves tments Equity Securities - Domes tic
Inves tment Pools Board of Regents Short-Term Fund Balanced Income Fund Total Return Fund
Total Inves tments

$2,482.80
449,109.89 468,762.95 2,387,939.20 $3,308,294.84

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 Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the University's total investment of $449,109.89, $441,492.00 is invested in debt securities.
The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the University's total investment of $468,762.95, $308,729.00 is invested in debt securities.

Southern Polytechnic State University Annual Financial Report FY 2006 20

The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $2,387,939.20, $775,605.00 is invested in debt securities.
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, 2006, $2,482.80 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $3,305,812.04 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, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,093,731.43 336,485.20 241,174.34 952,544.62
2,623,935.59 416,254.06
$2,207,681.53

Note 4. Inventories
Southern Polytechnic State University had no inventories at 6-30-06.
Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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 Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital As s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total As s ets Being Depreciated
Les s : Accumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total Accumulated Depreciation
Total Capital As s ets , Being Depreciated, Net
Capital A s s ets , net

Beginning B al anc e s 7/1/2005
$753,396.56
156,511.68 909,908.24

Additions
$947,000.00
1,512,232.95 2,459,232.95

Reductions $0.00
0.00

Ending B al anc e 6/30/2006
$1,700,396.56 0.00
1,668,744.63 3,369,141.19

1,623,504.00 56,374,303.81
567,531.00 8,238,378.93
5,611,935.85 30,500.00
72,446,153.59

270,000.00
1,319,625.41 33,792,317.80
295,243.21
35,677,186.42

739,140.11 4,449.00
743,589.11

1,623,504.00 56,644,303.81
567,531.00 8,818,864.23 33,792,317.80 5,902,730.06
30,500.00 107,379,750.90

726,247.44 13,721,764.61
497,203.69 6,861,767.25
4,293,763.00 13,136.47
26,113,882.46
46,332,271.13
$47,242,179.37

64,940.16 1,534,959.35
12,207.00 435,339.08 774,407.28 269,156.00
762.50 3,091,771.37
32,585,415.05
$35,044,648.00

6,494.02 153,495.94
1,220.70 149,116.34
4,449.00
314,776.00
428,813.11
$428,813.11

784,693.58 15,103,228.02
508,189.99 7,147,989.99
774,407.28 4,558,470.00
13,898.97 28,890,877.83
78,488,873.07
$81,858,014.26

Southern Polytechnic State University Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $1,992,931.95
487,452.88 $2,480,384.83

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005
$0.00

Additions $33,792,317.80

Reductions

Ending Balance June 30, 2006

$788,412.74

$33,003,905.06

Current Portion
$828,749.48

Other Liabilities Compensated Absences Total
Total Long TermObligations

898,169.69 898,169.69
$898,169.69

778,738.80 778,738.80
$34,571,056.60

699,350.18 699,350.18
$1,487,762.92

977,558.31 977,558.31
$33,981,463.37

646,263.80 646,263.80
$1,475,013.28

Note 9. Significant Commitments
The University had significant outstanding, construction or renovation contracts executed with a remaining amount of $ 2,947,660.49 as of June 30, 2006. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Southern Polytechnic State University 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 2029. Expenditures for fiscal year 2006 were $2,460,124.90 of which $1,671,712.16 represented interest. Total principal paid on capital leases was $788,412.74 for the fiscal year ended June 30, 2006. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Buildings Total Assets Held Under Capital Lease

$33,017,910.52 $33,017,910.52

Southern Polytechnic State University Annual Financial Report FY 2006 23

Southern Polytechnic State University had capital leases for two facilities with related entities in the current fiscal year. In July 2005, Southern Polytechnic State University entered into a capital lease of $11,643,862.28 at 5.00 percent with the Southern Polytechnic State University Foundation, Inc., a discretely presented component unit, whereby the University leases a building for a twenty-two year period that began July 2005 and expires June 2027. Also in July 2005, Southern Polytechnic State University entered into a capital lease of $22,148,455.52 at 5.00 percent with the Southern Polytechnic State University Foundation, Inc., whereby the University leases a building for a twenty-four year period that began July 2005 and expires June 2029. The outstanding liability at June 30, 2006 on these capital leases is $33,003,905.06. The University at its option may terminate the lease and purchase the Foundation's interest for the unamortized principal balance and the payment of $1.
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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 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

Real Property Capital Leas es
$2,460,124.92 2,460,124.92 2,460,124.92 2,460,124.92 2,460,124.92
12,300,624.60 12,300,624.60 12,300,624.60
5,633,010.84 54,835,509.24 21,831,604.18
0.00 $33,003,905.06

Southern Polytechnic State University had no expense for rental of real property and equipment under operating leases.

Southern Polytechnic State University Annual Financial Report FY 2006 24

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,016,839.89 $1,006,474,78 $1,116,496.27

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.

Southern Polytechnic State University Annual Financial Report FY 2006 25

Funding Policy Southern Polytechnic State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2006, 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 $738,959.62 (9.65%) and $382,882.18 (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 2006 amounted to $71,098.93 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 2006 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. 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 2006 27

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, 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, 2006, there were 170 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Southern Polytechnic State University recognized as incurred $857,807.50 of expenditures, which was net of $329,798.61 of participant contributions.
Southern Polytechnic State University Annual Financial Report FY 2006 28

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$9,373,782.56 2,822,219.59 2,682,384.04

$9,828.95 60,124.21 6,067.63

$0.00 304.00
2.62

$5,531.56 1,896,467.78
417,742.25

$7,750.80 1,782,257.44
412,126.67

$0.00 3,199,493.12 1,880,872.45

126,981.52 12,985.00 38,186.84 3,162,577.68 1,834,224.60

2,619.73 22,500.00
40,225.90

46,513.02
33,386.63 552,282.40 39,638.52

38,211.97
11,961.59 1,011,021.02
5,253.86

29,704.96
5,416.02 1,038,898.35
116,259.29

$20,053,341.83

$141,366.42

$306.62

$2,991,562.16

$3,268,583.35

$6,270,644.19

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary Enterpris es

Unallocated Exp en s es

Total Exp en s es

$0.00 1,415,866.64 399,780.27 (344,972.94)
2,639.41
1,338,261.07 2,370,838.12
311,901.45

$0.00 5.22
1,351,403.07

$0.00 $461,694.86
135,567.72 344,972.94
5,187.36 190,131.00 106,368.38 986,438.83 784,493.65

$0.00

$9,396,893.87 11,638,427.64 5,934,548.87
0.00 251,857.97 1,577,019.07 1,533,580.53 9,162,282.30 3,091,771.37

$5,494,314.02

$1,351,408.29

$3,014,854.74

$0.00

$42,586,381.62

Southern Polytechnic State University Annual Financial Report FY 2006 29

Note 16. Component Units
Southern Polytechnic State University Foundation, Inc. (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, 2006, the Foundation distributed $321,089 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.
Prior Year Adjustment As of July 1, 2005, the Foundation's net assets have been restated to properly record the investment in direct financing leases from Southern Polytechnic State University. The effect of this change in accounting method was to increase net assets at June 30, 2005 by $1,271,621 for the cumulative effect of the change on net income for prior years. This change was made in recognition of the fact that the buildings revert to the University at the end of the lease agreement.
Southern Polytechnic State University Annual Financial Report FY 2006 30

Investments for Component Units:

Southern Polytechnic State University Foundation holds endowment and other investments in the amount of $3 million. The $2.7 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. The Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the earnings may be used for academic scholarships. The remaining 95% of the earnings are set aside as a reserve.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Corporate Bonds Equity Securities Certificates of Deposit

$857,276.00 1,989,901.00
272,045.00

$850,487.00 1,903,774.00
272,045.00

T otal Investments

$3,119,222.00

$3,026,306.00

Long-term Liabilities for Component Units:

During the year ended June 30, 2004, SPSU Student Housing I, LLC, a subsidiary of the Foundation, arranged for the sale of $35,690,000 Development Authority of the City of Marietta Georgia (the Issuer) Tax-Exempt Adjustment Mode Revenue Bonds (Student Housing Facilities Revenue Bonds) Series 2003 (the Bonds). The proceeds were loaned to SPSU Student Housing I, LLC to finance the development, purchase and construction of dormitory and apartment facilities and to pay certain costs of issuance of the bonds. The Issuer entered into a loan agreement with the SPSU Student Housing I, LLC dated December 1, 2003. The Bonds are secured by all property of the borrower. The Bonds interest ranges from 2.5 to 5.25 percent.

Changes in long-term debt for the year ended June 30, 2006 are as follows:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Bond Premium, Net
Total Long Term Debt

$35,690,000.00 380,666.00
$36,070,666.00

$0.00 $0.00

$850,000.00 28,339.00
$878,339.00

$34,840,000.00 352,327.00
$35,192,327.00

$810,000.00 $810,000.00

Southern Polytechnic State University Annual Financial Report FY 2006 31

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing Facilities revenue bonds payable are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

2017 through 2021 2022 through 2026 2027 through 2031

11-15 16-20 21-25

Bonds Payable Principal Interest

$810,000.00 900,000.00 970,000.00
1,000,000.00 1,030,000.00 5,740,000.00
7,240,000.00 9,305,000.00 7,845,000.00

$1,623,720.00 1,599,420.00 1,576,020.00 1,546,920.00 1,515,920.00 6,987,465.00
5,489,775.00 3,416,969.00
936,000.00

Total
$2,433,720.00 2,499,420.00 2,433,720.00 2,499,420.00 2,546,020.00
12,727,465.00 12,729,775.00 12,721,969.00
8,781,000.00

$34,840,000.00

$24,692,209.00

$54,439,369.00

Southern Polytechnic State University Annual Financial Report FY 2006 32

GEORGIA INSTITUTE OF TECHNOLOGY
Financial Report
For the Year Ended June 30, 2006

Georgia Institute of Technology Atlanta, Georgia

Dr. G. Wayne Clough
President

Mr. Robert K. Thompson
Senior Vice President for Administration and Finance

GEORGIA INSTITUTE OF TECHNOLOGY ANNUAL FINANCIAL REPORT FY 2006
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ....................................................................................................... 8 Statement of Revenues, Expenses, and Changes in Net Assets ................................12 Statement of Cash Flows ................................................................................................... 16 Note 1 Summary of Significant Accounting Policies ..................................................... 18 Note 2 Deposits and Investments.................................................................................... 24 Note 3 Accounts Receivable............................................................................................ 28 Note 4 Inventories............................................................................................................ 28 Note 5 Notes/Loans Receivable....................................................................................... 28 Note 6 Capital Assets....................................................................................................... 29 Note 7 Deferred Revenue................................................................................................. 30 Note 8 Long-Term Liabilities .......................................................................................... 30 Note 9 Significant Commitments.................................................................30 Note 10 Lease Obligations................................................................................................ 30 Note 11 Retirement Plans ................................................................................................. 35 Note 12 Risk Management................................................................................................ 38 Note 13 Contingencies...................................................................................................... 39 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 40 Note 15 Natural Classifications With Functional Classifications..................................... 41 Note 16 Component Units ........................................................................ 42

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 over $400 million expended on sponsored research activities and providing a focused, technology based education to over 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 three 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. The Institute continues to grow as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
894 844 845

Students (Headcount)
17,135 16,841 16,649

Students (FTE)
16,299 16,022 15,889

Overview of the Financial Statements and Financial Analysis
The Georgia Institute of Technology is proud to present its financial statements for fiscal year 2006, which began July 1, 2005 and ended June 30, 2006. 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. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into four net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for FY 2005 and FY 2006.

Georgia Institute of Technology Annual Financial Report FY 2006 1

Statement of Net Assets

Using the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past transactions and events. This statement identifies the assets available for current operations, debts owed, and net assets available to continue operations in the future.

The Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into two 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, 2006 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
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, 2006
$141,652,174.94 1,149,606,811.19
63,439,283.97 1,354,698,270.10
82,815,062.58 348,919,406.29 431,734,468.87
814,640,088.28 47,535,013.93 26,607,479.99 15,941,133.84 18,240,085.19
$922,963,801.23

June 30, 2005
$128,558,615.37 1,135,752,856.00
61,463,979.77 1,325,775,451.14
76,862,980.76 343,414,915.30 420,277,896.06
797,714,559.53 45,926,483.32 29,916,051.09 18,849,526.19 13,090,934.95
$905,497,555.08

The total assets of the Institute increased by $28,922,818.96. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $13,093,559.57 in current assets and an increase of $13,853,955.19 in investment in plant, net of accumulated depreciation. Further review indicates that approximately $18.2 million in unrestricted net assets and approximately $42.5 million in restricted net assets are available for future operations.

Georgia Institute of Technology Annual Financial Report FY 2006 2

The total liabilities for the year increased by $11,456,572.81. The combination of the increase in total assets of $28,922,818.96 and the increase in total liabilities of $11,456,572.81 yields an increase in total net assets of $17,466,246.15. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $16,925,528.75.
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, and 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, 2006 and June 30, 2005:
Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2006

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

$624,286,378.91 842,777,841.66 (218,491,462.75) 222,812,182.82
4,320,720.07 13,145,526.08 17,466,246.15 905,497,555.08
0.00 905,497,555.08 $922,963,801.23

$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

Georgia Institute of Technology Annual Financial Report FY 2006 3

The Statement of Revenues, Expenses, and Changes in Net Assets reflects increases in both Operating and Non-Operating Revenues. Overall revenue increased by $71.7 million, primarily in the area of Federal, State, and Other Grants and Contracts. In addition, revenue from State Appropriations increased by $20.5 million while Tuition and Fees increased by $8.4 million. There was a reduction in Other Non-Operating Revenues of $15.4 million due to a thorough review of capital asset valuation which was completed in the current fiscal year. Please see Note 1 for more details.

The graph below compares current and prior year revenue:

$450 $400 $350 $300 $250 $200 $150 $100
$50 $-

Georgia Institute of Technology
Revenue
(dollars in millions)

FY 2006 $877.2

FY2005 $805.5

$422 .6 $399 .1

$234.0 $213.5

$106.1 $97.7

$101.3 $88.6

$13.2 $6.6

Tuition and Fees Gifts, Grants and Capital Gifts and Sales, Services,

State

Contracts

Grants

and Other

Appropriations

Total operating expenses for the year were approximately $842.8 million, an increase of $27.2 million, or 3.3%, over the previous year. The increase is actually less than the $35 million of the previous year, a testament to the cost cutting measures implemented during the past several years when State Appropriations and other revenue sources were flat. The graph on the following page shows year-to-year expenditure changes by object of expenditure:

Georgia Institute of Technology Annual Financial Report FY 2006 4

$600 $500 $400 $300 $200 $100
$0

Georgia Institute of Technology Operating Expenses by Object of Expediture Classification
(dollars in millions)

$532.3 $510.0

FY 2006 $842.8

FY 2005 $815.5

Salaries and Benef its

$219.0 $222.4
Travel, Supplies and Other

$56.0 $51.2 Depreciation

$25.0 $20.1 Utilities

$10.5 $11.8
Scholarships and Fellow ships

The chart below shows year-to-year expenditure changes by functional area:

$600 $500

$560.3$538.0

$400

$300

$200

$100

$0 Instruction,
Research, and Public Service

Georgia Institute of Technology Expenses by Functional Classification
(dollars in millions)

FY 2006 $842.8

FY 2005 $815.5

$96.6 $89.4

$71.1 $76.4

Academic, Student, and Institutional
Support

Operations and Maintenance of
Plant

$54.5 $54.3

$10.5 $11.8

$49.8 $45.6

Auxiliary Scholarships and Depreciation

Enterprises

Fellow ships

Georgia Institute of Technology Annual Financial Report FY 2006 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, 2006 and 2005, 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, 2006
($155,254,972.32) 240,243,152.12 (82,136,159.34) 14,740,214.19 17,592,234.65 57,798,022.19
$75,390,256.84

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

Capital Assets
The most significant capital addition for FY 2006 was the purchase of land and buildings in Midtown Atlanta for $14.2 million. In addition, the Swann Building renovation was completed at a cost of $2.8 million and equipment was purchased at a cost of $4 million for biology research.
For additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 10 in the notes to the financial statements.
Long Term Debt and Liabilities
Georgia Institute of Technology had Long-Term Debt and Liabilities of $369,131,869.54 of which $26,024,963.25 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1, 8 and 10 in the Notes to the Financial Statements.

Georgia Institute of Technology Annual Financial Report FY 2006 6

Component Units
In compliance with GASB Statement No. 39, Georgia Institute of Technology has included the financial statements and notes for all required component units for FY 2006. These units are: Georgia Tech Foundation, Inc., Georgia Tech Athletic Association, Georgia Tech Research Corporation, Georgia Advanced Technology Ventures, Inc., Georgia Tech Facilities, Inc. and Georgia Tech Alumni Association.
Significant investment and long-term liabilities balances for these organizations are as follows: Georgia Tech Foundation, Inc. holds investments of approximately $1.1 billion, of which $327.4 million is the corpus of the endowment. The foundation has three bond issues outstanding with balances totaling approximately $216 million, net of discounts. The Georgia Tech Athletic Association contracts with the Georgia Tech Foundation for investment services. The foundation held approximately $68.2 million in investments for the benefit of the Athletic Association at June 30, 2006. The Athletic Association has outstanding long-term debt, net of discounts and premiums, totaling approximately $108 million. Georgia Advanced Technology Ventures, Inc. holds investments of $1 million and has a capital lease payable with a balance of $50.6 million. Georgia Tech Facilities, Inc. holds investments of approximately $188.5 million and has five bond issues outstanding with balances totaling $212.6 million.
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 substantially ahead of prior years, so there are expectations that state appropriations, which have declined from a high of $258.8 million in fiscal year 2001 to $234.0 million in the current year, will show improvement. Board of Regents' allocation of state appropriated funds to Georgia Tech for fiscal year 2007 has increased to $244 million. A projected enrollment increase and an approved tuition increase ranging from 5% to 8% for fiscal year 2007 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. At the same time there continues to be pressures on expenses to meet competitive faculty needs and for utilities. Additional state support and capital investments will be necessary to maintain 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
Georgia Institute of Technology Annual Financial Report FY 2006 7

Statement of Net Assets

G EORG IA INSTITUTE OF TECHNOLOG Y STATEMENT OF NET ASSETS June 30, 2006

Component Units

Georgia Ins titute of Te c hnol og y

Georgia Tech Foundation, Inc.

Georgia Tech Athletic
As s ociation

ASS ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net (note 3) Receivables - Federal Financial As s is tance Receivables - Other Due From Component Units Leas es Receivable Pledges Receivable Contributions Receivable Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current As s ets
Noncurrent As s ets Noncurrent Cas h Due from Component Units Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Contributions Receivable Pledges Receivable Capital A s s ets , net (note 6) Other Assets Total Noncurrent As s ets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/Mortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities

$74,841,219.04 163,015.77
3,064,503.15 18,546,563.68 41,389,231.77
302,485.18 3,345,156.35
0.00 141,652,174.94
549,037.80 54,700,279.73
8,189,966.44
1,149,606,811.19 1,213,046,095.16 1,354,698,270.10

$21,778,000.00
336,000.00 14,769.00
3,665,388.98 2,538,210.68
1,319,000.00 29,651,368.66
1,111,949,000.00 171,743,611.02 17,264,789.32 40,873,000.00 19,110,000.00
1,360,940,400.34 1,390,591,769.00

$3,915,819.00
2,081,233.00 3,168,525.00
826,824.00 9,992,401.00
68,152,231.00
8,080,013.00 102,228,086.00
2,612,811.00 181,073,141.00 191,065,542.00

3,954,259.49 660,795.07 154,698.45
2,020,823.11 22,518,317.86 19,828,512.30
4,903,329.50 2,749,363.55
10,008,721.60 16,016,241.65
0.00 82,815,062.58

2,831,268.48
2,065,069.95 980,932.05
3,627,026.77 282,569.67
4,385,000.00 419,000.02
44,220,000.00 58,810,866.94

2,426,836.00
9,125,964.00 2,494,100.00
938,994.00 1,830,000.00
25,480.00 16,841,374.00

Georgia Institute of Technology Annual Financial Report FY 2006 8

Statement of Net Assets, Continued
G EORG IA INSTITUTE OF TECHNOLOG Y STATEMENT OF NET ASSETS June 30, 2006

Component Units

Georgia Ins titute of Te c hnol og y

Georgia Tech Foundation, Inc.

Georgia Tech Athletic
As s ociation

Noncurrent Liabilities Due to Primary Government Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Liabilities under Split-Interes t A greements Due to Component Units Notes and Loans Payable (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

331,226,771.31 5,812,500.00 11,880,134.98
348,919,406.29 431,734,468.87
814,640,088.28
47,535,013.93 26,607,479.99 15,941,133.84 18,240,085.19 $922,963,801.23

36,549,350.43
211,871,000.00 8,617,320.65 77,787,230.98
334,824,902.06 393,635,769.00
1,758,992.47
317,986,910.75 311,663,881.45 14,779,719.66 350,766,495.67 $996,956,000.00

106,131,507.00
962,734.00 107,094,241.00 123,935,615.00
(3,195,249.00)
13,669,608.00 46,948,959.00
9,706,609.00 $67,129,927.00

Georgia Institute of Technology Annual Financial Report FY 2006 9

Statement of Net Assets, Continued
G EORGIA INSTITUTE OF TECHNOLOG Y STATEMENT OF NET ASSETS June 30, 2006
Component Units

Georgia Tech Res earch
Corporation

Ge or g i a Advanced Technology Ventures , Inc.

Georgia Tech Facilities , Inc.

AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net (note 3) Receivables - Federal Financial As s is tance Receivables - Other Due From Component Units Leas es Receivable Pledges Receivable Contributions Receivable Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current As s ets

$40,022,629.00

$1,355,770.00

$375,000.00

29,020,309.00

950,198.00

851,000.00 419,000.02 2,295,000.00

400,904.00
33,064,745.00 102,508,587.00

57,985.00 2,363,953.00

6,006,000.00
1,231,000.00 11,177,000.02

Noncurrent As s ets Noncurrent Cas h Due from Component Units Inves tments (including Real Es tate) Notes Receivable, net Leas es Receivable Contributions Receivable Pledges Receivable Capital As s ets , net (note 6) Other Assets Total Noncurrent As s ets
TOTAL ASS ETS

959,595.00

1,000,000.00

9,634,999.98 188,523,000.00

1,849,313.00
2,808,908.00 105,317,495.00

77,748,125.00
78,748,125.00 81,112,078.00

69,484,000.00 5,122,000.00
272,763,999.98 283,941,000.00

LIAB ILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated Abs ences (current portion) Revenue/Mortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities

1,642,013.00

879,704.00

7,294,000.00

30,750,187.00 37,512,894.00
69,905,094.00

332,711.00 75,520.00

123,724.00
4,383,096.00 5,794,755.00

119,000.00 242,000.00 2,550,000.00
10,205,000.00

Georgia Tech Alumni
As s ociation
$263,827.00
112,018.00
2,642.00 8,443.00 386,930.00
628,023.00
511,945.00 1,139,968.00 1,526,898.00
264,348.00
310,000.00 6,587.00
162,382.00 14,769.00
758,086.00

Georgia Institute of Technology Annual Financial Report FY 2006 10

Statement of Net Assets, Continued
GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2006
Component Units

Georgia Tech Res earch
Corporation

Georgia Advanced Technology Ventures, Inc.

Georgia Tech Facilities, Inc.

Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements Due to Component Units Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES

50,613,331.00

9,492,000.00 50,404,000.00
210,125,000.00

0.00 69,905,094.00

6,324,344.00 56,937,675.00 62,732,430.00

270,021,000.00 280,226,000.00

NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Un res tricted TOTAL NET ASSETS

1,849,313.00

17,408,740.00

41,004,268.26

33,563,088.00 $35,412,401.00

862,745.00
108,163.00 $18,379,648.00

11,854,000.00
(49,143,268.26) $3,715,000.00

Georgia Tech Alumni
As s ociation
0.00 758,086.00 511,945.00
256,867.00 $768,812.00

Georgia Institute of Technology Annual Financial Report FY 2006 11

Statement of Revenues, Expenses and Changes in Net Assets
GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Component Units

Georgia Institute of Technology

Georgia Tech 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) 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 Interest and Dividend income Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits Other Personal 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 Georgia Institute of Technology
Total Operating Expenses Operating Income (loss)

$124,986,358.52 18,854,955.00
277,281,669.43 15,360,887.66 122,087,403.80 14,318,924.76
651,523.10
37,015,924.55 1,016,776.73 13,999,260.86 10,594,475.49 5,041,108.76 2,100,956.62 1,729,325.36
16,956,738.27 624,286,378.91
216,049,214.53 224,807,198.56 87,986,257.06
3,423,485.56 15,842,510.54 10,532,316.00 24,973,552.24 203,137,695.85 56,025,611.32
842,777,841.66 (218,491,462.75)

$0.00 38,682,495.00 34,362,195.32
311,595.74 16,391,395.31
89,747,681.37
1,800,900.00 355,165.00 97,365.00 61,725.00 3,340.00
1,483,144.00 2,334,283.00 5,149,888.00 67,909,033.00 79,194,843.00 10,552,838.37

Georgia Tech Athletic
As s ociation
$0.00 7,860,322.00
24,941,310.00 2,044,924.00
34,846,556.00
12,118,888.01 2,606,305.00 2,303,427.00
912,605.73 9,624,929.62 4,521,125.00 9,451,611.64 41,538,892.00 (6,692,336.00)

Georgia Institute of Technology Annual Financial Report FY 2006 12

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Component Units

NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 St at e Ot h er 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

Georgia Institute of Technology

Georgia Tech Foundation, Inc.

Georgia Tech Ath l e ti c
As s oci ati on

233,962,236.00 7,914,302.87 11,913,987.57
(16,962,749.94) (14,015,593.68) 222,812,182.82
4,320,720.07

85,522,813.63 (13,843,157.00)
71,679,656.63 82,232,495.00

8,323,024.00 (6,227,517.00)
2,095,507.00 (4,596,829.00)

9,507,759.27 3,637,766.81
13,145,526.08 17,466,246.15
905,497,555.08 0.00
905,497,555.08 $922,963,801.23

21,118,505.00 21,118,505.00 103,351,000.00
893,605,000.00 0.00
893,605,000.00 $996,956,000.00

1,202,291.00 1,202,291.00 (3,394,538.00)
70,524,465.00 0.00
70,524,465.00 $67,129,927.00

Georgia Institute of Technology Annual Financial Report FY 2006 13

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT of REVENUES, EXPENSES, and CHANGES in NETASSETS
for the Year Ended June 30, 2006

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) 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 Interest and Dividend income Other Operating Revenues Total Operating Revenues
EXPENSES Operating Expenses
Salaries: Faculty Staff
Employee Benefits Other Personal 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 Georgia Institute of Technology
Total Operating Expenses Operating Income (loss)

Georgia Tech Research
Corporation

Georgia Advanced Technology Ventures, Inc.

Georgia Tech Facilities, Inc.

Georgia Tech Alumni
Association

$0.00
275,585,148.00 13,443,178.00 47,051,123.00 6,635,282.00

$0.00 323,952.00

$0.00

$0.00 3,999,052.00

150,000.00
805,926.00 7,003,759.00

476,000.00 4,500,000.00

804,548.00 1,014,718.00

44,532.00 342,759,263.00

8,283,637.00

72,000.00 5,048,000.00

64,912.00 140,968.00 6,024,198.00

36,479.00
7,547,111.00 584,733.00
337,269,521.00 345,437,844.00
(2,678,581.00)

76,924.00 18,076.00
3,992.00
443,410.00 4,635,398.00 1,855,054.00
273,500.00 7,306,354.00
977,283.00

460,000.00 60,000.00 96,000.00
395,000.00 1,011,000.00 4,037,000.00

2,784,530.00 677,825.00
277,577.00 107,508.00
1,198,932.00 114,888.00
839,139.00 6,000,399.00
23,799.00

Georgia Institute of Technology Annual Financial Report FY 2006 14

Statement of Revenues, Expenses and Changes in Net Assets, Continued
GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

Georgia Tech Re s e arch
C orpo ra ti o n

Component Units

Ge orgi a Advan ce d Te ch n ol ogy Ventures, Inc.

Georgia Tech Facilities, Inc.

Ge orgi a Tech Alumni As s o ci a ti on

NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 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

1,315,834.00
1,315,834.00 (1,362,747.00)

40,723.00 3,845,000.00 (3,427,328.00) (9,273,000.00)

(12,142.00)

(3,386,605.00) (5,428,000.00) (2,409,322.00) (1,391,000.00)

(12,142.00) 11,657.00

0.00 (1,362,747.00)

0.00

0.00

(2,409,322.00) (1,391,000.00)

0.00 11,657.00

36,775,148.00 0.00
36,775,148.00 $35,412,401.00

20,788,970.00 0.00
20,788,970.00 $18,379,648.00

5,106,000.00 0.00
5,106,000.00 $3,715,000.00

757,155.00 0.00
757,155.00 $768,812.00

Georgia Institute of Technology Annual Financial Report FY 2006 15

Statement of Cash Flows
G EORG IA INSTITUTE OF TECHNOLOG Y STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Capital Debt Proceeds from Sale 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 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, 2006
$105,271,025.10
418,643,746.52 18,347,591.87
(327,470,919.29) (441,297,364.01)
(10,532,316.00) (3,814,621.40) 3,310,403.44
36,769,585.77 1,079,624.40 13,994,515.86
10,609,249.78 5,047,110.76 2,100,956.62 1,761,699.85 10,924,738.41
(155,254,972.32)
233,962,236.00 (420,640.07) 5,233,221.73 1,468,334.46
240,243,152.12
6,268,770.00 47,370.44
(64,370,581.27) (7,118,968.57)
(16,962,749.94) (82,136,159.34)
3,974,203.25 10,766,010.94 14,740,214.19 17,592,234.65 57,798,022.19 $75,390,256.84

Georgia Institute of Technology Annual Financial Report FY 2006 16

Statement of Cash Flows, Continued
G EORG IA INSTITUTE OF TECHNOLOG Y STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net A ccounts Payable Deferred Revenue Other Liabilities Compens ated A bs ences
Net Cas h Provided (us ed) by Operating A ctivities

June 30, 2006
($218,491,462.75)
56,025,611.32 (2,283,321.64)
193,845.83 2,290,838.03 (504,217.96) (2,996,542.61) 2,546,787.67 8,508,181.45 (544,691.66) ($155,254,972.32)

** 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 Gifts other than capital as s ets reducing proceeds of grants & gifts for other than capital

$10,316,165.01 $1,147,976.63 ($9,507,759.27) ($2,681,081.14)

Georgia Institute of Technology Annual Financial Report FY 2006 17

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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 Georgia Institute of Technology is one of thirty-five (35) 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 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. 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 Georgia Institute of Technology) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 2005. 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 Institute's report. For FY 2006, Georgia Institute of Technology is reporting activity for the following:
Georgia Tech Foundation, Inc. Georgia Tech Athletic Association and its subsidiary Alexander-Tharpe Fund Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research
Corporation Georgia Advanced Technology Ventures, Inc.
Georgia Institute of Technology Annual Financial Report FY 2006 18

Georgia Tech Facilities, Inc. Georgia Tech Alumni Association, Inc.
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 implemented 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 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 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 of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments The Institute 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 Statement of Revenues, Expenses, and
Georgia Institute of Technology Annual Financial Report FY 2006 19

Changes in Net Assets. The Board of Regents Diversified Fund and the Georgia Extended Asset Pool 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 on sponsored research 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 on the Statement of Net Assets using the average-cost 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 Institute's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life 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 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 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 Georgia Institute of Technology when complete. For the year ended June 30, 2006, GSFIC transferred capital additions valued at $9,461,867.97 to the Georgia Institute of Technology.
Georgia Institute of Technology Annual Financial Report FY 2006 20

In the current fiscal year, a thorough review of capital asset valuation was completed. This review included research with the Georgia State Finance and Investment Commission (GSFIC) to verify the accuracy of prior period capital additions. As a result of this effort, it was determined that construction work in process and some buildings had been over valued in prior years and a write down of $15,492,421.21 was taken in the current year. The Institute has implemented new accounting procedures and other controls to help ensure more accurate valuation in the future.
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.
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 and pre-paid rent.
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. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $28,441,068.29 as of July 1, 2005. For FY 2006, $16,589,018.72 was earned in compensated absences and employees were paid $17,133,710.38, for a net decrease of $(544,691.66). The ending balance as of June 30, 2006 in accrued liability for compensated absences was $27,896,376.63.
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 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.
Georgia Institute of Technology Annual Financial Report FY 2006 21

Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Quas i-Endowments Total Res tricted Expendable

June 30, 2006
$7,105,693.35 6,480,889.55 3,978,175.59 9,042,721.50
$26,607,479.99

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, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Res erve Res erve for Encumbrances Res erve for Inventory Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$12,997,398.77 23,069,960.91 285,979.60 (18,113,254.09)
$18,240,085.19

Georgia Institute of Technology Annual Financial Report FY 2006 22

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 revenues as either operating or non-operating 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 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 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 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 2006 23

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 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, 2006, the carrying value of deposits was $46,439,405.94 and the bank balance was $54,383,516.34. Of the Institute's deposits, $54,180,036.30 were uninsured. Of these uninsured deposits, $48,353,586.12 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name, and $5,826,450.18 were uncollateralized.
Georgia Institute of Technology Annual Financial Report FY 2006 24

B. Investments Georgia Institute of Technology 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 Institute's investments as of June 30, 2006 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
Explicitly Guaranteed Implicitly Guaranteed Certificates of Deposit Corporate Debt Mortgage Backed Securities (U.S. Agencies)

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$6,272,468.09 $1,000,065.82 $2,918,141.15 $1,575,946.20 $778,314.92

2,590,993.65 35,000.00
2,331,134.15 235,637.59

620,611.95 35,000.00 178,545.45

1,472,814.00
1,484,588.35 34,466.62

497,567.70
668,000.35 52,992.71

148,178.26

Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes
Investment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool
Total Investments

$11,465,233.48 $1,834,223.22 $5,910,010.12 $2,794,506.96 $926,493.18
159,894.10 308,170.43 996,354.09
1,458.11
9,956,451.47 42,030,692.62 18,714,374.53
128,015.77 $83,760,644.60

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. 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 Institute of Technology Annual Financial Report FY 2006 25

The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the Institute's total investment of $9,956,451.47 in the Short Term Fund, $9,787,569.00 is invested in debt securities.
The Weighted Average Maturity of the Diversified Fund is 8.2 years. Of the Institute's total investment of $42,030,692.62 in the Diversified Fund, $12,339,747.00 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 28 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, which was $1.97 at June 30, 2006. The Georgia Extended Asset Pool is an AAAf rated investment pool by Standard and Poor's. The duration for the month of June, 2006 was .92 years.
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. The Institute's policy for managing custodial credit risk for investments is an integral part of its 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, 2006, $11,236,065.17 of the Institute's applicable investments were uninsured and held by the investment's counterparty in the Institute's name and $1,885,332.12 were uninsured and held by the investment's counterparty's trust department or agent, but not in the college/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 Institute's policy for managing credit quality risk 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.
Georgia Institute of Technology Annual Financial Report FY 2006 26

Credit Quality Risk
Related Debt Investments
U. S. Agencies Certificates of Deposit/Time Deposits Corporate Debt Mortgage Backed Securities (US Agencies) Money Market Equity Fund Money Market Bond Fund

Fair Value
$8,863,461.73 35,000.00
2,331,134.15 235,637.59 308,170.43 159,894.10
$11,933,298.00

AAA

AA

A

Baa

Unrated

$8,531,657.90
67,049.00 229,138.99

$0.00 843,362.15

$0.00 997,826.80

$0.00 422,896.20

$8,827,845.89

$843,362.15

$997,826.80

$422,896.20

$331,803.83 35,000.00
6,498.60 308,170.43 159,894.10
$841,366.96

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 Institute's policy for managing concentration of credit risk is an integral part of its 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 U.S. Treasury or other Federal Government agencies.

Georgia Institute of Technology Annual Financial Report FY 2006 27

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$749,338.87 1,550,242.41 3,064,503.15 41,389,231.77 17,945,552.25 64,698,868.45 1,698,569.85
$63,000,298.60

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Phys ical Plant Other
Total

June 30, 2006
$271,372.86 31,112.32
$302,485.18

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, 2006. 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, 2006 the allowance for uncollectible loans was $55,126.97.

Georgia Institute of Technology Annual Financial Report FY 2006 28

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 Balance
July 1, 2005
$42,937,634.97 3,398,775.00 29,051,108.03 75,387,518.00

Additions
$6,006,471.34 $2,973,045.00 33,465,844.95 42,445,361.29

Reductions
$0.00
12,772,063.35 12,772,063.35

44,932,890.01 994,606,064.78 14,366,612.98 298,137,183.23 72,376,563.18 80,548,527.55
1,504,967,841.73

5,840,982.23 18,263,206.44
166,157.47 23,937,052.24
4,762,816.00
52,970,214.38

(50,572,184.87) 144,413.07
3,890,528.69 72,376,563.18
2,474.00
25,841,794.07

8,649,692.47 180,130,479.66
6,545,696.64 183,477,855.28
9,632,886.91 56,165,892.77
444,602,503.73
1,060,365,338.00
$1,135,752,856.00

1,025,619.06 25,742,219.44
315,651.35 25,812,688.47
3,129,433.00
56,025,611.32
(3,055,396.94)
$39,389,964.35

(4,522,302.76) 94,200.84
7,870,589.27 9,632,886.91
2,474.00
13,077,848.26
12,763,945.81
$25,536,009.16

Ending Balance June 30, 2006
$48,944,106.31 6,371,820.00 49,744,889.63
105,060,815.94
50,773,872.24 1,063,441,456.09
14,388,357.38 318,183,706.78
0.00 85,308,869.55
0.00 1,532,096,262.04
9,675,311.53 210,395,001.86
6,767,147.15 201,419,954.48
0.00 59,292,851.77
0.00 487,550,266.79
1,044,545,995.25
$1,149,606,811.19

Georgia Institute of Technology Annual Financial Report FY 2006 29

Note 7. Deferred Revenue Current deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2006
$9,988,582.51 8,960,353.10 879,576.69
$19,828,512.30

Long term deferred revenue totaled $5,812,500.00.

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long Term Obligations

Beginning Balance July 1, 2005
$338,038,296.47

Additions $10,316,165.01

Reductions

Ending Balance June 30, 2006

$7,118,968.57

$341,235,492.91

Current Portion
$10,008,721.60

28,441,068.29 28,441,068.29
$366,479,364.76

16,589,018.72 16,589,018.72
$26,905,183.73

17,133,710.38 17,133,710.38
$24,252,678.95

27,896,376.63 27,896,376.63
$369,131,869.54

16,016,241.65 16,016,241.65
$26,024,963.25

Note 9. Significant Commitments
Georgia Institute of Technology had significant unearned, outstanding, construction or renovation contracts executed in the amount of $4,075,491.44 as of June 30, 2006. 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.

Georgia Institute of Technology Annual Financial Report FY 2006 30

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 2006 were $24,520,584.55 of which $17,401,615.98 represented interest. Total principal paid on capital leases was $7,118,968.57 for the fiscal year ended June 30, 2006. Interest rates range from 3.36 percent to 11 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Land Buildings Equipment Total Assets Held Under Capital Lease

$11,315,863.31 324,191,454.91
8,817,797.21 $344,325,115.43

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.
Georgia Institute of Technology had four capital leases with related parties in fiscal year 2006. 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, 2006 the remaining long-term debt obligation (principal) under the lease was $19,025,000.00, and the amount due (principal and interest) in the next fiscal year is $1,423,608.76.
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, 2006 the remaining long-term debt obligation (principal) under the lease was $134,536,960.00, and the amount due (principal and interest) in the next fiscal year is $9,939,912.60.
In February 2001 Georgia Institute of Technology entered into a capital lease of $44,980,000.00 with the Georgia Tech Foundation, Inc. for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2006 the remaining long-term debt obligation (principal) under the lease was $42,605,000.00, and the amount due (principal and interest) in the next fiscal year is $3,069,317.52.
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, 2006 the remaining long-term debt obligation under the lease was
Georgia Institute of Technology Annual Financial Report FY 2006 31

$68,885,000.00 and the amount due (principal and interest) in the next fiscal year is $5,080,145.02.
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, 2006 the remaining longterm debt obligation (principal) under the lease was $62,874,061.76 and the amount due (principal and interest) in the next fiscal year is $4,140,928.90. 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, 2006 totaling $13,309,471.15.
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, 2006 through June 30, 2007 for monthly fees of $16,709.14. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $200,509.68 in fiscal year 2007.
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, 2006 through June 30, 2007 for monthly fees of $105,055.83. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,260,669.96 in fiscal year 2007.
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, 2006 through June 30, 2007 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 2007.
Georgia Institute of Technology Annual Financial Report FY 2006 32

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, 2006 through June 30, 2007 for monthly fees of $15,904.50. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $190,854.00 in fiscal year 2007.
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, 2006 through June 30, 2007 for monthly fees of $3,743.86. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $44,926.32 in fiscal year 2007.
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 75 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2006 through June 30, 2007 for monthly fees of $69,934.53. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $839,214.36 in fiscal year 2007.
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, 2006 through June 30, 2007 for monthly fees of $55,797.51. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc. a minimum of $669,570.16 in fiscal year 2007.
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, 2006 through June 30, 2007 for monthly fees of $22,983.83. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 2, Inc. $275,805.96 in fiscal year 2007.
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, 2006 through June 30, 2007 with monthly fees of $2,116.80. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $25,200.00 in fiscal year 2007.
In 2006, 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, 2006 through June 30, 2007 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 2007.
Georgia Institute of Technology Annual Financial Report FY 2006 33

In 2006, 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 75 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2006 through June 30, 2007 for monthly fees of $128,683.63. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $1,544,203.56 in fiscal year 2007.
In 2006, Georgia Institute of Technology entered into a real property operating lease with VLP 3, Inc. a subsidiary of Georgia Advanced Technology Ventures, Inc., a related party, for office space located at 395 North Avenue in Atlanta, Georgia. The current agreement is for July 1, 2006 through June 30, 2007 for monthly fees of $33,714.10. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 3, Inc. $404,569.20 in fiscal year 2007.
In 2006, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Foundation Real Estate Holding Corporation, a related party, for office space located at 831 Marietta Street in Atlanta, Georgia. The current agreement is for July 1, 2006 through June 30, 2007 for monthly fees of $2,976.46. Under this agreement, Georgia Institute of Technology is obligated to pay the Georgia Tech Foundation Real Estate Holding Corporation $35,717.52 in fiscal year 2007.
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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 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

Real Property/Equipment

Capital Leas es

Operating Leas es

$27,342,801.23 27,274,410.90 27,402,993.79 26,548,727.19 25,022,918.98
122,010,659.28 127,567,119.61 121,602,034.22
78,745,670.46 8,323,839.74
591,841,175.40 250,605,682.49
0.00 $341,235,492.91

$9,394,929.38 $9,394,929.38

Georgia Institute of Technology's FY2006 expense for rental of real property and/or equipment under operating leases was $8,892,542.20.

Georgia Institute of Technology Annual Financial Report FY 2006 34

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 2006, 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

2006 2005 2004

100% 100% 100%

$17,233,661.18 $16,731,285.81 $16,699,191.29

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Georgia Institute of Technology Annual Financial Report FY 2006 35

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 Institute's payroll for the year ended June 30, 2006, for employees covered by ERS was $513,004.24. The Institute's total payroll for all employees was $444,279,898.65.
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, 2006, 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 2006 amounted to $61,660.51, of which $43,713.38 was made by the Institute and $17,947.13 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2006, financial report, which may be obtained through ERS.
Georgia Institute of Technology Annual Financial Report FY 2006 36

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 2006, 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 $16,098,913.92 (9.65%) and $8,340,874.46 (5%), respectively in fiscal year 2006.
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.
Georgia Institute of Technology Annual Financial Report FY 2006 37

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 2006 amounted to $764,788.22 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.
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
Georgia Institute of Technology Annual Financial Report FY 2006 38

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, 2006.
At the request of Institute management, in April 2004, Georgia Tech Facilities Inc. (Facilities), a component unit of Georgia Tech (see Note 16), 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 been completed and it is expected that the project will be completed in fiscal year 2008.
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 fiscal 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
Georgia Institute of Technology Annual Financial Report FY 2006 39

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 fiscal year 2007.
On July 21, 2006, Georgia Institute of Technology and the current owners reached a tentative agreement for the purchase of land and buildings located at 830 West Peachtree Street, Atlanta, Georgia. The agreed upon amount was $1,515,196.00, and this was in addition to amounts previously paid to the Superior Court of Fulton County in a condemnation settlement. This tentative agreement is subject to the approval of the Georgia Board of Regents.
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, 2006, there were 1,170 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Georgia Institute of Technology recognized as incurred $5,786,006.60 of expenditures, which was net of $2,164,574.54 of participant contributions.
Georgia Institute of Technology Annual Financial Report FY 2006 40

Note 15. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY 2006 are shown below:

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

Functional Classification FY 2006

Instruction

Research

Public Service

Academic Support

$82,187,555.45 44,577,941.29 25,115,737.35 1,908,803.26 2,587,703.83

$121,104,386.56 82,689,916.24 37,336,543.83 314,836.04 10,569,583.19

$7,098,405.13 10,369,870.45
3,661,677.11 786,955.02 1,352,772.27

$4,466,768.90 17,624,631.48 4,821,987.95
118,909.96 612,192.80

216,430.35 25,318,121.74

187,308.22 86,192,529.13

107,438.33 16,616,575.54

7,091,792.63

Student Services
$227,302.54 9,889,085.69 1,988,647.67
17,003.56 261,593.03
7,818,936.95

Institutional Support
$729,797.54 24,813,570.56 7,192,530.88
71,500.00 274,114.93
10,565.57 8,562,447.83

$181,912,293.27

$338,395,103.21 $39,993,693.85

$34,736,283.72

$20,202,569.44

$41,654,527.31

Plant Operations & Maintenance

Functional Classification FY 2006

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Depreciation Exp en s es

Total Exp en s es

$234,998.41 21,308,401.38 4,892,390.06
204,148.14 73,607.41
18,155,044.78 26,199,117.86

$0.00 10,532,316.00

$0.00 13,533,781.47 2,976,742.21
1,329.58 110,943.08
6,296,764.99 25,338,174.17 6,230,985.30

$0.00 49,794,626.02

$216,049,214.53 224,807,198.56 87,986,257.06
3,423,485.56 15,842,510.54 10,532,316.00 24,973,552.24 203,137,695.85 56,025,611.32

$71,067,708.04

$10,532,316.00

$54,488,720.80

$49,794,626.02

$842,777,841.66

Georgia Institute of Technology Annual Financial Report FY 2006 41

Note 16. Component Units
Georgia Tech Foundation, Inc. Georgia Tech Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit 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's 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 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 2006, the Foundation distributed approximately $67.9 million to the Institute for restricted and unrestricted purposes. Note 10 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.
Investments for Component Units:
The Georgia Tech Foundation holds investments totaling $1.112 billion as of June 30, 2006, of which $327.4 million is the corpus of the endowment (permanently restricted). The corpus is nonexpendable, but the earnings on the investments may be spent in accordance with donor restrictions or in accordance with the Foundation's spending policy. The Foundation 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 2006, the Foundation allocated 5.15% of that average.
Georgia Institute of Technology Annual Financial Report FY 2006 42

Investments are comprised of the following amounts at June 30, 2006:

Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Venture Capital, Buyout Funds and distressed securities Diversifying strategies
Total Investments

Cost
$5,217,160.36 21,941,353.76 27,821,556.77 351,946,212.78 53,192,067.63 33,464,313.18 169,582,333.62 249,186,465.48
$912,351,463.58

Fair Value
$5,217,160.36 22,373,110.11 26,849,942.38 478,800,912.57 54,277,620.03 37,182,570.20 211,977,917.03 275,269,767.32
$1,111,949,000.00

Capital Assets for Component Units:

Georgia Tech Foundation, Inc. holds the following Capital Assets at June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$2,553,000.00 2,553,000.00
38,051,000.00 7,000,000.00
45,051,000.00 6,731,000.00
38,320,000.00 $40,873,000.00

Georgia Institute of Technology Annual Financial Report FY 2006 43

Long-term Liabilities for Component Units:

Changes in long-term liabilities for Georgia Tech Foundation, Inc. for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities
Total Long Term Liabilities

$268,430.75 222,055,000.00
$222,323,430.75

$485,436.25 44,220,000.00
9,598,252.70
$54,303,688.95

$471,297.33 5,799,000.00
$6,270,297.33

$282,569.67 44,220,000.00 216,256,000.00
9,598,252.70

$282,569.67 44,220,000.00 4,385,000.00
980,932.05

$270,356,822.37 $49,868,501.72

Lines of Credit The Foundation has two $30 million revolving lines of credit. At June 30, 2006, $44,220,000 was the total aggregate outstanding on the lines of credit. Interest is calculated using the 30-day LIBOR rate plus 0.25%, which was 5.42% at June 30, 2006. One line of credit expires on June 30, 2007 and the other on December 31, 2006. The foundation expects to renew both lines of credit upon expiration.
Series 2001 Bond Issuance During May 2001, the Foundation borrowed $44.98 million in Series 2001A Bonds. These bonds were issued to provide funds to finance the costs of construction of the CRC, a facility that has been constructed on the Institute's campus. These bonds are general unsecured obligations of the Foundation. The interest rates on the outstanding bond principal ranges from 4% to 5.75% until maturity in November 2030.
Series 2002 Bond Issuance During January 2002, the Foundation borrowed $111.09 million in Series 2002A (tax exempt) Bonds and $73.19 million Series 2002B (taxable) Bonds. These bonds were issued to provide funds to finance the costs of the acquisition, construction and installation of an addition to the Institute's campus known as Technology Square. The Foundation leased the hotel and conference center portion of Technology Square to a third party in July, 2003. The other components of Technology Square were leased to the Board of Regents, on behalf of the Institute, under a capital lease effective July, 2004. The bonds are general unsecured obligations of the Foundation. The interest rates on the outstanding bond principal range from 5.23% to 6.6% through maturity in November 2031.

Georgia Institute of Technology Annual Financial Report FY 2006 44

Annual debt service requirements to maturity for Georgia Tech Foundation's revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Bond Discount, net

Bonds Payable

Principal

Interest

Total

$4,385,000.00 4,605,000.00 4,825,000.00 5,060,000.00 5,310,000.00
31,385,000.00 41,760,000.00 48,030,000.00 61,255,000.00 11,260,000.00 217,875,000.00 (1,619,000.00) $216,256,000.00

$11,879,629.78 11,662,200.03 11,437,490.53 11,203,636.65 10,945,586.52 49,883,558.85 39,512,526.34 26,806,193.01 12,002,153.00 316,360.00
185,649,334.71
$185,649,334.71

$16,264,629.78 16,267,200.03 16,262,490.53 16,263,636.65 16,255,586.52 81,268,558.85 81,272,526.34 74,836,193.01 73,257,153.00 11,576,360.00
403,524,334.71 (1,619,000.00)
$401,905,334.71

Georgia Tech Athletic Association Georgia Tech Athletic Association (the Athletic Association) is a legally separate, tax-exempt component unit of the Georgia Institute of Technology (Institute). The Athletic 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 from the Athletic Association, all of the resources are restricted to support the intercollegiate athletic program for Georgia Tech. Because these resources are used for the benefit of the Institute, the Athletic Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements.
The Athletic Association is a private nonprofit organization that reports under GASB standards, in accordance with Statements of Governmental Accounting Standards ("SGAS") No. 35, Basic Financial Statements-and Management's Discussion and Analysis-for Public Colleges and Universities, as amended by SGAS No. 37, Basic Financial Statements-and Management's Discussion and Analysis-State and Local Governments: Omnibus-an Amendment of GASB Statements No. 21 and No. 34, and SGAS No. 38, Certain Financial Statement Note Disclosures. The financial statement presentation required by these statements provide a comprehensive, entity-wide perspective of the Association's assets, liabilities, net assets, revenues, expenses, and changes in net assets. The Athletic Association's fiscal year is July 1 through June 30.
During the year ended June 30, 2006, the Athletic Association distributed approximately $9.5 million to the Institute for athletic scholarship support and other payments that were either expense reimbursements or support for Institute programs. Complete financial statements for the
Georgia Institute of Technology Annual Financial Report FY 2006 45

Athletic Association can be obtained from the Georgia Tech Athletic Association, Attention: Mollie Simmons Mayfield, Assistant Director of Athletics, 150 Bobby Dodd Way, NW, Atlanta, GA 30332-0455.
Deposits and Investments for Component Units:
During the year ended June 30, 2005, the Athletic Association adopted SGAS No. 40, Deposit and Investment Risk Disclosures, which amends SGAS No. 3, Deposits With Financial Institutions, Investments (Including Repurchase Agreements), and Reverse Repurchase Agreements. This statement requires the Association to disclose custodial risk related to deposits and investment securities. Custodial credit risk is the risk that in the event of a bank failure, the Athletic Association's deposits or funds invested may not be returned to it.
The Association does not have a policy that addresses custodial credit risk. As of June 30, 2006, $5,194,189 of the Athletic Association's bank balance of $5,294,189 was uncollateralized and exposed to custodial credit risk.
The Athletic Association's investments are held and reported by Georgia Tech Foundation and are represented by a $68,152,231 Due from Component Unit balance on the Statement of Net Assets.
Capital Assets for Component Units:
Georgia Tech Athletic Association had the following Capital Asset activity for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Total Assets Being Depreciated
Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning Balances 7/1/2005
$0.00 65,888.00 65,888.00
127,611,520.00 423,778.00
2,238,651.00 130,273,949.00
23,555,082.00 253,535.00
1,092,226.00 24,900,843.00
105,373,106.00
$105,438,994.00

Additions
$49,946.00 473,447.00 523,393.00

Reductions
$0.00 65,888.00 65,888.00

Ending Balance 6/30/2006
$49,946.00 473,447.00 523,393.00

595,152.00
257,560.00 852,712.00

3,096,887.00
(3,096,887.00) 0.00

125,109,785.00 423,778.00
5,593,098.00 131,126,661.00

3,910,623.00 46,562.00 563,940.00
4,521,125.00
(3,668,413.00)
($3,145,020.00)

857,916.00
(857,916.00) 0.00

26,607,789.00 300,097.00
2,514,082.00 29,421,968.00

0.00

101,704,693.00

$65,888.00 $102,228,086.00

Georgia Institute of Technology Annual Financial Report FY 2006 46

Long-term Liabilities for Component Units:

Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable
Total Long Term Debt

$751,616.00 1,012,694.00 109,761,479.00
$111,525,789.00

$488,145.00 $488,145.00

$300,767.00 24,480.00
1,799,972.00
$2,125,219.00

$938,994.00 988,214.00
107,961,507.00
$109,888,715.00

$938,994.00 25,480.00
1,830,000.00
$2,794,474.00

Notes Payable at June 30, 2006 represent the Athletic Association's obligation to Georgia Tech Foundation Facilities, Inc. with respect to the William C. Wardlaw Center. The effective interest rate at June 30, 2006 is 4.92%.

Annual debt service requirements to maturity for the Athletic Association's note payable are as follows:

Year Ending June Year

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016 6-10

2017 through 2021 11-15

2022 through 2026 16-20

2027 through 2031 21-25

Notes and Loans Payable

Principal

Interest

$25,480.00 26,979.00 27,978.00 29,477.00 30,975.00 179,357.00 230,816.00 296,264.00 140,888.00

$48,885.00 47,670.00 46,376.00 44,998.00 43,510.00
192,028.00 140,847.00
74,993.00 7,359.00

Total
$74,365.00 74,649.00 74,354.00 74,475.00 74,485.00
371,385.00 371,663.00 371,257.00 148,247.00

$988,214.00

$646,666.00

$1,634,880.00

In December, 2001, the Development Authority of Fulton County issued the Georgia Tech Athletic Association Revenue Bonds, Series 2001 ("Series 2001 Bonds") with a par value of $112,080,000 to finance the construction of a new baseball stadium, demolish a portion of the Georgia Tech Football stadium, the construction of certain improvements thereto, other miscellaneous capital improvements, and to refinance the outstanding principal on the Series 1995 Bonds and other borrowings. The interest rates on the bonds range from 4% to 5.5% and the bonds mature in October, 2032.
On March 16, 2004, the Athletic Association entered into a master swap agreement with UBS AG, Stamford Branch ("UBS"), an investment bank, and simultaneously sold UBS, an Interest
Georgia Institute of Technology Annual Financial Report FY 2006 47

Rate Swaption ("swaption"). The swaption represents an option to enter into an interest rate swap. The swaption premium generated by this contract was an upfront payment to the Athletic Association of $2,367,000. In exchange for the swaption premium, UBS gains the right (but not the obligation) to enter into a specified swap agreement with the Athletic Association beginning on April 1, 2012. If the swaption is exercised, the Athletic Association and UBS will swap interest rate payments. The Athletic Association will pay interest to UBS based on the stated rates in the swap agreement. UBS would then pay the Athletic Association a floating rate based on the Bond Market Association Municipal Swap Index plus 21 basis points (0.21%), which approximates the expected interest cost on the variable rate refunding bonds. At June 30, 2006, the swaption had a fair value (representing a liability) of $4,439,680, as calculated by UBS. The swaption premium is recorded as a component of bonds payable in the statement of net assets and is being amortized on a straight-line basis over the remaining life of the bonds as a component of interest expense in the statement of revenues, expenses, and changes in net assets.

Annual debt service requirements to maturity for the Athletic Association's revenue bonds payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012hrough 2016 2017through 2021 2022through 2026 2027 through 2031 2032 through 2036

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

Bonds Payable

Principal

Interest

Total

$1,830,000.00 1,925,000.00 2,025,000.00 2,120,000.00 2,210,000.00
12,945,000.00 16,950,000.00 21,880,000.00 29,585,000.00 15,240,000.00

$5,426,211.00 5,332,336.00 5,233,586.00 5,137,911.00 5,045,346.00
23,338,856.00 19,330,381.00 14,404,582.00
8,914,410.00 791,043.00

$7,256,211.00 7,257,336.00 7,258,586.00 7,257,911.00 7,255,346.00
36,283,856.00 36,280,381.00 36,284,582.00 38,499,410.00 16,031,043.00

Bond Discount/Swaption Premium, net

$1,251,507.00 $107,961,507.00

$92,954,662.00

$1,251,507.00 $199,664,662.00

Georgia Tech Research Corporation 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 the Institute. Because the 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.

Georgia Institute of Technology Annual Financial Report FY 2006 48

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 for external financial reporting purposes in these financial statements. The Research Corporation's fiscal year is July 1 through June 30.

During fiscal year 2006, GTRC distributed approximately $337 million to the Institute for restricted and unrestricted purposes. 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:

Georgia Tech Research Corporation holds investments in the amount of $960 thousand in the form of marketable securities as of June 30, 2006.

Cost

Fair Value

Equity Securities Total Investments

$0.00 $0.00

$959,595.00 $959,595.00

Capital Assets for Component Units:

Georgia Tech Research Corporation holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets being Depreciated: Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net Capital Assets, Net

$4,312,482.00 4,312,482.00 2,463,169.00 1,849,313.00
$1,849,313.00

Georgia Advanced Technology Ventures, Inc. 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.

Georgia Institute of Technology Annual Financial Report FY 2006 49

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 for external financial reporting purposes in these financial statements. Georgia Advanced Technology Ventures fiscal year is July 1 through June 30.

During the year ended June 30, 2006, Georgia Advanced Technology Ventures, Inc. distributed $178,500 to the Institute for operating supplies and services and $95,000 for salaries. 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 303320257 Attention: Joel Hercik.

Investments for Component Units:

Georgia Advanced Technology Ventures, Inc. holds investments in the amount of $1 million. These funds are invested in Georgia Venture Partners, LLC.

Capital Assets for Component Units:

Georgia Advanced Technology Ventures, Inc. holds the following Capital Assets as of June 30, 2006:
June 30, 2006

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$10,725,522.00 10,725,522.00
70,384,712.00 1,047,396.00
71,432,108.00 4,409,505.00
67,022,603.00 $77,748,125.00

Georgia Institute of Technology Annual Financial Report FY 2006 50

Long-term Liabilities for Component Units:

Changes in long-term liabilities for the GATV for the fiscal year ended June 30, 2006 are shown

below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Capital Lease Obligations Notes and Loans Payable
Total Long Term Debt

$49,631,945.00 6,821,580.00
$56,453,525.00

$981,386.00 3,900,234.00
$4,881,620.00

$0.00 14,374.00
$14,374.00

$50,613,331.00 10,707,440.00
$61,320,771.00

$0.00 4,383,096.00
$4,383,096.00

Annual debt service requirements to maturity for lease purchase obligations are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Capital Lease Payable

Principal

Interest

($307,092.00) (237,920.00) (163,918.00) (77,434.00) 18,149.00 1,835,654.00 5,774,964.00
11,222,916.00 18,963,780.00 13,584,232.00

$3,419,780.00 3,438,286.00 3,452,211.00 3,460,684.00 3,463,029.00
17,094,092.00 15,863,417.00 13,063,516.00
8,133,616.00 1,382,966.00

Total
$3,112,688.00 3,200,366.00 3,288,293.00 3,383,250.00 3,481,178.00
18,929,746.00 21,638,381.00 24,286,432.00 27,097,396.00 14,967,198.00

$50,613,331.00

$72,771,597.00

$123,384,928.00

Annual estimated debt service requirements to maturity for Notes Payable are as follows:

Year ending June 30:

2007

1

2008

2

2009

3

2010

4

2011

5

2012 through 2016

6-10

Principal
$4,383,096.00 30,507.00
6,032,338.00 34,278.00 36,335.00
190,886.00

Notes Payable Interest
$758,078.00 646,167.00 174,307.00 15,690.00 13,633.00 3,818.00

Total
$5,141,174.00 676,674.00
6,206,645.00 49,968.00 49,968.00
194,704.00

$10,707,440.00

$1,611,693.00

$12,319,133.00

Georgia Institute of Technology Annual Financial Report FY 2006 51

Georgia Tech Facilities, Inc. 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 these 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 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 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 $141,714,000 and bonds payable are included in the 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. During fiscal 2006, Facilities distributed $395,000 to the Institute for restricted and unrestricted purposes. Complete financial statements for Facilities can be obtained from the following address: Georgia Tech Facilities, Inc. Treasurer's Office, Lyman Hall, Room 315, Atlanta, GA 30332-0257, Attention: Joel Hercik.

Investments for Component Units:

Georgia Tech Facilities, Inc. holds investments in the amount of $188.5 million. Investments consist of marketable securities, bonds and real property as follows:

Cost

Fair Value

Cash held by investment organization Money Market Accounts Government and Agency Securities Real Estate Bankers Acceptance/Repo Agreements
Total Investments

$11,595,367.10 1,921,393.28 8,763,701.27
141,714,000.00 24,528,538.35
$188,523,000.00

$11,595,367.10 1,921,393.28 8,763,701.27
141,714,000.00 24,528,538.35
$188,523,000.00

Georgia Institute of Technology Annual Financial Report FY 2006 52

Capital Assets for Component Units:

Georgia Tech Facilities, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$598,000.00 68,166,000.00 68,764,000.00
1,200,000.00 1,200,000.00
480,000.00 720,000.00 $69,484,000.00

Long-term Liabilities for Component Units:
Georgia Tech Facilities, Inc. has five bond issues outstanding with balances totaling $212,675,000 and one Master Lease/Sublease agreement for $9,734,000.
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, the Molecular Science and Engineering Building, and the Electrical Substation. Interest rates on the bonds range from 2% to 5.25%. Also, for the 2005 Series bonds, Facilities has an interest rate swap agreement. Facilities retains an independent entity to provide periodic valuation of the interest rate swap. At June 30, 2006, the value is $1,231,000 and is reflected in Other Current Assets on the Statement of Net Assets.
The lease agreement finances the Georgia Tech Telecommunications Equipment and Installation project. To finance the equipment, Georgia Tech Facilities, Inc. entered into a Master Lease and Sublease Agreement with SunTrust Leasing Corporation (as Lessor) and the Development Authority of Fulton County (as lessee).

Georgia Institute of Technology Annual Financial Report FY 2006 53

Changes in long-term liabilities for Facilities for the fiscal year ended June 30, 2006 are shown

below:

Beginning

Ending

Amounts due

Balance

Balance

within

July 1, 2005

Additions

Reductions

June 30, 2006

One Year

Capital Lease Obligations Revenue/Mortgage Bonds Payable
Total Long Term Debt

$0.00 175,155,000.00
$175,155,000.00

$9,734,000.00 39,670,000.00
$49,404,000.00

$0.00 2,150,000.00
$2,150,000.00

$9,734,000.00 212,675,000.00
$222,409,000.00

$242,000.00 2,550,000.00
$2,792,000.00

Annual debt service requirements to maturity for Georgia Tech Facilities, Inc. revenue bonds payable are as follows:

Bonds Payable

Principal

Interest

Total

Year ending June 30:

2007

1

$2,550,000.00

$9,988,000.00

$12,538,000.00

2008

2

3,921,000.00

9,913,000.00

13,834,000.00

2009

3

4,795,000.00

9,789,000.00

14,584,000.00

2010

4

4,950,000.00

9,642,000.00

14,592,000.00

2011

5

4,574,000.00

9,429,000.00

14,003,000.00

2012 through 2016

6-10

28,130,000.00

43,418,000.00

71,548,000.00

2017 through 2021

11-15

37,125,000.00

35,246,000.00

72,371,000.00

2022 through 2026

16-20

46,570,000.00

24,862,000.00

71,432,000.00

2027 through 2031

21-25

46,470,000.00

13,045,000.00

59,515,000.00

2032 through 2036

26-30

31,390,000.00

4,869,000.00

36,259,000.00

2037 through 2041

31-35

2,200,000.00

72,000.00

2,272,000.00

$212,675,000.00

$170,273,000.00

$382,948,000.00

Annual debt service requirements to maturity for lease purchase obligations are as follows:

Year Ending June 30:
2007 2008 2009 2010
2011 2012 through 2016

Year
1 2 3 4
5 6-10

Capital Lease Payable

Principal

Interest

Total

$242,000.00 2,097,000.00 2,179,000.00 2,263,000.00
2,351,000.00 602,000.00

$366,000.00 332,000.00 251,000.00 167,000.00
79,000.00 6,000.00

$608,000.00 2,429,000.00 2,430,000.00 2,430,000.00
2,430,000.00 608,000.00

$9,734,000.00

$1,201,000.00

$10,935,000.00

Georgia Institute of Technology Annual Financial Report FY 2006 54

Georgia Tech Alumni Association Georgia Tech Alumni Association (Alumni Association) is a legally separate, tax-exempt component unit 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 forty-three member Alumni Association board of trustees is self-perpetuating and consists of alumni and friends of the Institute. Although the Institute does not control the timing or amount of receipts from the Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests 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 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 Alumni Association's fiscal year is July 1 through June 30.

During the year ended June 30, 2006, the Alumni Association distributed $839,139 to the Institute primarily for employee salary and insurance costs. Complete financial statements for the Alumni Association can be obtained from the Georgia Tech Alumni Association, Attention: Controller, 190 North Avenue, Atlanta, GA 30313.

Investments for Component Units:

The Georgia Tech Alumni Association holds investments in the amount of $628,023. Investments consist of mutual funds as follows:

Cost

Fair Value

Mutual Funds Total Investments

$725,894.00 $725,894.00

$628,023.00 $628,023.00

Georgia Institute of Technology Annual Financial Report FY 2006 55

Capital Assets for Component Units:

Georgia Tech Alumni Association holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$0.00 7,077.00 7,077.00
702,586.00 618,011.00 1,320,597.00 815,729.00 504,868.00 $511,945.00

Georgia Institute of Technology Annual Financial Report FY 2006 56

THE UNIVERSITY OF GEORGIA
Financial Report
Financial Report For the Year Ended
June 30, 2006

The University of Georgia Athens, Georgia

Michael F. Adams President

Tim Burgess Senior Vice President for Finance & Administration

THE UNIVERSITY OF GEORGIA ANNUAL FINANCIAL REPORT
FY 2006
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 ................................................................................................... 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....................................................................................... 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 ................................................................................................. 29 Note 12 Risk Management................................................................................................ 32 Note 13 Contingencies...................................................................................................... 33 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 33 Note 15 Natural Classifications With Functional Classifications..................................... 35 Note 16 Component Units ........................................................................ 36

THE UNIVERSITY OF GEORGIA
Management's Discussion and Analysis

Introduction

The University of Georgia was incorporated by an act of the General Assembly on January 27, 1785. Georgia became the first state to charter a state-supported university.

The University of Georgia, a land-grant and sea-grant university with state-wide commitments and responsibilities, is the state's flagship institution of higher education. It is also the state's oldest, most comprehensive, and most diversified institution of higher education. Its motto, "to teach, to serve, and to inquire into the nature of things," reflects the University's integral and unique role in the conservation and enhancement of the state's and nation's intellectual, cultural, and environmental heritage. As a comprehensive land-grant and sea-grant institution, the University of Georgia offers baccalaureate, master's, doctoral and professional degrees in the arts, humanities, social sciences, biological sciences, physical sciences, agricultural and environmental sciences, business, environmental design, family and consumer sciences, forest resources, journalism and mass communication, education, law, pharmacy, social work, and veterinary medicine.

The student population and number of faculty have slightly increased this fiscal year.

FY2006 FY2005 FY2004

Faculty
1,725 1,703 1,684

Students (Headcount)
33,660 33,405 33,878

Students (FTE)
31,492 31,285 31,688

Overview of the Financial Statements and Financial Analysis

The University of Georgia is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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

University of Georgia Annual Financial Report FY 2006 1

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
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, 2006
$213,904,716.77 1,061,065,947.57
81,431,163.54 1,356,401,827.88
116,807,661.05 176,775,982.80 293,583,643.85
896,946,160.28 43,526,769.05 57,846,748.68 437,918.81 64,060,587.21
$1,062,818,184.03

June 30, 2005
$191,614,424.15 1,031,318,453.66
84,995,353.43 1,307,928,231.24
111,874,105.42 160,243,460.54 272,117,565.96
881,930,856.52 46,931,620.93 48,112,738.84 425,718.71 58,409,730.28
$1,035,810,665.28

The total assets of the institution increased by $48,473,596.64. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $29,747,493.91 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 $21,466,077.89. The combination of the increase in total assets of $48,473,596.64 and the increase in total liabilities of $21,466,077.89 yields an increase in total net assets of $27,007,518.75. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $15,015,303.76.

University of Georgia Annual Financial Report FY 2006 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, 2006

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

$550,360,419.61 1,007,715,921.89 (457,355,502.28)
455,286,734.70
(2,068,767.58) 29,076,286.33 27,007,518.75 1,035,810,665.28
0.00 1,035,810,665.28 $1,062,818,184.03

$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
0.00 997,325,459.93 $1,035,810,665.28

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 Georgia Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$183,374,226.33 11,067,255.90 200,702,893.05 38,558,064.23 114,517,413.38 2,140,566.72
550,360,419.61
418,736,051.26 29,374,248.98 6,202,772.94 6,560,952.55 4,630,011.13 465,504,036.86
12,758,806.26 16,317,480.07 29,076,286.33
$1,044,940,742.80

June 30, 2005
$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

University of Georgia Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$202,487,108.42 270,323,099.80 135,037,365.72
94,987,764.29 28,344,265.46 69,422,689.19 78,216,448.32 20,679,004.12 108,218,176.57
1,007,715,921.89
10,217,302.16
$1,017,933,224.05

June 30, 2005
$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

The increase in operating revenues from fiscal year 2005 to fiscal year 2006 is primarily the result of $23 million in tuition and fee revenue generated by an 8% increase in general tuition rates and small increases in mandatory fees. Contracts and Grants revenues increased from $194 million in fiscal year 2005 to $200 million in fiscal year 2006. Auxiliary revenues increased from $95.6 million in fiscal year 2005 to $114 million in fiscal year 2006 primarily in the residence hall, food service, parking, and transportation enterprises.
Significant increases in operating expenses from fiscal year 2005 to fiscal year 2006 include compensation and employee benefits, scholarships, utilities costs and depreciation expense. The compensation and employee benefits category increased by $40 million; $22.3 million of this increase is faculty and staff salaries for fiscal year 2006 and $17.7 million of the increase is in employee benefits. Most notably, the share of health insurance premiums borne by the institution on behalf of its active employees and retirees increased by roughly 10%. Scholarship and fellowship expenses increased from $19.9 million in fiscal year 2005 to $27.7 million in fiscal year 2006. Utilities costs, including natural gas, electricity, and coal, increased by $5.2 million during the fiscal year. Depreciation expense also increased from fiscal year 2005 to fiscal year 2006 by $3.1 million. This increase is a result of one full year of depreciation on facilities completed in fiscal year 2005 including the East Campus Village residence halls, the East Village Commons dining hall, the Veterinary Bio-Resource Facility, the Hull Street parking deck and the South Campus parking deck expansion.
State appropriations increased from fiscal year 2005 to fiscal year 2006 mainly due to appropriations for salary increases as well as additional funding formula based state support allocated from the Board of Regents that resulted from student enrollment and credit hour growth
University of Georgia Annual Financial Report FY 2006 5

that was realized during FY2004. Nonoperating revenues recorded as gifts in fiscal year 2005 were reclassified as grants and contracts in fiscal year 2006. This accounts for the significant variation in these two nonoperating revenue categories between fiscal years. Capital Gifts and Grants slightly increased from fiscal year 2005 to fiscal year 2006 as a result of capital improvements funded by GSFIC which were completed and recognized by the University in fiscal year 2006. Additionally, there were additions and improvements to assets 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, 2006 and 2005, 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, 2006
($386,667,743.26) 452,013,977.87 (60,014,674.50) 11,915,612.10 17,247,172.21 129,428,580.68
$146,675,752.89

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

Capital Assets
In fiscal year 2006, the University opened the Paul D. Coverdell Center for Biomedical and Health Sciences, an interdisciplinary research facility housing a range of disciplines from disease and immunology to mathematics, engineering, and other areas of biomedical research. The University also opened the Tifton Campus Conference Center featuring a 2000 seat auditorium, exhibit space, banquet and reception facilities, and a business center. Other capital improvements made during fiscal year 2006 include improvements to the scoreboards at Sanford Stadium and Foley Field, renovations at the University of Georgia Center for Continuing Education, and improvements to the Boyd Data Center.

University of Georgia Annual Financial Report FY 2006 6

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
The University of Georgia had Long-Term Debt and Liabilities of $202,503,319.06 of which $25,727,336.26 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
In compliance with GASB Statement No. 39, the University of Georgia has included the financial statements and notes for all required component units for FY2006. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units.
Economic Outlook
The University of Georgia ended fiscal year 2006 in the midst of an economic recovery. The University continues to monitor and use its resources wisely. As a result of modest increases in operating revenues and state appropriations, the University was able to provide increased support to its instruction, research, and public service missions. This increase in support was characterized by filling vacant faculty lines, the initiation of undergraduate programs on the University campus in Griffin, GA, and the opening of the Paul D. Coverdell Center for Biomedical and Health Sciences.
As the University begins fiscal year 2007, the University has taken steps to maintain a strong financial posture in the face of rising health care premiums and energy costs. In order to manage the risk of unknown additional increases in health care insurance and utility costs, the University has taken proactive steps to set aside 2% of its current operating budget. The University will continue to monitor the need for this 2% reserve as fiscal year 2007 progresses and take appropriate measures to maintain the University's ability to operate and improve all functions of the University.
Michael F. Adams President The University of Georgia
University of Georgia Annual Financial Report FY 2006 7

Statement of Net Assets
AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Due From Component Units Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items Other Assets Total Current Assets
Noncurrent Assets Noncurrent Cash Due from Component Units Due From Primary Government Investments (including Real Estate) Notes Receivable, net Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Dep o s its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Compensated Absences (current portion) Revenue/Mortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities

THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

University of Georgia

University of Georgia Foundation

Component Units
University of Georgia Athletic Association,
Inc.

University of Georgia Research Foundation,
Inc.

$137,079,553.88
17,466,088.98 17,797,657.46 22,509,952.52
4,664,974.51 14,386,489.42 213,904,716.77
9,596,199.01 2,336,437.00 61,039,833.17 8,458,694.36 1,061,065,947.57 1,142,497,111.11 1,356,401,827.88

$7,111,948.00 41,161,597.00
2,866,669.00
2,487,755.00
344,481.00 1,558,945.00 55,531,395.00
13,959,276.00
490,567,909.00 77,689.00
18,155,595.00 186,536,958.00
4,818,887.00 714,116,314.00 769,647,709.00

10,296,084.71 3,170,627.40
2,485,169.43 3,511,090.07 48,230,298.62 1,310,287.17 13,732,489.39
2,422,568.92 23,304,767.34
469,278.00
108,932,661.05

4,439,189.00 700.00
710,616.00 768,702.00 26,883.00 3,365,000.00 2,555,872.00 1,148,762.00 13,015,724.00

$46,922,660.00
2,968,262.00 2,555,872.00
194,709.00 52,641,503.00 28,533,612.00
170,478,357.00 1,420,090.00
200,432,059.00 253,073,562.00
6,665,855.00 2,639.00
16,929,225.00 500,000.00
1,676,546.00
1,955,009.00 80,289.00
27,809,563.00

$3,679,515.00
20,352,451.00
469,278.00 81,390.00 14,239,464.00 38,822,098.00
7,875,000.00 36,312,418.00
561,076.00 497,425.00 45,245,919.00 84,068,017.00
9,623,271.48
14,239,464.00 3,780,816.00
20,064,704.52
47,708,256.00

University of Georgia Annual Financial Report FY 2006 8

Statement of Net Assets, Continued
THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2006

University of Georgia

University of Georgia Foundation

Component Units
University of Georgia Athletic Association,
Inc.

University of Georgia Research Foundation,
Inc.

Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements Other Long-TermLiabilities Due to Component Units Notes and Loans Payable (noncurrent) 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

161,697,218.37 15,078,764.43
7,875,000.00 184,650,982.80 293,583,643.85
896,946,160.28 43,526,769.05 57,846,748.68
437,918.81 64,060,587.21 $1,062,818,184.03

187,150,024.00 11,291,219.00
13,201,584.00 211,642,827.00 224,658,551.00
263,400,760.00 261,833,729.00 19,754,669.00 $544,989,158.00

2,336,437.00
97,559,991.00 2,750,438.00
87,112.00 102,733,978.00 130,543,541.00
68,145,556.00
28,533,612.00 25,850,853.00 $122,530,021.00

7,876,730.00
7,876,730.00 55,584,986.00
561,076.00
27,921,955.00 $28,483,031.00

University of Georgia Annual Financial Report FY 2006 9

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, 2006

REVENUES

University of Georgia

University of Georgia

Foundation

Component Units
University of Georgia Athletic Association,
Inc.

University of Georgia Res earch
Foundation, Inc.

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
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of University of Georgia
Total Operating Expens es Operating Income (loss)

$243,279,796.75 59,905,570.42
11,067,255.90
107,974,410.09 42,426,418.38 50,302,064.58 38,558,064.23
270,333.94
33,142,786.75 4,575,037.00 28,872,344.26 14,123,905.89 15,081,243.69 15,444,259.54 3,277,836.25 1,870,232.78 550,360,419.61

$0.00 4,707,522.00 9,612,194.00
1,562,685.00 20,075,486.00
35,957,887.00

$0.00

$0.00

124,274,115.00 15,133,783.00

74,035,200.00 74,035,200.00

516,961.00 139,924,859.00

134,279,156.96 394,534,861.15 137,853,581.51 13,280,711.97 27,676,704.40 34,406,398.35 204,139,789.01 61,544,718.54
1,007,715,921.89 (457,355,502.28)

732,925.00 118,383.00
373,758.00 6,177,886.00 5,833,163.00 22,479,425.00 35,715,540.00
242,347.00

23,590,286.00 4,555,529.00 25,500,018.00 53,645,833.00 20,389,367.00

11,693,697.00 46,082.00
128,439,909.00 140,179,688.00
(254,829.00)

University of Georgia Annual Financial Report FY 2006 10

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, 2006

Component Units

University of Georgia

University of Georgia

Foundation

University of Georgia Athletic Association,
Inc.

University of Georgia Res earch
Foundation, Inc.

NONOPERATINGREVENUES (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

418,736,051.26
9,152,546.90 407,255.00
19,814,447.08 6,202,772.94 6,560,952.55 (10,217,302.16) 4,630,011.13 455,286,734.70 (2,068,767.58)
5,890,400.50 12,758,806.26 10,427,079.57
29,076,286.33 27,007,518.75
1,035,810,665.28 0.00
1,035,810,665.28 $1,062,818,184.03

42,048,058.00 (8,439,683.00)
33,608,375.00 33,850,722.00
10,981,492.00 10,981,492.00 44,832,214.00
500,156,944.00 0.00
500,156,944.00 $544,989,158.00

589,533.00 2,623,196.00 (3,693,416.00) (1,830,348.00) (2,311,035.00) 18,078,332.00
0.00 18,078,332.00
104,451,689.00 0.00
104,451,689.00 $122,530,021.00

2,991,714.00
2,991,714.00 2,736,885.00
0.00 2,736,885.00 25,746,146.00
0.00 25,746,146.00 $28,483,031.00

University of Georgia Annual Financial Report FY 2006 11

Statement of Cash Flows
THE UNIVERSITY OF G EORG IA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Sale 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, 2006
$184,295,578.40 11,617,948.52
197,334,516.57 34,740,972.04
(389,812,541.81) (526,417,155.97)
(27,676,704.40) (2,740,817.40) 3,135,386.77
33,162,405.92 4,661,703.16 28,633,700.65 14,170,420.03 16,064,037.08 15,354,332.16 3,190,036.48 13,618,438.54 (386,667,743.26)
418,736,051.26 769,533.69
31,755,831.24 752,561.68
452,013,977.87
22,208,142.57 108,597.68
(66,026,933.66) (6,087,178.93)
(10,217,302.16) (60,014,674.50)
5,055,000.00 6,860,612.10
11,915,612.10 17,247,172.21 129,428,580.68 $146,675,752.89

University of Georgia Annual Financial Report FY 2006 12

Statement of Cash Flows, Continued
THE UNIVERSITY OF G EORG IA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($457,355,502.28)
61,544,718.54 3,212,636.17 (792,646.15) (9,714,417.21) 394,569.37 (2,789,886.98) 399,549.62
15,271,331.54 3,161,904.12
($386,667,743.26)
$20,819,369.08 $299,659.55
($6,868,143.76)

University of Georgia Annual Financial Report FY 2006 13

THE UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 FY2006, The University of Georgia is reporting the activity for the University of Georgia Foundation, the University of Georgia Athletic Association, Inc. and the University of Georgia Research 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
University of Georgia Annual Financial Report FY 2006 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 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
University of Georgia Annual Financial Report FY 2006 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 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 of Georgia when complete. For the year ended June 30, 2006, GSFIC transferred capital additions valued at $349,200.41 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 2006 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. The University of Georgia had accrued liability for compensated absences in the amount of $35,221,627.65 as of 7-1-2005. For FY2006, $27,762,592.71 was earned in compensated absences and employees were paid $24,600,688.59, for a net increase of $3,161,904.12. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $38,383,531.77.
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 2006 17

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Federal Loans Ins titutional Loans Total Res tricted Expendable

June 30, 2006
$37,843,029.00 10,273,831.25 9,729,888.43
$57,846,748.68

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, 2006
$7,652,277.16 37,848,638.46
1,487,000.00 17,072,671.59 $64,060,587.21

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 2006 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 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 2006 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, 2006, the carrying value of deposits was $62,932,877.15 and the bank balance was $75,528,647.56. Of the University's deposits, $75,415,686.80 were uninsured. Of these uninsured deposits, $608.99 were collateralized with securities held by the financial institution's trust department or agent in the University's name, and $75,415,077.81 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name.
University of Georgia Annual Financial Report FY 2006 20

B. 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.

The University's investments as of June 30, 2006 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
Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Repurchase Agreements

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$9,221,220.04
3,358,366.71 80,725,257.34 2,001,585.63 4,789,658.49 $100,096,088.21

$971,078.27
3,343,398.48 56,260,595.73
114,706.65 4,789,658.49 $65,479,437.62

$6,429,472.85
9,737.08 17,443,144.82 1,068,339.70
$24,950,694.45

$1,735,408.25 5,231.15
818,539.28 $2,559,178.68

$85,260.67 7,021,516.79 $7,106,777.46

Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes

605,102.29 9,154,349.88
240,469.38

Investment Pools Board of Regents Legal Fund Office of Treasury and Fis cal Services Georgia Fund 1

4,586,934.65 23,626,795.24

Total Investments

$138,309,739.65

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 Legal Fund is 3.1 years. Of the University's total investment of $4,586,934.65 in the Legal Fund, $4,586,456.00 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

University of Georgia Annual Financial Report FY 2006 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 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 28 days.

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, 2006, $15,021,106.55 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $99,420,762.47 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.

Related Debt Investments
U. S. Agencies Corporate Debt Money Market Mutual Fund Repurchase Agreements - Underlying
U. S. Agency Securities

Fair Value

AAA

AA

A

Ba

Baaa

Unrated

$84,083,624.05 2,001,585.63 605,102.29
4,789,658.49
$91,479,970.46

$84,056,517.50 161,139.15

$0.00 446,469.90

$0.00 549,518.51

$0.00 155,669.00

4,789,658.49 $89,007,315.14

$446,469.90

$549,518.51

$155,669.00

$0.00 688,789.07

$27,106.55 605,102.29

$688,789.07

$632,208.84

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 comprises 25-50%, investment in the Office of Treasury and Fiscal Services Georgia Fund I 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%.

University of Georgia Annual Financial Report FY 2006 22

As of June 30, 2006, applicable investments in a single issuer where those investments exceed 5% of total investments were as follows:

Federal National Mortgage Association

16%

Federal Home Loan Mortgage Corporation

13%

Federal Home Loan Bank

17%

Freddie Mac

11%

Georgia Fund 1

17%

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.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$3,374,036.15 2,402,258.12 17,466,088.98 22,509,952.52 12,227,727.60 57,980,063.37
206,364.41
$57,773,698.96

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Food Services Phys ical Plant Other
Total

June 30, 2006
$1,479,062.64 953,322.24
2,232,589.63 $4,664,974.51

University of Georgia Annual Financial Report FY 2006 23

Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006 the allowance for uncollectible loans was approximately $676,538.26.
University of Georgia Annual Financial Report FY 2006 24

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 Total Assets Being Depreciated
Less: Accumulated Depreciation In fras tru ctu re Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, net

Beginning Balances 7/1/2005
$24,517,001.23 10,571,014.72 43,450,087.53 78,538,103.48

Additions
$672,139.52 421,000.00 13,605,124.25 14,698,263.77

Reductions
$2,255.00
36,124,317.03 36,126,572.03

38,428,300.87 983,932,402.85 140,522,336.89 295,570,615.82
2,162,011.84 191,214,982.15 1,651,830,650.42

2,435,812.31 70,105,183.19 4,936,345.77 24,987,030.20
819,369.08 11,856,759.21 115,140,499.76

20,013,082.88 1,585,842.34
373,058.00 21,971,983.22

13,025,986.35 296,071,275.20 27,859,016.10 225,414,209.87
815,212.72 135,864,600.00 699,050,300.24
952,780,350.18
$1,031,318,453.66

1,193,113.70 23,825,997.44 3,334,687.54 25,960,023.47
229,417.39 7,001,479.00 61,544,718.54
53,595,781.22
$68,294,044.99

18,589,170.15 589,776.02 373,058.00
19,552,004.17
2,419,979.05
$38,546,551.08

Ending Balance 6/30/2006
$25,186,885.75 10,992,014.72 20,930,894.75 57,109,795.22
40,864,113.18 1,054,037,586.04
145,458,682.66 300,544,563.14
1,395,538.58 202,698,683.36 1,744,999,166.96
14,219,100.05 319,897,272.64 31,193,703.64 232,785,063.19
454,854.09 142,493,021.00 741,043,014.61
1,003,956,152.35
$1,061,065,947.57

University of Georgia Annual Financial Report FY 2006 25

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Res earch Other Deferred Revenue
T o t a ls

June 30, 2006
$19,451,354.76 13,171,132.43 15,607,811.43
$48,230,298.62

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$149,387,597.14

Additions $20,819,369.08

Reductions

Ending Balance June 30, 2006

$6,087,178.93

$164,119,787.29

Current Portion
$2,422,568.92

35,221,627.65 35,221,627.65
$184,609,224.79

27,762,592.71 27,762,592.71
$48,581,961.79

24,600,688.59 24,600,688.59
$30,687,867.52

38,383,531.77 38,383,531.77
$202,503,319.06

23,304,767.34 23,304,767.34
$25,727,336.26

Note 9. Significant Commitments
The University of Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $5,585,686.24 as of June 30, 2006. 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.

University of Georgia Annual Financial Report FY 2006 26

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 2032, 2033, three expire in 2034, and one expires in 2036. The equipment capital leases expire between 2007 and 2009. Expenditures for fiscal year 2006 were $16,304,481.10, of which $10,217,302.17 represented interest and $6,087,178.93 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 at June 30, 2006 were as follows:

Buildings Equipment Total Assets Held Under Capital Lease

$159,923,088.01 940,684.49
$160,863,772.50

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 originally expired June 30, 2011. In December of 2005, the University of Georgia purchased this leased property. 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 UGAREF, whereby, the University leases the Complex Carbohydrate Research Center for a 30year 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 UGAREF, 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, 2034. The University of Georgia entered into a seventh capital lease with UGAREF whereby the University leases the Coverdell Center for a 30-year period that began December 9, 2005 and expires November 30, 2035. The outstanding liability at June 30, 2006 on these capital leases is $163,656,705.22.
The University also has various capital leases for equipment with an outstanding balance of $463,082.07 at June 30, 2006.
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.

University of Georgia Annual Financial Report FY 2006 27

Properties are leased for a variety of functions, from farm acreage to office space to parking lots.

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, 2006, were as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 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

Real Property/Equipment

Capital Leas es

Operating Leas es

$13,729,015.89 13,622,832.11 13,487,948.11 13,450,271.04 13,450,271.04 67,151,355.20 67,126,355.20 67,126,355.20 67,126,355.20 36,627,360.01 372,898,119.00
194,647,331.71 14,131,000.00
$164,119,787.29

$4,534,340.68 $4,534,340.68

Noncancellable operating lease expenditures in 2006 were $5,484,130.04 for real property. No expenditures were made for equipment under noncancellable operating leases.

University of Georgia Annual Financial Report FY 2006 28

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 2006, 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

2006 2005 2004

100% 100% 100%

$29,007,245.63 $28,398,641.35 $29,085,698.09

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

University of Georgia Annual Financial Report FY 2006 29

Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2006, for employees covered by ERS was $764,695.77. The University's total payroll for all employees was $528,828,075.24.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $91,570.42, of which $59,819.04 was made by the University and $31,751.38 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, 2006, financial report, which may be obtained through ERS.
Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-
University of Georgia Annual Financial Report FY 2006 30

21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $11,273,252.75 (9.65%) and $5,841,037.97 (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 The University of Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are
University of Georgia Annual Financial Report FY 2006 31

credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2006 amounted to $1,841,036.87 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 FY2006 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 2006, the employer contribution rate was 9.24% for covered employees.
Source of Funding For FY2006, 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. 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
University of Georgia Annual Financial Report FY 2006 32

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, 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
University of Georgia Annual Financial Report FY 2006 33

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, 2006, there were 3,713 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, The University of Georgia recognized as incurred $17,930,352.24 of expenditures, which was net of $6,309,490.37 of participant contributions.
University of Georgia Annual Financial Report FY 2006 34

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$79,422,985.42 58,838,617.65 26,948,723.17

$51,789,471.67 100,175,840.62 31,662,819.67

$1,989,920.60 72,849,775.71 22,891,799.10

$636,187.13 45,010,419.23 10,966,526.02

$315,841.44 12,871,762.32 3,199,095.05

$75,562.50 33,188,726.71 23,648,640.98

2,464,531.39 3,670,651.90 1,518,876.85 16,731,534.98 12,891,187.06

5,613,639.28 944,552.37 1,285,120.99
61,098,663.84 17,752,991.36

3,515,941.62 89,947.09
1,261,554.91 28,898,195.43 3,540,231.26

705,913.33 2,850.00
574,269.40 24,513,627.60 12,577,971.58

224,645.71 1,734,156.00 222,407.02 9,076,283.72 700,074.20

510,971.47
611,867.12 10,442,398.67
944,521.74

$202,487,108.42

$270,323,099.80

$135,037,365.72

$94,987,764.29

$28,344,265.46

$69,422,689.19

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 26,239,761.45
8,014,787.10
44,922.43
23,099,341.50 18,317,681.87 2,499,953.97

$0.00 20,679,004.12

$49,188.20 45,359,957.46
10,521,190.42
200,146.74 555,542.92 5,832,960.56 35,061,402.90 10,637,787.37

$0.00

$134,279,156.96 394,534,861.15 137,853,581.51 0.00 13,280,711.97 27,676,704.40 34,406,398.35 204,139,789.01 61,544,718.54

$78,216,448.32

$20,679,004.12

$108,218,176.57

$0.00

$1,007,715,921.89

University of Georgia Annual Financial Report FY 2006 35

Note 16. Component Units
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, 2007 and provides for annual renewal. The Real Estate Foundation's $50 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, 2007.
In February 2006, the Board of Trustees of the Foundation agreed to transfer the sole membership of the Real Estate Foundation to the University of Georgia Research Foundation, Inc. (the "Research Foundation") contingent on a private letter ruling from the Internal Revenue Service accepting this transfer with no negative impact on the tax-exempt status of the outstanding bond debt. As of October 20, 2006, the anticipated date of ruling from the Internal Revenue Service is unknown. Upon receipt of an acceptable ruling, the bylaws of the Foundation and Real Estate Foundation will be amended to reflect the transfer of sole membership. Also at that time, the Foundation's guarantee of the Real Estate Foundation's revolving credit agreement will be replaced by a guarantee from the Research 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.
University of Georgia Annual Financial Report FY 2006 36

During the year ended June 30, 2006, the Foundation distributed $22,479,425 to the University for scholarships and donor restricted support. Facilities valued at $181 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. Complete financial statements for the Foundation can be obtained from the Foundation Office at 394 South Milledge Avenue, Athens, GA 30602.

Investments for Component Units:

The University of Georgia Foundation holds investments in the amount of $491 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.

Investments are comprised of the following amounts at June 30, 2006:

Cost

Fair Value

Managed Cash Funds Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Split-Interest Investments Long-term Investment Pools
Total Investments

$172,451.00 887,911.00
1,089,390.00 6,795,849.00 1,145,048.00 17,315,885.00 13,313,088.00 350,152,974.00
$390,872,596.00

$172,451.00 852,747.00 879,477.00
7,203,604.00 1,267,232.00 17,315,885.00 15,027,655.00 447,848,858.00
$490,567,909.00

As of June 30, 2006, the long-term investment pool consists of investments in domestic and international equities (71.4%), fixed income instruments (6.5%), private equity investments (4.5%), real estate funds (6.2%), hedge funds (7.4%), timber, gas & oil (0.2%), and deposits (3.8%) that are held by outside investment managers.

The Long-Term Investment Pool includes assets held for the Athletic Association in the amount of $2,555,872. This amount is reported as Due from Component Units by this entity. The Foundation reports the liability for these investments in Due to Component Units.

University of Georgia Annual Financial Report FY 2006 37

Capital Assets for Component Units:

The University of Georgia Foundation holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$21,830,788.00 4,394.00
21,835,182.00
179,178,357.00 889,559.00
180,067,916.00 15,366,140.00
164,701,776.00 $186,536,958.00

Long-Term Liabilities for Component Units:

Changes in long-term liabilities for the University of Georgia Foundation for the fiscal year ended June 30, 2006 are shown below:

Revenue/Mortgage Bonds Payable Notes and Loans Payable Bond Premiums/Discounts, net
Total Long Term Debt

Beginning Balance July 1, 2005
$196,090,000.00 15,336,557.00 1,593,914.00
$213,020,471.00

Additions
$0.00 4,914,342.00
$4,914,342.00

Reductions
$7,080,000.00 5,900,553.00 88,890.00
$13,069,443.00

Ending Balance June 30, 2006

Amounts due within
One Year

$189,010,000.00 14,350,346.00 1,505,024.00

$3,365,000.00 1,148,762.00

$204,865,370.00

$4,513,762.00

$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, a wholly owned subsidiary of the 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 $50 million credit agreement discussed below. The Foundation has guaranteed certain obligations, including the letter of credit, under the Real Estate Foundation's $50 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 (3.99% at June 30, 2006). The loan matures in 2031, subject to certain early

University of Georgia Annual Financial Report FY 2006 38

repayment provisions. During the year ended June 30, 2006 principal payments of $4,255,000 were made.
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, 2006 was $102,506, and was recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $44,195 on the fair value of the derivative for the year ended June 30, 2006, as an adjustment to interest expense.
$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. The CCRC Entity used the proceeds of this loan to fund construction of the facility which was completed in October 2003.
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, 2006 principal payments of $760,000 were made.
$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. The Housing Entity used the proceeds of this loan to fund construction of certain real estate projects which were completed in July 2004.
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, 2006, a principal payment of $1,825,000 was made.
$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
University of Georgia Annual Financial Report FY 2006 39

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 land and educational facility and by the Gainesville Campus Entity's interest in certain rents and leases derived from the land and educational facility. During 2003, the Gainesville Campus Entity used the proceeds of this loan to fund the acquisition of the land and educational facility.
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 year ended June 30, 2006, principal payments of $240,000 were made.
$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, 2006 and 2005, 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.
University of Georgia Annual Financial Report FY 2006 40

Debt Service Obligations for Revenue and Mortgage Bonds Payable:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Total Bond Obligations

Principal

Interest

Total

$3,365,000.00 14,875,561.00
3,595,000.00 3,695,000.00 3,825,000.00 21,320,000.00 26,615,000.00 34,280,000.00 50,184,439.00 27,255,000.00

$8,643,676.00 8,092,775.62 7,989,577.62 7,869,861.62 7,734,749.62
36,289,959.08 30,762,590.08 23,234,761.08 13,491,175.46
2,097,853.00

$12,008,676.00 22,968,336.62 11,584,577.62 11,564,861.62 11,559,749.62 57,609,959.08 57,377,590.08 57,514,761.08 63,675,614.46 29,352,853.00

$189,010,000.00

$146,206,979.18

$335,216,979.18

Notes and Loans Payable
$50,000,000 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 during the year ended June 30, 2005, and then decreased to $50 million during the year ended June 30, 2006. 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, 2006, amounts outstanding or issued under this agreement included borrowings of $12,111,334, and letters of credit and bank credit reserves of $20,264,347, resulting in $17,624,319 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's 30day London InterBank Offered Rate ("LIBOR") plus 32-1/2 basis points (or 0.325%).
At June 30, 2006, the rate applicable to the borrowings was 5.454%. The Foundation has guaranteed certain 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 discussed above. 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 has been amended to expire on July 31, 2007. During the forbearance period, the bank agrees not to call any borrowings or letters of credit and to continue to make loans as long
University of Georgia Annual Financial Report FY 2006 41

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, 2006, that is callable by the bank after the forbearance period is $12,390,969 and is included in the total principal payments due during the year ending June 30, 2008.

During 2006, the Real Estate Foundation entered into an interest rate cap agreement effectively limiting the interest rate on the revolving credit agreement to a 6.0% fixed rate until December 1, 2010. The Real Estate Foundation paid a premium of $122,000 in connection with this agreement. The fair value of the interest rate cap as of June 30, 2006 was $124,097 and was recorded as an other asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $2,097 on the fair value of the derivative for the year ended June 30, 2006 as an adjustment to interest expense.

$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, 2006, $1,179,250 was outstanding under this agreement. Interest is charged at a fixed rate of 7.13%. Principal payments in the amount of $22,250 are payable quarterly.

$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, 2006, $1,059,762 was outstanding under this agreement. Interest is charged at the bank's 30 day LIBOR rate plus .45%, or 5.56% at June 30, 2006. Principal and interest are payable monthly.

Debt Obligations for Notes and Loans Payable:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2020

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

Notes and Loans Payable

Principal

Interest

Total

$1,148,762.00 12,200,334.00
89,000.00 89,000.00 89,000.00 445,000.00 289,250.00

$861,559.04 135,911.67 69,009.00 62,664.00 56,318.00 186,405.00 36,091.00

$2,010,321.04 12,336,245.67
158,009.00 151,664.00 145,318.00 631,405.00 325,341.00

$14,350,346.00

$1,407,957.71 $15,758,303.71

The University of Georgia Athletic Association, Inc. The University of Georgia Athletic Association, Inc. (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 of Georgia Annual Financial Report FY 2006 42

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, 2006, 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 $25,500,018 and were recognized as expenses of the Association. Capital assets net of accumulated depreciation of $144.7M are included in the financial statements of the Association. These capital assets, excluding moveable equipment, are also included in the University's report. Complete financial statements for the Association can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602.
Deposits for Component Units:
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 Authority 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. Insurance of accounts provided by the Federal Deposit Insurance Corporation and the Federal Savings and Loan 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.
University of Georgia Annual Financial Report FY 2006 43

At June 30, 2006, the book-carrying amount of the Association's deposits, including noncurrent cash and cash equivalents, was $75,456,272 and the bank balance was $78,469,403. The Association's bank balance is classified as follows at June 30, 2006:

Amount insured by the FDIC and FSLIC or Collateralized with securities held in the Association's name
Uncollateralized

$72,892,574 5,576,829
$78,469,403

Capital Assets for Component Units:

The University of Georgia Athletic Association, Inc. had the following Capital Assets activity for the year ended June 30, 2006:

Capital As sets , Not Being Depreciated: Construction W ork-in-Progress
Total Capital As s ets Not Being Depreciated
Capital As sets , Being Depreciated: Land Improvements Building , Building Improvements & Infras tructure Eq u ip me n t Total Ass ets Being Depreciated
Les s : Accumulated Depreciation Land Improvements Building , Building Improvements & Infras tructure Eq u ip me n t Total Accumulated Depreciation
Total Capital As s ets , Being Depreciated, Net
Capital As sets , net

Beginning Balances 7/1/2005
$4,761,467.00 4,761,467.00
16,902,083.00
167,196,490.00 6,652,886.00
190,751,459.00
4,748,033.00
28,720,933.00 4,787,253.00 38,256,219.00
152,495,240.00
$157,256,707.00

Additions
$8,686,344.00 8,686,344.00

Reductions
$4,491,941.00 4,491,941.00

Ending Balance 6/30/2006
$8,955,870.00 8,955,870.00

2,381,286.00
9,057,273.00 2,310,201.00 13,748,760.00

1,659,846.00 1,659,846.00

19,283,369.00
176,253,763.00 7,303,241.00
202,840,373.00

790,867.00
3,119,513.00 645,149.00
4,555,529.00
9,193,231.00
$17,879,575.00

1,493,862.00 1,493,862.00
165,984.00
$4,657,925.00

5,538,900.00
31,840,446.00 3,938,540.00 41,317,886.00
161,522,487.00
$170,478,357.00

University of Georgia Annual Financial Report FY 2006 44

Long-term Liabilities for Component Units:

Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due Within
One Year

Revenue/Mortgage Bonds Payable Notes and Loans Payable-Primary Government Notes and Loans Payable Other Long-term Liabilities
Total Long Term Debt

$71,470,000.00 2,946,082.00 241,400.00 1,781,602.00

$30,000,000.00 1,830,348.00

$76,439,084.00 $31,830,348.00

$1,955,000.00 295,682.00 73,999.00 361,512.00
$2,686,193.00

$99,515,000.00 2,650,400.00 167,401.00 3,250,438.00
$105,583,239.00

$1,955,009.00 313,963.00 80,289.00 500,000.00
$2,849,261.00

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, 2007 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 (4.02% on June 30, 2006). The loan matures in 2031, subject to certain early repayment provisions.

On December 22, 2005, the Association entered into a fifteen and one-half year interest rate swap agreement for the remaining $33.1 million of the Series 2001 Bonds. Based on the swap agreement, the Association owes interest calculated at a fixed rate of 3.49% 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. 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 fair value of the interest rate swap agreement as of June 30, 2006 represented a $983,903 receivable for the Association had the swap been terminated at that time.
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, 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

University of Georgia Annual Financial Report FY 2006 45

Loan Agreement bear interest payable monthly at a formula rate adjusted daily (4.04% on June 30, 2006). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the Association redeemed $16 million of these bonds.
On January 28, 2005, the Association 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 fair value of the interest rate swap agreement as of June 30, 2006, represented a $696,915 receivable for 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, 2007 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 (5.30% on June 30, 2006). The loan matures in 2021 and requires yearly principal reductions.
On December 22, 2005, the Association entered into a fifteen and one-half year interest rate swap agreement for the remaining $17.09 million of the Series 2005A Bonds. Based on the swap agreement, the Association owes interest calculated at a fixed rate of 5.058% 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 fair value of the interest rate swap agreement as of June 30, 2006 represented a $560,113 receivable for the Association had the swap been terminated at that time.
On August 25, 2005, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $30 million in Revenue Bonds (UGA Athletic Association, Inc. Project),
University of Georgia Annual Financial Report FY 2006 46

Series 2005B (the Bonds) and entered into an agreement (the Loan Agreement) to loan $30 million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority. The letter of credit expires August 24, 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 (4.04% on June 30, 2006). The loan matures in 2035, subject to certain early repayment provisions.

On August 25, 2005, the Association entered into a thirty year interest rate swap agreement for $30 million of the Series 2005B Bonds. Based on the swap agreement, the Association owes interest calculated at a fixed rate of 3.483% 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 fair value of the interest rate swap agreement as of June 30, 2006 represented a $908,349 receivable for the Association had the swap been terminated at that time.

Debt Service Obligations

Annual debt service requirements to maturity for Athletic Facilities (Athletic Association) revenue bonds payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Principal
$1,955,009.82 2,090,009.90 2,140,007.78 2,195,006.83 3,118,941.21
11,206,024.46 13,645,000.00 10,105,000.00 10,105,000.00 42,955,000.00

Bonds Payable Interest

Total

$3,633,885.17 3,547,357.10 3,458,788.22 3,367,915.17 3,356,897.79
14,818,558.54 12,211,784.00
9,841,455.00 8,192,381.00
810,611.00

$5,588,894.99 5,637,367.00 5,598,796.00 5,562,922.00 6,475,839.00
26,024,583.00 25,856,784.00 19,946,455.00 18,297,381.00 43,765,611.00

$99,515,000.00

$63,239,632.99

$100,691,640.99

University of Georgia Annual Financial Report FY 2006 47

Annual debt service requirements to maturity for Athletic Facilities (Athletic Association) notes and loans payable are as follows:

Year Ending June 30:
2007 2008 2009 2010 2011 2012 through 2016

Year
1 2 3 4 5 6-10

Notes and Loans Payable

Principal

Interest

Total

$394,252.18 420,497.10 354,008.22 375,907.17 399,160.79 873,975.54

$178,182.83 151,937.90 123,908.78 102,009.83 78,756.21 81,858.46

$572,435.01 572,435.00 477,917.00 477,917.00 477,917.00 955,834.00

$2,817,801.00

$716,654.01

$3,534,455.01

University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation, Inc. (the Research Foundation) is a legally separate, tax-exempt component unit of The University of Georgia. The 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 2006, the Research Foundation transferred approximately $128 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. 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 2006 48

Deposits and Investments for Component Units:

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 Foundation does not have a deposit policy for custodial credit risk.

At June 30, 2006, the book value of the Foundation's deposits was $3,679,515. The bank and investment account balances at June 30, 2006 were $5,670,586 of which $5,570,586 was uninsured. Of these uninsured deposits, $4,969,000 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $601,586 were uncollateralized.

Investments

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 Research Foundation's investments as of June 30, 2006 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
Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (U.S. Agencies) Mortgage Backed Securities (Corporate)

Fair Value

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$1,267,933.00
272,721.00 3,171,735.00 16,516,444.00 1,589,075.00 2,266,584.00 $25,084,492.00

$244,503.00
177,513.00 13,487,842.00
$13,909,858.00

$265,724.00
2,577,271.00 2,792,382.00 1,979,680.00 $7,615,057.00

$618,705.00
280,189.00 236,220.00
$1,135,114.00

$139,001.00
272,721.00 136,762.00
1,589,075.00 286,904.00
$2,424,463.00

Other Investments Equity Mutual Funds -Domestic Equity Mutual Funds -International Equity Securities - Domestic Equity Securities - International Managed Futures/Hedge Funds

2,033,496.00 1,467,511.00 5,770,342.00 1,123,901.00
832,676.00
$36,312,418.00

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. 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.

University of Georgia Annual Financial Report FY 2006 49

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 Research Foundation will not be able to recover the value of the investment or collateral securities that are in possession of an outside party. The Foundation does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2006, $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 investment policies specify that fixed income securities be of investment grade. The short-term investment policy specifies that corporate bonds be rated BBB (Standard & Poor's) or Baa (Moody's) or higher; the long-term policy requires a BBB (Standard & Poor's) or Baa3 (Moody's) rating or higher. The investment policy also requires that securities that drop below investment grade should be sold at the manager's discretion; in the event that a rating falls below investment grade, the manager will contact the financial advisor and advise them of the proposed strategy for disposition of the security.

Fair Value

AAA

AA

A

Ba

Baaa

Unrated

Related Debt Investments
U. S. Agencies
Corporate Debt

$3,171,735.00 18,783,028.00

$673,833.00 368,609.00

$0.00 142,464.00

$0.00

$0.00

$0.00 $2,497,902.00

4,589,223.00 1,617,328.00 12,065,404.00

$21,954,763.00 $1,042,442.00 $142,464.00 $4,589,223.00 $1,617,328.00 $12,065,404.00 $2,497,902.00

Mutual Bond Funds (Morning star Ratings)

5-Star

$504,848.00

4-Star

$2,996,159.00

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, 2006, investments in a single issuer where those investments exceed 5% of total investments were: Colonial Realty LP 5%; core Investment Grade Bond Trust 5%; Government National Mortgage Association 5%.

University of Georgia Annual Financial Report FY 2006 50

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 Foundation's investment policy.
Capital Assets for Component Units:
University of Georgia Research Foundation, Inc. had Capital Assets activity as follows for the year ended June 30, 2006:

Capital A ssets , Not Being Depreciated: Land (and other assets)
Total Capital As sets Not Being Depreciated
Capital A ssets , Being Depreciated: Building and Building Improvements Total Assets Being Depreciated
Les s: A ccumulated Depreciation Bu ild in g s Total Accumulated Depreciation
Total Capital As sets, Being Depreciated, Net
Capital A ssets , net

Beginning Balances 7/1/2005
$110,000.00 110,000.00

Additions
$0.00 0.00

Reductions
$0.00 0.00

Ending Balance 6/30/2006
$110,000.00 110,000.00

1,142,307.00 1,142,307.00

1,142,307.00

0.00

0.00

1,142,307.00

645,149.00 645,149.00
497,158.00
$607,158.00

46,082.00 46,082.00
(46,082.00)
($46,082.00)

0.00 0.00 $0.00

691,231.00 691,231.00
451,076.00
$561,076.00

University of Georgia Annual Financial Report FY 2006 51

UNIVERSITY SYSTEM OFFICE
Annual Financial Report
For the Year Ended June 30, 2006

University System Office Board of Regents of the University System of Georgia
Atlanta, Georgia

Erroll B. Davis, Jr.
Chancellor

William R. Bowes
Vice Chancellor for Fiscal Affairs/Treasurer
Debra J. Lasher
Executive Director for Business and Financial Affairs

UNIVERSITY SYSTEM OFFICE ANNUAL FINANCIAL REPORT
FY 2006
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 ................................................................................................... 10 Note 1 Summary of Significant Accounting Policies ..................................................... 11 Note 2 Deposits and Investments.................................................................................... 17 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................................................................................................ 30 Note 13 Contingencies...................................................................................................... 31 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 32 Note 15 Natural Classifications With Functional Classifications..................................... 33 Note 16 Special Items ............................................................................ 34

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 the chief executive officer of the University System. The Board oversees 35 institutions: four research institutions, two regional universities, 13 state universities, seven state colleges, and nine two-year colleges. In addition, one marine research institute is governed by the Board. These institutions enroll more than 250,000 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 2006. 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 2005 and FY 2006.
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 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 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 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 three major categories. The first category, invested in capital assets, net of debt, provides the
University System Office Annual Financial Report FY 2006 1

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, 2006
$177,749,330.06 33,352,309.34 3,612,043.20
214,713,682.60
166,946,479.47 23,484,463.35
190,430,942.82
7,087,350.15 3,612,043.20 8,057,130.89
5,526,215.54 $24,282,739.78

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

The total assets of the University System Office decreased by ($20,176,567.22). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease in cash and investments related to the Investment Pool. The Short Term Fund experienced a decrease of ($15,104,418.34) for the year, the Balanced Income Fund a decrease of ($1,659,470.95), the Legal Fund a decrease of ($205,606.41) the Total Return Fund a decrease of ($28,376,512.05) and the Diversified Fund an increase of $22,231,417.09. In addition, there was an increase of $1,750,800.98 in investment in plant, net of accumulated depreciation.
The total liabilities for the year decreased by ($17,150,918.69). The primary cause for the decrease was in current liabilities and is also related to the reduction in the Investment Pool described above in the asset section. The combination of the decrease in total assets of ($20,176,567.22) and the decrease in total liabilities of ($17,150,918.69) yields a decrease in total net assets of ($3,025,648.53). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($4,494,890.58).
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 non-

University System Office Annual Financial Report FY 2006 2

operating, 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, 2006

June 30, 2005

Operating Revenues
Operating Expenses Operating Loss
Nonoperating Revenues and Expenses
Income (Loss) Before other revenues, expenses, gains or losses
Special Items
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

$289,538,961.90 437,363,775.70 (147,824,813.80) 144,751,553.16
(3,073,260.64) 47,612.11
(3,025,648.53) 27,308,388.31
0.00 27,308,388.31 $24,282,739.78

$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
0.00 63,357,242.72 $27,308,388.31

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:
During FY 2005, in order to lessen the impact of a $64.8 million budget reduction, the Board of Regents of the University System of Georgia granted credits to institutions for the employer portion of health insurance premiums. Therefore the premium monies received by the University System Office were reduced. The increase in Operating Revenue for FY 06 was primarily due to the full premiums being received from the institutions for health insurance for this fiscal year. In addition, a premium increase went into effect on July 1, 2005.

University System Office Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005

Operating Revenue Grants and Contracts Sales and Services Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Grants and Contracts Investment Income Other
Total Nonoperating Revenue
Special Items
Total Revenues

June 30, 2006
$12,111,049.78 21,304,813.18 256,123,098.94
289,538,961.90
141,686,201.80 2,829,039.10 708,238.60 668,299.46
145,891,778.96
47,612.11
435,478,352.97

June 30, 2005
$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
371,856,075.38

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

Op eratin g Exp en s es In s tru ctio n Res earch Pu b lic Serv ice A cad emic Su p p o rt Stu d en t Serv ices In s titu tio n al Su p p o rt Sch o lars h ip s an d Fello ws h ip s Un allo cated Exp en s es
T o tal Op eratin g Exp en s es
No n o p eratin g Exp en s es In teres t Exp en s e (Cap ital A s s ets )
T o tal Exp en s es

June 30, 2006
$1,264,753.04 138,250.53
90,871,953.38 18,977,612.07
279,541.53 324,974,952.34
164,410.08 692,302.73 437,363,775.70
1,140,225.80
$438,504,001.50

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

The compensation and employee benefits category increased by approximately $2,746,482.33. The increase reflects an increased cost of health insurance and salary increases averaging 4% effective January 1, 2006.
And once again the increase in health insurance premiums and collections can be seen on the detail schedule in the Institutional Support line. The primary portion of the $30,331,710.05

University System Office Annual Financial Report FY 2006 4

increase in Institutional Support expense is $21,061,092.00 due to increased claims paid for health insurance.
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.

Cash Flows for the Years Ended June 30, 2006 and 2005, Condensed

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

June 30, 2006
($140,035,363.82) 129,165,844.77 (4,147,544.52) 5,296,659.84 (9,720,403.73) 82,199,424.92
$72,479,021.19

June 30, 2005
($165,649,573.40) 136,702,043.42 (5,840,175.11) 17,297,926.40 (17,489,778.69) 99,689,203.61
$82,199,424.92

Capital Assets
The Georgia Public Telecommunications Commission ("the Commission") transferred to the University System Office other property and equipment located at the thirty-one (31) transmitter sites throughout the State. The value of the equipment transferred is $22,336,534.25 and the accumulated depreciation is $22,288,922.14 for a net value of $47,612.11.
The transfer was required for the Commission to obtain the use of five-year-general obligation bonds sold in the University System Office name on behalf of the Commission. The Commission, an authority created after 1967, cannot have bonds sold on its behalf. An intergovernmental agreement has been executed between the Commission and the University System Office that allows the Commission to utilize these funds for the digital conversion of the towers and antennae. The bonds were sold September 7, 2005, and the agreement with the University System Office expires at the end of the five-year period and the bonds are paid in full.

University System Office Annual Financial Report FY 2006 5

All equipment will be transferred back to the ownership of the Commission at the expiration of the intergovernmental agreement.

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 2006 is listed below.

Beginning Net A s s ets July 1, 2005 Plus Revenues FY 2006 Premium Receipts A djus tment to Fair M arket Value
Les s Expenditures FY 2006 Claim Payments Change in Incurred But Not Reported
Ending Net A s s ets June 30, 2006

$256,122,834 170,408
(259,407,571) (400,419)

$1,598,556
256,293,242
(259,807,990) ($1,916,192)

As mentioned on page 3, the crediting of premiums to University System of Georgia institutions by action of the Board of Regents to address a mid-year budget reduction in fiscal year 2005, resulted in a reduction of premium collections. This accounts for the negative dollar amount for Ending Net Assets June 30, 2006.
Long Term Debt and Liabilities
The University System Office had Long-Term Debt of $28,716,176.97, of which $5,231,713.62 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements.
Component Units
The University System Office does not have any units that qualify as component units for the purposes of GASB 39 reporting.

University System Office Annual Financial Report FY 2006 6

Economic Outlook With the recent turnaround in the state's economic picture which has resulted in revenue growth exceeding amounts collected from prior years, further reductions in state appropriations support for the University System Office are not anticipated in this year or next. Adjustments in the premium amounts for the Board of Regents health insurance programs are expected to eliminate the negative balance in net assets for the program by the end of fiscal year 2007. Recent legislative changes allowing for the carry forward of departmental sales and services funds for the University System of Georgia, including the University System Office, will provide flexibility that will promote better management of resources to meet contingencies. 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.
William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office
University System Office Annual Financial Report FY 2006 7

Statement of Net Assets
UNIVERSITY SYSTEM OFFICE STATEMENT OF NET ASSETS
June 30, 2006
AS S ETS Current Ass ets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Prepaid items Total Current A ssets
Noncurrent As sets Investments (including Real Es tate) Capital Ass ets, net (note 6) Total Noncurrent As sets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Benefits Payable Depos its Held for Other Organizations Lease Purchase Obligations (current portion) Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Assets, 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 Un re s tric ted
TOTAL NET ASSETS

June 30, 2006
$72,479,021.19 103,489,030.91
474,791.95 1,302,620.89
3,865.12 177,749,330.06
3,612,043.20 33,352,309.34 36,964,352.54 214,713,682.60
17,745.23 27,983,473.00 133,713,547.62
3,553,846.23 1,677,867.39 166,946,479.47
22,711,112.96 773,350.39
23,484,463.35 190,430,942.82
7,087,350.15
3,612,043.20 8,057,130.89
5,526,215.54 $24,282,739.78

University System Office Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
UNIVERSITY SYSTEM OFFICE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006

REVENUES
Operating Revenues Grants and Contracts Federal St at e Ot h er Sales and Services Other Operating Revenues T otal Operating Revenues
EXPENS ES Operating Expenses
Salaries: Facult y St aff
Employee Benefits T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat ion
T otal Operating Expenses Operating Income (loss)
NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal Ot her Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss T otal Other Revenues Special Items (See Note 16) 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

June 30, 2006
$11,795,949.97 160,000.00 155,099.81
21,304,813.18 256,123,098.94 289,538,961.90
(4,951.90) 21,781,264.14
5,446,929.42 575,303.08 433,506.91
24,059,208.42 377,784,445.20
7,288,070.43 437,363,775.70 (147,824,813.80)
141,686,201.80
47,157.01 2,781,882.09
708,238.60 (1,140,225.80)
668,299.46 144,751,553.16
(3,073,260.64) 0.00
47,612.11 (3,025,648.53)
27,308,388.31 0.00
27,308,388.31 $24,282,739.78

University System Office Annual Financial Report FY 2006 9

Statement of Cash Flows
UNIVERSITY SYSTEM OFFICE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
CAS H FLOWS FROM OPERATING ACTIVITIES Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholars hips and Fellows hips 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 Proceeds from Sale of Capital A s s ets Purchas es of Capital As 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 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
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 Other Ass ets Accounts Payable Benefits Payable Leas e Purchas e Obligations Compens ated Abs ences
Net Cas h Provided (us ed) by Operating Activities
** 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

June 30, 2006
$11,855,303.70 21,416,545.67
(407,383,891.88) (21,612,766.56) (433,506.91) 256,122,952.16
(140,035,363.82)
141,686,201.80 (15,695,290.23)
3,174,933.20 129,165,844.77
500,000.00 (1,042,591.66) (2,464,727.06) (1,140,225.80) (4,147,544.52)
5,196,648.72 100,011.12
5,296,659.84 (9,720,403.73) 82,199,424.92 $72,479,021.19
($147,824,813.80)
7,288,070.43
(144,160.37) (3,865.12) (2,410.94)
400,419.00 84,156.34
167,240.64
($140,035,363.82)
$8,626,262.28 $608,227.48

University System Office Annual Financial Report FY 2006 10

UNIVERSITY SYSTEM OFFICE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations The Board of Regents of the University System of Georgia, an organizational unit of the State of Georgia, was created by the "Reorganization Act of 1931". With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today the Board of Regents is composed of 18 members, five of whom are appointed from the state-atlarge, and one from each of the 13 congressional districts. The Chancellor is appointed by the Board of Regents as chief executive officer and serves at the pleasure of the Board. The Board oversees 35 institutions (four research institutions, two regional universities, 13 state universities, seven state colleges, and nine two-year colleges), Skidaway Institute of Oceanography and an administrative central office (The University System Office). These institutions enroll more than 250,000 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-five (35) 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 fiscal year
University System Office Annual Financial Report FY 2006 11

2006, the University System Office does not have any foundations or affiliated organizations that qualify as component units.
Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia 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 2006 12

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, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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, 2006.
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, 2006, GSFIC did not transfer any capital additions to the University System Office.
Deposits The University System Office had no deposits as of June 30, 2006.
University System Office Annual Financial Report FY 2006 13

Deferred Revenues The University System Office had no deferred revenues as of June 30, 2006.
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 $2,283,977.14 as of July 1, 2005. For FY2006, $1,876,642.79 was earned in compensated absences and employees were paid $1,709,402.15, for a net increase of $167,240.64. The ending balance as of June 30, 2006 in accrued liability for compensated absences was $2,451,217.78.
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.
University System Office Annual Financial Report FY 2006 14

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Total Res tricted Expendable

June 30, 2006
$8,057,130.89 $8,057,130.89

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.

Res erve for Encumbrances Other Unres tricted Total Unres tricted Net A s s ets

June 30, 2006
$5,885,698.03 (359,482.49)
$5,526,215.54

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 2006 15

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, 2006
University System Office Annual Financial Report FY 2006 16

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 System Office's deposits may not be recovered. 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, 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, 2006, the carrying value of deposits was $30,093,768.83 and the bank balance was $18,994,628.34. Of the University System Office's deposits, $18,894,628.34 was uninsured. Of these uninsured deposits, $17,182,168.94 were collateralized with securities held by the financial institution's trust department or agent in the University System Office's name, $701,614.09 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 $1,010,845.31 were uncollateralized.
University System Office Annual Financial Report FY 2006 17

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 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, possessing 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.
Balanced 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 2006 18

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 to 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 2006 19

The University System Office's investments at June 30, 2006 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
Explicitly Guaranteed Implicitly Guaranteed Mutual Bond Fund Repurchase Agreements
Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Alternative Investments
Total Investments

Fair Value
$4,753,916.10 3,696,178.43 46,518,811.86 30,003,936.20 1,563,000.00 $86,535,842.59
28,789,946.25 28,969,796.65 5,190,740.98 $149,486,326.47

Less Than 1 Year

Investment Maturity

1-5 Years

6-10 Years

More Than 10 Years

$3,214,432.05

$1,539,484.05

$0.00

$0.00

3,696,178.43

16,727,463.71

29,791,348.15

30,003,936.20

1,563,000.00

$21,504,895.76

$65,030,946.83

$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. 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 2006 20

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, 2006, $149,486,326.47 were uninsured and held by the investment's counterparty's trust department or agent, 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 Investments
U. S. A gencies M utual Bond Fund Repurchas e A greements - Underlying
U. S. A gency Securities

Fair Value
$50,214,990.29 30,003,936.20 1,563,000.00

AAA $0.00
1,563,000.00

Un ra t e d
$50,214,990.29 30,003,936.20

$81,781,926.49

$1,563,000.00

$80,218,926.49

University System Office Annual Financial Report FY 2006 21

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.

Condensed financial information for the investment pool follows:

Statement of Net Assets - June 30, 2006

As s e t s Cash Inve s t m e nt s Interest Receivable

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

Net Assets Held in Trust for Pool Participants Internal Portion External Portion

$ 1 1 ,8 5 1 ,8 9 8 .6 4 1 3 3 ,3 4 4 ,4 8 5 .3 4 $ 1 4 5 ,1 9 6 ,3 8 3 .9 8

Statement of Changes in Net Assets - Year Ended June 30, 2006

R e ve nue s 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 ,7 8 6 ,7 1 1 .8 1 3 ,1 4 7 ,6 9 5 .9 0 7 ,9 3 4 ,4 0 7 .7 1
3 9 2 ,8 3 3 .6 1 7 ,5 4 1 ,5 7 4 .1 0

Distribution to Participants Capital Transactions Total Increase (Decrease) in Net Assets Net Assets July 1, 2005 Net Assets June 30, 2006

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

University System Office Annual Financial Report FY 2006 22

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, 2006, 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.

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006:

June 30, 2006

Federal Financial A s s is tance Other
Les s A llowance for Doubtful A ccounts Net A ccounts Receivable

$474,791.95 1,342,337.48 1,817,129.43
39,716.59
$1,777,412.84

Note 4. Inventories The University System Office had no inventories at June 30, 2006.

Note 5. Notes/Loans Receivable The University System Office had no Notes/Loans Receivable as of June 30, 2006.

University System Office Annual Financial Report FY 2006 23

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections 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 7/1/2005

Special Item Transfer

$2,366,877.00 10,000.00 0.00
2,376,877.00

$0.00 0.00

Additions $0.00

Reductions $90,000.00

0.00

90,000.00

Ending Balance 6/30/2006
$2,276,877.00 10,000.00 0.00
2,286,877.00

0.00 728,406.53
0.00 27,949,507.03 26,979,006.44
0.00 0.00 55,656,920.00

22,336,534.25 22,336,534.25

1,042,591.66 8,626,262.28

2,364,458.76

9,668,853.94

2,364,458.76

0.00 728,406.53
0.00 48,964,174.18 35,605,268.72
0.00 0.00 85,297,849.43

0.00 32,778.29
0.00 21,895,420.93 4,504,089.42
0.00 0.00 26,432,288.64
29,224,631.36
$31,601,508.36

22,288,922.14
22,288,922.14 47,612.11 $47,612.11

16,389.14 2,700,386.21 4,571,295.08
7,288,070.43 2,380,783.51 $2,380,783.51

1,776,864.12
1,776,864.12 587,594.64 $677,594.64

0.00 49,167.43
0.00 45,107,865.16 9,075,384.50
0.00 0.00 54,232,417.09
31,065,432.34
$33,352,309.34

University System Office Annual Financial Report FY 2006 24

Note 7. Deferred Revenue The University System Office had no deferred revenue at June 30, 2006. Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2005

Additions

Reductions

Adjustments

Ending Balance June 30, 2006

Current Portion

$20,019,267.63

$7,026,080.67

$2,464,727.06

$1,684,337.95

$26,264,959.19

$3,553,846.23

Other Liabilities Compensated Absences Total

2,283,977.14 2,283,977.14

1,876,642.79 1,876,642.79

1,709,402.15 1,709,402.15

2,451,217.78

1,677,867.39

0.00

2,451,217.78

1,677,867.39

Total Long Term Obligations

$22,303,244.77

Note 9. Significant Commitments

$8,902,723.46

$4,174,129.21

$1,684,337.95

$28,716,176.97 $5,231,713.62

The University System Office had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2006.

Note 10. Lease Obligations

The University System Office is obligated under various capital leases and installment purchase agreements for the acquisition of real property and equipment.
CAPITAL LEASES

The University System Office has nine capital leases payable in monthly installments with terms

expiring in various years between 2009 and 2025. Expenditures for fiscal year 2006 were

$3,604,952.86 of which $1,140,225.80 represented interest. Total principal paid on capital

leases was $2,464,727.06 for the fiscal year ended June 30, 2006. Interest rates range from 3.83

percent to 5.00 percent. The following is a summary of the carrying values of assets held under

capital lease at June 30, 2006:

Land

$0.00

Buildings

12,605,475.67

Equipment

13,924,408.55

Total Assets Held Under Capital Lease

$26,529,884.22

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

University System Office Annual Financial Report FY 2006 25

The University System Office entered into four new Capital Lease Obligations in the current year. In December 2005, lease obligation number 257 was completed for numerous items of equipment for a principal amount of $3,795,715.69 at an interest rate of 4.79 percent. In January 2006, lease obligation number 273 was completed for ExLibris Software for a principal amount of $997,365.00 at an interest rate of 5.00 percent. In May 2006, the University System Office entered into a capital lease of $1,278,000.00 at 3.83 percent for numerous items of equipment and a capital lease of $955,000.00 at 4.03 percent for software licenses. In May 2006, the University System Office refinanced lease obligation numbers 224, 232, 240 and 257 resulting in a decrease in interest rates from 4.95 percent, 5.65 percent, 5.65 percent and 4.79 percent, respectively to 4.10 percent for each lease obligation.

Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) as of June 30, 2006, are as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 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

Real Property Capital Leas es
$4,673,816.86 4,688,329.77 4,523,709.04 3,663,700.76 1,788,970.15 5,370,217.74 5,785,249.66 3,999,829.47 34,493,823.45 8,228,864.26 0.00
$26,264,959.19

The University System Office had no expense for rental of real property and equipment under operating leases.

University System Office Annual Financial Report FY 2006 26

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 2006, 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

2006 2005 2004

100% 100% 100%

$1,657,222.84 $1,575,446.47 $1,576,593.52

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to

University System Office Annual Financial Report FY 2006 27

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, 2006, for employees covered by ERS was $434,310.75. The University System Office's total payroll for all employees was $21,776,312.24.
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, 2006, 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 2006 amounted to $51,893.40, of which $45,378.74 was made by the University System Office and $6,514.66 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, 2006 financial report, which may be obtained through ERS.
University System Office Annual Financial Report FY 2006 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 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 2006, 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 $230,404.66 (9.65%) and $119,382.49 (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 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 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 System Office Annual Financial Report FY 2006 29

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 2006 amounted to $17,354.91 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 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.
University System Office Annual Financial Report FY 2006 30

A reconciliation of total estimated claims liabilities for the fiscal years ended June 30, 2006 and June 30, 2005 is shown below:

Unpaid Claims and Claim A djus tments (Prior year IBNR)
Incurred Claims and Claim A djus tments (Calculation of the other 3 lines )
Payments - Claims and Claim A djus tments (Payments made for claims only from the trial balance)
Unpaid Claim and Claim A djus tments (Current year IBNR)

June 30, 2006 $27,583,054.00 245,822,647.27 245,422,228.27 $27,983,473.00

June 30, 2005 $26,506,139.92 226,706,589.97 225,629,675.89 $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 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.

University System Office Annual Financial Report FY 2006 31

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, 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, 2006, there were 62 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, the University System Office recognized as incurred $265,470.47 of expenditures, which was net of $120,572.87 of participant contributions.
University System Office Annual Financial Report FY 2006 32

Note 15. Natural Classifications with Functional Classifications
The University System Office's operating expenses by functional classification for FY2006 are shown below:

Functional Classification FY2006

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

In s tru ctio n

Res earch

$0.00 $584,222.58
119,912.11

$0.00 105,861.92 25,344.70

830.83

4,094.91 532,563.61
23,129.00

7,043.91

Public Service

A ca d emic Support

Student Services

$0.00 1,648,849.10 367,050.99

($4,951.90) 1,454,012.40
346,130.13

$0.00 218,023.95 38,983.20

46,749.96 269,096.83 18,026,390.76 70,343,229.02 170,586.72

81,733.30
65,614.42 16,627,950.21
407,123.51

14,053.73
2,761.29 5,719.36

Total Expenses

$1,264,753.04

$138,250.53

$90,871,953.38 $18,977,612.07

$279,541.53

Functional Classification FY2 0 0 6

Natural Classification

Scholars hips & Fellows hips

Un a llo c a t e d Expens es

Total Expens es

Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships U tilitie s Supplies and Others Services D e pre c ia tion

$0.00 164,410.08

$0.00 692,302.73

($4,951.90) 21,781,264.14 5,446,929.42
0.00 575,303.08 433,506.91 24,059,208.42 377,784,445.20 7,288,070.43

Total Expenses

$164,410.08

$692,302.73

$437,363,775.70

In s titu tio n al Support
$0.00 17,770,294.19 4,549,508.29
431,935.26
5,960,347.04 290,267,939.09
5,994,928.47
$324,974,952.34

University System Office Annual Financial Report FY 2006 33

Note 16. Special Items The Georgia Public Telecommunications Commission ("the Commission") transferred Other Property and Equipment located at the tower sites through an Intergovernmental agreement to the University System Office. This agreement provides general obligation bonds to fund the digital conversion of the Commission's towers and transmitters. The value of this equipment at June 30, 2006 was $22,336,534.25 and the accumulated depreciation was $22,288,922.14 for a net value of $47,612.11. This transfer of assets is noted as a Special Item Transfer on the Statement of Revenues, Expenses and Changes in Net Assets. See Note 6 Capital Assets for additional information.
University System Office Annual Financial Report FY 2006 34

VALDOSTA STATE UNIVERSITY
Financial Report
For the Year Ended June 30, 2006

Valdosta State University Valdosta, Georgia

Dr. Ronald M. Zaccari President

James Black Vice President for Finance and Administration

VALDOSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2006
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 ................................................................................................. 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 ........................................................................ 32

VALDOSTA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Valdosta State University is one of the 35 institutions of higher education 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.

FY2006 FY2005 FY2004

Faculty
466 455 442

Students (Headcount)
10,503 10,400 10,547

Students (FTE)
9,431 9,295 9,228

Overview of the Financial Statements and Financial Analysis
Valdosta State University is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.
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.

Valdosta State University Annual Financial Report FY 2006 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
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 Unrest rict ed Total Ne t Asse ts

June 30, 2006
$10,761,953.09 125,244,166.33
11,672,664.83 147,678,784.25
7,631,215.80 27,293,019.56 34,924,235.36
98,702,388.69 2,420,924.51 3,771,794.76 0.00 7,859,440.93
$112,754,548.89

June 30, 2005
$9,122,464.86 117,996,220.21
11,464,372.87 138,583,057.94
7,253,425.73 20,353,977.92 27,607,403.65
97,770,276.29 3,041,856.40 3,093,606.08 0.00 7,069,915.52
$110,975,654.29

The total assets of the institution increased by $9,095,726.31. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $7,247,946.12 of investment in plant, net of accumulated depreciation, due to the addition of a leased asset, Lowndes Hall, and related renovations. 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 $7,316,831.71. The primary cause for the increase was in non-current liabilities, primarily $6,839,677.34 in non-current lease payment obligations related to the acquisition of Lowndes Hall, the aforementioned leased asset, which contributed to the increase in invested in capital assets, net of debt. The combination of the increase in total assets of $9,095,726.31 and the increase in total liabilities of $7,316,831.71 yields an increase in total net assets of $1,778,894.60. The increase in total net assets is primarily in the category of

Valdosta State University Annual Financial Report FY 2006 2

unrestricted net assets, which is largely due to a planned increase in Auxiliary Net Assets to meet funding requirements of Dining Service renovations in process.
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, 2006

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

$63,241,403.23 110,721,583.61 (47,480,180.38)
48,440,014.62
959,834.24 819,060.36 1,778,894.60 110,975,654.29
0.00 110,975,654.29 $112,754,548.89

$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
0.00 106,562,585.45 $110,975,654.29

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:

Valdosta State University Annual Financial Report FY 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$26,768,895.38
11,361,517.02 622,157.79
23,699,868.16 788,964.88
63,241,403.23
47,853,835.22 809,999.64
1,266,544.43 917,926.67 (642,526.18)
50,205,779.78
722,535.36 96,525.00
819,060.36
$114,266,243.37

June 30, 2005
$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

Valdosta State University Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and June 30, 2005

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, 2006
$42,996,879.95 333,082.86
1,656,323.65 7,217,800.10 6,878,994.07 17,374,268.92 9,550,853.79 3,560,277.87 21,153,102.40
110,721,583.61

Nonoperat ing Expenses Int erest Expense (Capit al Asset s)
T ot al Expenses

1,765,765.16 $112,487,348.77

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

There were two primary increases in Revenues. The first was Tuition and Fees, net of scholarship allowances, which increased $3,496,941.15. This increase was due to a general tuition increase of approximately 5%, which resulted in approximately $1,753,642.38 of additional revenue. However, a new fee, University Union Construction, was also implemented in the current year. Revenues associated with that fee totaled $1,618,495.16.
Second, revenues associated with the residential life, net of sponsored and unsponsored scholarships, category increased approximately $1,684,085.64 during the year. This increase reflects the changing environment of residential life on the University's campus. During the year, residential life opened the second phase of Centennial Hall, increasing the number of on campus residence available rooms by approximately 200. The University entered into a long-term leasing relationship for additional housing units with the Valdosta State University Real Estate Foundation LLC, an affiliated organization.
The compensation and employee benefits category increased by approximately $5,090,576.76. The increase reflects an increase in faculty and staff salaries as well as the cost of health insurance for the employees of the institution.
Utilities increased by approximately $853,287.77 during the past year. The increase was primarily associated with the increased electrical costs as well as natural gas costs that were experienced in the winter of fiscal year 2006.

Valdosta State University Annual Financial Report FY 2006 5

Under non-operating revenues (expenses), state appropriations increased by approximately $4,280,678.74. The addition in state appropriations was due to formula funding increases for enrollment and other funding allocations such as merit increases.

Statement of Cash Flows

The final statement presented by the Valdosta State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($39,903,467.71) 50,125,344.12 (9,007,115.99) 698,185.82 1,912,946.24 3,989,536.44
$5,902,482.68

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

Capital Assets
The University had one significant capital asset addition for facilities in fiscal year 2006. The Lowndes Hall renovation was completed and opened during the fiscal year, for which the University entered into a capital lease with the Valdosta State University Foundation Real Estate I, LLC. The lease value is approximately $7,116,694.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Valdosta State University Annual Financial Report FY 2006 6

Long Term Debt and Liabilities Valdosta State University had Long-Term Debt and Liabilities of $29,232,516.99 of which $1,939,497.43 was reflected as current liability at June 30, 2006. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Valdosta State University has included the financial statements and notes for all required component units for FY2006. The Valdosta State University Foundation, Inc. Consolidated had endowment investments of $17.8 million as of December 31, 2005. Further 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 continues to move toward its strategic goals incorporating planning and realizing efficiencies in operations whenever possible. The University anticipates the current fiscal year will be much like last year 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 2006 7

Statement of Net Assets

VALDOSTA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2006

AS S ETS C u rre n t Asse ts Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Due From Component Unit s P ledges Receivable Due From P rimary Government Invent ories (not e 4) P repaid it ems Ot her Asset s T ot al Current Asset s
Non cu rre n t Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net P ledges Receivable Capit al Asset s, net (not e 6) Ot her Asset s 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 Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Lease P urchase Obligat ions (current port ion) Compensat ed Absences (current port ion) Revenue/Mort gage Bonds P ayable (current ) Not es and Loans P ayable (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 ) Compensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreement s Not es and Loans P ayable (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 Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS

Val dosta S tate Un i ve rsi ty
$5,873,701.34
673,482.09 2,531,227.69
222,440.07
1,364,103.58 96,998.32
10,761,953.09
28,781.34 11,588,208.73
55,674.76
125,244,166.33
136,916,831.16 147,678,784.25
2,015,038.35 1,157,735.80
636,656.00 860,155.45
29,039.93 993,092.84 403,950.10 1,496,503.39
39,043.94 7,631,215.80
25,947,828.20 1,194,235.96
150,955.40 27,293,019.56 34,924,235.36
98,702,388.69
2,420,924.51 3,771,794.76
7,859,440.93 $112,754,548.89

C om pon e n t Un i t Val dosta S tate Un i ve rsi ty
Fou n dati on , In c.
$4,288,687.00
50,000.00 247,965.00
14,132.00 4,600,784.00
7,238,266.00 17,815,329.00
134,749.00 34,165,199.00
1,209,501.00 60,563,044.00 65,163,828.00
1,551,149.00
107,520.00 98,297.00
395,061.00 913,719.00 3,065,746.00
38,095,457.00 430,303.00 349,862.00
38,875,622.00 41,941,368.00
2,069,098.00 16,712,991.00
1,604,390.00 517,675.00
2,318,306.00 $23,222,460.00

Valdosta State University Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets
VALDOSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholars hip Allowances Gifts and Contributions Endowment Income (per s pending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expenses
Salaries : Faculty Staff
Employee Benefits Other Pers onal 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)

Valdos ta State Uni ve rs i ty

Valdosta State Univers ity
Foundation, Inc.

$30,950,238.17 4,181,342.79
9,126,321.41 1,769,775.24
465,420.37 622,157.79
6,968,553.48 5,619,146.82 4,988,459.32 1,021,161.62 1,514,745.08 3,121,011.26
466,790.58 788,964.88 63,241,403.23

$0.00 967,668.00 1,597,283.00
532,443.00 2,894,341.00
207,457.00 6,199,192.00

29,346,571.63 26,000,895.18 16,358,801.73
209,491.74 970,140.54 5,041,080.16 4,539,337.29 21,936,331.66 6,318,933.68
110,721,583.61 (47,480,180.38)

947,585.00 712,090.00 1,661,958.00 3,321,633.00 2,877,559.00

Valdosta State University Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
VALDOSTA STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Valdos ta State Uni ve rs i ty

Valdosta State Univers ity
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 losses Capital Grants and Gifts 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

47,853,835.22

619,339.84 186,128.37
4,531.43 1,266,544.43
917,926.67 (1,765,765.16)
(642,526.18) 48,440,014.62
959,834.24

9,580.00 (862,052.00) (244,283.00) (1,096,755.00) 1,780,804.00

722,535.36 96,525.00
819,060.36 1,778,894.60

780,466.00 780,466.00 2,561,270.00

110,975,654.29 0.00
110,975,654.29 $112,754,548.89

20,661,190.00 0.00
20,661,190.00 $23,222,460.00

Valdosta State University Annual Financial Report FY 2006 10

Statement of Cash Flows
VALDOS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2006
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 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 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, 2006
$26,902,096.09
11,503,565.83 284,155.46
(43,685,499.14) (55,095,697.85)
(5,041,080.16) (184,812.32) 201,272.62
6,938,415.81 5,592,316.69 5,925,735.98 1,024,434.14 1,523,586.36 3,317,575.92 (637,339.95) 1,527,806.81 (39,903,467.71)
47,853,835.22 180,637.95
2,090,870.95 50,125,344.12
597,251.09 (6,947,780.80)
(890,821.12) (1,765,765.16) (9,007,115.99)
(102,328.99) 800,514.81 698,185.82 1,912,946.24 3,989,536.44 $5,902,482.68

Valdosta State University Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
VALDOS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2006
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 P repaid Items Not es Receivable, Net 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 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

June 30, 2006
($47,480,180.38)
6,318,933.68 204,553.64 46,133.50 17,759.46 16,460.30 125,434.72 474,523.09 219,503.09 153,411.19
($39,903,467.71)
$7,177,783.46 $117,411.86 ($221,808.37)

Valdosta State University Annual Financial Report FY 2006 12

VALDOSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 FY2006, Valdosta State University is reporting the activity for the Valdosta State University Foundation, Inc. Consolidated, which includes the activities of Valdosta State University Foundation, Valdosta State University Foundation Real Estate I, LLC, and Valdosta State University Foundation Real Estate II, LLC.
See Note 16, Component Units, for foundation notes.
Valdosta State University Annual Financial Report FY 2006 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 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
Valdosta State University Annual Financial Report FY 2006 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 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, 2006, GSFIC transferred capital additions valued at $125,283.37 to Valdosta State University.
Valdosta State University Annual Financial Report FY 2006 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. Valdosta State University had accrued liability for compensated absences in the amount of $2,537,328.16 as of 7-1-2005. For FY2006, $1,984,205.53 was earned in compensated absences and employees were paid $1,830,794.34, for a net increase of $153,411.19. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $2,690,739.35.
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.
Valdosta State University Annual Financial Report FY 2006 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:

June 30, 2006

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans T erm Endowments Quasi-Endowment s T otal Restricted Expendable

$2,617,516.80 35,565.65
319,771.48 691,332.91 107,607.92 $3,771,794.76

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, 2006
$1,025,712.83 4,816,041.51 338,131.23 1,679,555.36
$7,859,440.93

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.
Valdosta State University Annual Financial Report FY 2006 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. 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.
Valdosta State University Annual Financial Report FY 2006 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, 2006, the carrying value of deposits was $5,846,371.68 and the bank balance was $7,332,820.71. All of the University's $7,232,072.48 in deposits were uninsured and uncollateralized.
Valdosta State University Annual Financial Report FY 2006 19

B. Investments

At June 30, 2006, the carrying value of the University's investments was $11,588,208.73, 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:

Type of Investment

Investment Pools Board of Regents Total Return Fund Diversified Fund Sub Total

$2,952,245.24 3,085,930.89 6,038,176.13

Office of Treasury and Fiscal Services Georgia Extended Asset Pool
Sub Total

5,550,032.60 5,550,032.60

Total Investment Pools

$11,588,208.73

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.
The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the University's total investment of $ 2,952,245.24 in the Total Return Fund, $949,426.00 is invested in debt securities.
The Weighted Average Maturity of the Diversified Fund is 8.2 years. Of the University's total investment of $3,085,930.89 in the Diversified Fund, $903,303.00 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 $1.97 at June 30, 2006. The Georgia Extended Asset Pool is an AAAf rated investment pool by Standard and Poor's.

Valdosta State University Annual Financial Report FY 2006 20

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. However, the duration of the Georgia Extended Asset Pool was .92 years for the month of June 2006.

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, 2006:

June 30, 2006

St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Georgia St at e Financing and Invest m ent Com m ission Due from Com ponent Unit s Ot h er
Less Allowance for Doubt ful Account s
Net Account s Receivable

$62,728.44 529,849.31 673,482.09 410,879.92 222,440.07 1,557,371.67 3,456,751.50
29,601.65
$3,427,149.85

Note 4. Inventories

Inventories consisted of the following at June 30, 2006:

Bookst ore P hysical P lant Other
T otal

June 30, 2006
$945,150.55 354,933.26 64,019.77
$1,364,103.58

Note 5. Notes/Loans Receivable

The Federal Perkins Loan Program (the Program) comprises approximately one-half of the loans receivable at June 30, 2006 (the remainder 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, 2006, no provision has been made for uncollectible loans.

Valdosta State University Annual Financial Report FY 2006 21

Note 6. Capital Assets

Following are the changes in capital assets for the year ended June 30, 2006:

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

Beginning B al an ce s 7/1/2005
$2,434,485.21 0.00
606,219.34 3,040,704.55

Addi ti on s
$55,269.00 26,817.00
3,477,881.90 3,559,967.90

Re du cti on s
$0.00
858,877.43 858,877.43

En di n g B al an ce 6/30/2006
$2,489,754.21 26,817.00
3,225,223.81 5,741,795.02

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

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

1,287,309.62 1,462,723.43
645,759.73 7,177,783.46 1,229,788.62
11,803,364.86

2,021,600.00
456,568.15 5,700.03
22,961.86
2,506,830.04

118,080,203.17 6,060,814.43
14,674,714.93 27,666,836.17 19,414,548.90
0.00 185,897,117.60

Less: Accumulated Depreciation Infrast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation

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

3,142,002.00 197,922.76 975,353.79 953,748.13
1,049,907.00
6,318,933.68

1,351,945.00
189,692.62 4,655.03
22,961.86
1,569,254.51

35,961,778.66 2,882,072.00
10,743,353.72 1,762,271.14
15,045,270.77 0.00
66,394,746.29

T otal Capital Assets, Being Depreciated, Net 114,955,515.66

5,484,431.18

937,575.53 119,502,371.31

Capital Assets, net

$117,996,220.21

$9,044,399.08

$1,796,452.96 $125,244,166.33

Valdosta State University Annual Financial Report FY 2006 22

Note 7. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2006.

Ot her Deferred Revenue T otals

June 30, 2006 $860,155.45 $860,155.45

Note 8. Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2006 was as follows:

Le as e s Lease Obligations

Beginning Balance
July 1, 2005
$19,991,053.56

Addi ti on s $7,177,783.46

Re du cti on s

En di n g B al an ce June 30, 2006

$817,058.72 $26,351,778.30

C u rre n t Portion
$403,950.10

O ther Liabilities Compensated Absences Notes/Loans Payable T ot al

2,537,328.16 234,890.36
2,772,218.52

1,984,205.53 1,984,205.53

1,830,794.34 44,891.02
1,875,685.36

2,690,739.35 189,999.34
2,880,738.69

1,496,503.39 39,043.94
1,535,547.33

Total Long Term O bligations

$22,763,272.08 $9,161,988.99

$2,692,744.08

$29,232,516.99 $1,939,497.43

Note 9. Significant Commitments

The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,638,637.08 as of June 30, 2006. 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 2007 and 2031. Expenditures for fiscal year 2006 were $2,656,586.28 of which $1,765,765.16 represented interest and $890,821.12 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, 2006:

Valdosta State University Annual Financial Report FY 2006 23

Buildings Equipment Total Assets Held Under Capital Lease

$25,810,218.44 94,346.59
$25,904,565.03

Certain capital leases provide for renewal and/or purchase options.
Valdosta State University had three capital leases with related entities in the current fiscal year. In 2006, Valdosta State University entered into a capital lease of $7,116,694 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC. The University leased Lowndes Hall, a housing unit located on main campus for a twenty-five year period. In 2005, the University entered into a capital lease for a twenty-five year period at an amount of $19,285,471.00 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC, for Centennial Hall, a housing unit located on Sustella Avenue. Finally, in 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, 2006 on these capital leases is $7,193,676.00, $18,261,647.66, and $807,063.31 respectively.
Valdosta State University also has various capital leases for equipment with an outstanding balance at June 30, 2006 in the amount of $89,391.33.
OPERATING LEASES
Valdosta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2007 through 2015. 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.
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, 2006, were as follows:

Valdosta State University Annual Financial Report FY 2006 24

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 T otal 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

Real Property/Equipment

Capital Leases

Operating Leases

$2,468,711.54 2,503,024.08 2,530,735.10 2,555,236.65 2,364,350.12
11,980,342.94 11,666,000.82 11,790,060.00 10,321,734.60 58,180,195.85 31,828,417.55
0.00 $26,351,778.30

$240,240.00 139,440.00 139,440.00 139,440.00 139,440.00 418,320.00
$1,216,320.00

Valdosta State University's FY2006 expense for rental of real property and equipment under operating leases was $315,240.

Valdosta State University Annual Financial Report FY 2006 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 2006, 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

2006 2005 2004

100% 100% 100%

$2,878,308.57 $2,805,355.72 $2,870,027.54

Employees' Retirement System of Georgia

Plan Description Valdosta 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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Valdosta State University Annual Financial Report FY 2006 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 University's payroll for the year ended June 30, 2006, for employees covered by ERS was $29,265.96. The University's total payroll for all employees was $55,556,958.55.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $3,485.52, of which $3,046.56 was made by the University and $438.96 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2006, financial report, which may be obtained through ERS.
Valdosta State University Annual Financial Report FY 2006 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 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 2006, 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 $1,789,243.93(9.65%) and $927,195.64 (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.
Valdosta State University Annual Financial Report FY 2006 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 2006 amounted to $85,410.69 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. Valdosta State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both 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
Valdosta State University Annual Financial Report FY 2006 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 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, 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, 2006, 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, 2006, Valdosta State University recognized as incurred $1,675,478.70 of expenditures, which was net of $642,375.12 of participant contributions.
Valdosta State University Annual Financial Report FY 2006 30

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

Natural Classification
Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation
Total Expenses
Natural Classification
F acult y St aff B enefit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation
Total Exp enses

Instruction

Research

Functional Classification FY2006

Public Service

Academic Support

Student Services

Institutional Support

$ 29,042,875.58 2,712,840.68 8,023,834.35 65,979.37 242,042.93 199,578.59 221,065.92 2,214,940.01 273,722.52

$ 82,441.40 47,102.74 2,103.06
10,847.89 770.00
151,062.31 38,755.46

$ 74,773.78 651,151.92 177,911.24
33,997.88 10,753.00 13,059.35 195,687.51 498,988.97

$ 102,174.98 3,612,937.09
924,589.84 5,454.88
369,693.13
45,830.36 702,960.64 1,454,159.18

$ 0.00 3,340,737.34
914,775.51 3,418.15
103,191.12
103,364.14 2,331,748.13
81,759.68

$ 26,493.13 6,867,676.85 3,626,310.28
51,743.57 109,136.92 346,435.72 257,766.65 5,717,453.10 371,252.70

$ 42,996,879.95

$ 333,082.86

$ 1,656,323.65

$ 7,217,800.10

$ 6,878,994.07

$ 17,374,268.92

P lant Op erat io n s & Maintenance

Functional Class ification FY2006

Sch o lar sh ip s & Fellowships

A ux ilia r y Ent erprises

Un allo cat ed E x p en ses

T otal E x p en ses

$ 0.00 3 ,0 7 5 ,2 5 6 .0 5
1,10 9 ,10 6 .7 1 (8 6 0 ,5 10 .9 9 )
4 ,0 4 5 .8 5
3 ,4 10 ,5 9 9 .6 1 2 3 4 ,9 6 9 .5 3 2 ,5 7 7 ,3 8 7 .0 3

$ 0.00 3 ,5 6 0 ,2 7 7 .8 7

$ 17,812.76 5 ,6 9 3 ,19 2 .5 1 1,5 8 0 ,17 0 .7 4 9 4 3 ,4 0 6 .7 6
9 7 ,18 4 .8 2 9 2 3 ,2 6 4 .9 8 4 8 7 ,6 5 1.2 6 10 ,3 8 7 ,5 10 .4 3 1,0 2 2 ,9 0 8 .14

$ 0.00

$ 29,346,571.63 2 6 ,0 0 0 ,8 9 5 .18 16 ,3 5 8 ,8 0 1.7 3 2 0 9 ,4 9 1.7 4 9 7 0 ,14 0 .5 4 5 ,0 4 1,0 8 0 .16 4 ,5 3 9 ,3 3 7 .2 9 2 1,9 3 6 ,3 3 1.6 6 6 ,3 18 ,9 3 3 .6 8

$ 9,550,853.79

$ 3,560,277.87

$ 21,153,102.40

$ 0.00

$ 110,721,583.61

Valdosta State University Annual Financial Report FY 2006 31

Note 16. Component Units
Valdosta State University Foundation- Consolidated (Foundation) is a legally separate, taxexempt component unit of Valdosta State University (University). The Foundation is also the sole member of VSU Foundation Real Estate I, LLC, and VSU Foundation Real Estate II, LLC. The Foundation and any subsidiaries under its control act primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The twenty-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, 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, which is different than that of the University.
Property and Equipment and Construction in Progress 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, 2005, the Foundation distributed $1,661,958 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Offices at 102 Georgia Avenue, Valdosta, GA 31698 or from the Foundation's website at http://www.valdosta.edu/foundation/.
Investments for Component Units:
Valdosta State University Foundation (consolidated) holds endowment investments in the amount of $17,815,329. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Valdosta State University Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the earnings may be used for academic scholarships. The remaining earnings are set aside as a reserve.
Valdosta State University Annual Financial Report FY 2006 32

Investments are comprised of the following amounts at December 31, 2005:

Money Market Accounts Life Income agreements Corporate Bonds Equity Securities Mutual Funds Equity Common Trust Funds
Total Investments

Cost
$499,042.00 654,632.00
4,216,822.00 2,436,440.00 1,411,471.00 5,085,401.00
$14,303,808.00

Fair Value
$499,042.00 654,632.00
4,950,863.00 2,750,539.00 1,376,015.00 7,584,238.00
$17,815,329.00

Capital Assets for Component Units:

Valdosta State University Foundation, Inc. holds the following Capital Assets as of December 31, 2005:

December 31, 2005

Capital Assets not being Depreciated: Land and other Assets Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$3,016,925.00 3,925,877.00 6,942,802.00
29,039,397.00 29,039,397.00
1,817,000.00 27,222,397.00 $34,165,199.00

Long-term Liabilities for Component Units:
Valdosta State University Foundation issued Bonds to finance the acquisition of facilities for Valdosta State University. The bonds mature serially and are collateralized by real estate. The interest rates for the 95 and 98 bonds are 4.8% and 5.0%, respectively. These Bonds are represented as Property and Equipment and a Bond Payable on the Foundation's financial statement. Since the University leases the property from the Foundation, the University has accounted for this transaction as a capital lease and related Lease Obligation.
The Foundation also incurred a Note payable to a local financial institution to assist with updating University Athletic facilities. 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.

Valdosta State University Annual Financial Report FY 2006 33

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 debt for the Foundation for the fiscal year ended December 31, 2005 are shown below:

Beginning Balance January 1, 2005

Additions

Reductions

Ending

Amounts due

Balance December 31, 2005

within One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable
Total Long Term Debt

$240,692.00 38,925,739.00
$39,166,431.00

$1,059,594.00 $1,059,594.00

$36,705.00 435,221.00
$471,926.00

$1,263,581.00 38,490,518.00
$39,754,099.00

$913,719.00 395,061.00
$1,308,780.00

Annual debt service requirements to maturity for Notes and Revenue Bonds Payable are as follows:

Year ending December 31:

2006

1

2007

2

2008

3

2009

4

2010

5

2011 t hrough 2015

6-10

2016 t hrough 2020

11-15

2021 t hrough 2025

16-20

2026 t hrough 2030

21-25

Unamortized Bond Premium, net

Notes and Bonds Payable

Prin c ip a l

Interes t

Total

$1,308,780.00 448,857.00
1,240,706.00 1,170,482.00 1,177,775.00 7,960,838.00 7,500,000.00 9,610,000.00 9,635,000.00 40,052,438.00 (298,339.00) $39,754,099.00

$1,716,230.00 1,716,230.00 1,694,905.00 1,668,455.00 1,640,805.00 7,545,962.50 6,085,335.00 3,964,675.70 1,247,312.30
27,279,910.50
$27,279,910.50

$3,025,010.00 2,165,087.00 3,025,010.00 2,165,087.00 2,935,611.00
15,506,800.50 13,585,335.00 13,574,675.70 10,882,312.30 66,864,928.50
(298,339.00) $61,674,831.50

Valdosta State University Annual Financial Report FY 2006 34

WAYCROSS COLLEGE
Financial Report
For the Year Ended June 30, 2006

Barbara P. Losty
President

Waycross College Waycross, Georgia
William E. Deason
Vice President for Business Affairs

WAYCROSS COLLEGE ANNUAL FINANCIAL REPORT
FY 2006
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

WAYCROSS COLLEGE
Management's Discussion and Analysis

Introduction

Waycross College is one of the 35 institutions of higher education 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 1,000 students each year. The institution has experienced a decrease in enrollment this year as shown by the comparison numbers that follow.

FY2006 FY2005 FY2004

Faculty
23 19 20

Students (Headcount)
882 1,005 1,027

Students (FTE)
622 663 697

Overview of the Financial Statements and Financial Analysis

Waycross College is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

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 2006 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, 2006
$1,163,576.72 8,624,301.53 269,673.69
10,057,551.94
414,717.57 41,545.48
456,263.05
8,624,301.53 131,240.03 91,535.21
754,212.12 $9,601,288.89

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

The total assets of the institution decreased by ($159,233.84). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($358,560.51) of investment in plant, net of accumulated depreciation, offset by an increase in Cash and Cash Equivalents of $143,982.98. 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 $40,507.57. The primary cause for this increase was in current liabilities, primarily $28,427.90 in Deferred Revenue. Compensated absences (current) also contributed to the increase by $12,110.19. The combination of the decrease in total assets of ($159,233.84) and the increase in total liabilities of $40,507.57 yields a decrease in total net assets of ($199,741.41). The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of ($358,560.51).

Waycross College Annual Financial Report FY 2006 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, 2006

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

$2,194,680.30 6,094,464.84 (3,899,784.54) 3,652,365.56
(247,418.98) 47,677.57
(199,741.41) 9,801,030.30
0.00 9,801,030.30 $9,601,288.89

$2,201,680.32 6,104,060.66 (3,902,380.34) 3,436,281.63
(466,098.71) 252,703.58 (213,395.13) 9,825,619.80 188,805.63 10,014,425.43 $9,801,030.30

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 2006 3

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$714,990.67
981,604.97 19,530.75
470,790.75 7,763.16
2,194,680.30
3,430,372.96 123,705.30 49,866.50 45,953.06 2,467.74
3,652,365.56
47,677.57
47,677.57
$5,894,723.43

June 30, 2005
$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

Waycross College Annual Financial Report FY 2006 4

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$1,656,790.67
659,866.52 546,887.53 1,131,717.38 1,131,052.12 526,657.86 441,492.76
6,094,464.84
0.00 $6,094,464.84

June 30, 2005
$1,519,501.76
846,228.80 564,928.77 1,026,961.85 1,202,389.81 519,617.36 424,432.31
6,104,060.66
0.00 $6,104,060.66

Total operating revenue decreases of ($7,000.02) are primarily due to decreases in Grants and Contracts ($29,259.32) and other revenue ($11,164.63), offset by increases in Tuition and fees of $20,681.04 and Auxiliary revenue of $14,697.04.
The increase in tuition and fee revenue even with an enrollment drop is due to receiving four year college rates for classes taught at the Liberty Center in conjunction with Armstrong Atlantic State University. A pro-rata share of technology fees are also received for these students. This program began in Fall, 2005.
Total operating expenses decreased by ($9,595.82). This decrease includes reductions in Supplies and other services by ($153,935.86) that were mostly offset by increases in Benefits of $107,099.63 and Utilities of $20,237.78. The significant decrease in Supplies and other services was primarily due to declining enrollment. Increases in Benefits and Utilities were the result of increased health insurance and electricity costs, respectively.
Non-operating revenues increased by $216,083.93. The increase is primarily due to an increase in State appropriations of $210,721.10.

Waycross College Annual Financial Report FY 2006 5

Statement of Cash Flows
The final statement presented by Waycross College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2006 and 2005, 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, 2006
($3,374,015.59) 3,605,199.28 (122,213.14) 35,012.43 143,982.98 729,860.56
$873,843.54

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

Capital Assets
Waycross College completed the sidewalk, gazebo, and exterior classroom project that was started in FY 2005. This two phase project was funded using funds from the Georgia State Finance and Investment Commission (GSFIC) in the amount of $69,335.57 and college funds totaling $153,652.43 over the two years. Of the total project cost of $222,988.15, $213,420.15 was capitalized this year upon completion of the total project. An additional $8,430.00 was received from GSFIC during the year for other non-capitalized projects, including drainage improvements.
Projected funding by GSFIC for FY 2007 will be approximately the same as it was for FY 2006.
For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.

Waycross College Annual Financial Report FY 2006 6

Long Term Debt and Liabilities Waycross College had Long-Term Debt and Liabilities of $198,960.53 of which $157,415.05 was reflected as current liability at June 30, 2006. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Waycross College has included the financial statements and notes for all required component units for FY2006. The Waycross College Foundation, Inc. had endowment investments of $1.25 million as of June 30, 2006. 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. We have been able to control decreases in operating revenue due to enrollment decreases by controlling expenditures and an increase in State appropriations this year. 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 2006 7

Statement of Net Assets

WAYCROSS COLLEGE STATEMENT OF NET ASSETS
June 30, 2006

Component Unit

AS S ETS Current As sets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial As sistance Receivables - Other Due From Component Units Inventories (note 4) Prepaid items Other Assets Total Current As sets
Noncurrent Assets Investments (including Real Estate) Capital As sets , net (note 6) Other Assets Total Noncurrent Ass ets
TOTAL ASSETS
LIABILITIES Current Liabilities Accounts Payable Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES
NET ASSETS Invested in Capital Ass ets, 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 AS S ETS

Waycross College

Waycross College Foundation, Inc.

$873,843.54
98,147.59 108,915.41
4,533.38 78,136.80
1,163,576.72
269,673.69 8,624,301.53
8,893,975.22 10,057,551.94
46,233.41 164,906.58
2,663.05 43,499.48
157,415.05 414,717.57
41,545.48 41,545.48 456,263.05
8,624,301.53
131,240.03 91,535.21
754,212.12 $9,601,288.89

$178,339.64 29,634.76
498.39 208,472.79 1,245,249.38 1,245,249.38 1,453,722.17
2,521.60
4,533.38 7,054.98
0.00 7,054.98
1,212,016.79 98,863.83
135,786.57 $1,446,667.19

Waycross College Annual Financial Report FY 2006 8

Statement of Revenues, Expenses and Changes in Net Assets

WAYCROSS COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Waycros s College

Waycros s Col l e g e Foundation, Inc.

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) Grants and Contracts Fe d e ra l Sales and Services Rents and Royalties A uxiliary Enterpris es Books tore Food Services Other Organizations Other Operating Revenues Total Operating Revenues
EXPENS ES Operating Expens es
Salaries : Fa c u lt y Staff
Employee Benefits 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 W aycros s College
Total Operating Expens es Operating Income (los s )

$1,198,056.41 483,065.74
981,604.97 19,530.75
2,835.00
406,661.69 39,653.85 24,475.21
4,928.16 2,194,680.30
1,086,754.04 1,764,604.38
860,259.08 31,905.06
563,611.83 188,991.54 1,067,419.95 530,918.96
6,094,464.84 (3,899,784.54)

$0.00 37,327.88 34,357.79
71,685.67
1,200.00 412.00
9,483.22 60,852.05 71,947.27
(261.60)

Waycross College Annual Financial Report FY 2006 9

Statement of Revenues, Expenses and Changes in Net Assets, Continued
WAYCROSS COLLEG E STATEMENT of REVENUES, EXPENSES, and CHANG ES i n NET ASSETS
for the Year Ended June 30, 2006
Component Unit

Waycros s College

Waycros s Col l e g e Foundation, Inc.

NONOPERATING REVENUES (EXPENS ES ) State A ppropriations Grants and Contracts State Other Gifts Inves tment Income (endowments , auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues , expens es , gains , or los s Capital Grants and Gifts State 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

3,430,372.96
65,243.02 58,462.28 49,866.50 45,953.06
2,467.74 3,652,365.56 (247,418.98)
47,677.57
47,677.57 (199,741.41)
9,801,030.30 0.00
9,801,030.30 $9,601,288.89

2,452.82
2,452.82 2,191.22
46,793.97 46,793.97 48,985.19
1,397,682.00 0.00
1,397,682.00 $1,446,667.19

Waycross College Annual Financial Report FY 2006 10

Statement of Cash Flows
WAYCROSS COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Principal Paid on Ins tallment Debt Interes t Paid on Ins tallment Debt 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 Sale 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, 2006 $739,832.19 971,354.52 19,530.75
(2,152,577.54) (2,839,096.58)
(563,611.83)
390,878.52 41,708.79
23,843.49 (5,877.90) (3,374,015.59) 3,430,372.96 1,254.52 173,571.80
3,605,199.28
(122,213.14)
(122,213.14) 1,757.22
44,615.01 (11,359.80) 35,012.43 143,982.98 729,860.56 $873,843.54

Waycross College Annual Financial Report FY 2006 11

Statement of Cash Flows, Continued
WAYCROSS COLLEG E STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($3,899,784.54)
530,918.96 (37,056.03)
(7,617.03) 270.00
(2,801.86) 28,427.90
1,426.96 12,200.05 ($3,374,015.59)
$1,338.05 ($47,677.57)

Waycross College Annual Financial Report FY 2006 12

WAYCROSS COLLEGE NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
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-five (35) 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 2005. 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 FY2006, Waycross College is reporting the activity for the Waycross 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
Waycross College Annual Financial Report FY 2006 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 predominant 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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
Waycross College Annual Financial Report FY 2006 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.
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 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, 2006, GSFIC did not transfer any capital additions to Waycross College.
Deposits Deposits represent good faith deposits from students. Waycross College does not require student deposits.
Waycross College Annual Financial Report FY 2006 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. Waycross College had accrued liability for compensated absences in the amount of $186,760.48 as of 7-1-2005. For FY2006, $145,276.08 was earned in compensated absences and employees were paid $133,076.03, for a net increase of $12,200.05. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $198,960.53.
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.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Waycross College Annual Financial Report FY 2006 16

Expendable Restricted Net Assets include the following:

Res tricted - E&G and Other Organized A ctivities Total Res tricted Expendable

June 30, 2006
$91,535.21 $91,535.21

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, 2006
$179,866.48 429,462.98
11,307.08 133,575.58 $754,212.12

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 2006 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. 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.
Waycross College Annual Financial Report FY 2006 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 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.
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, 2006, the carrying value of deposits was $831,387.68 and the bank balance was $962,809.40. Of the College's deposits, $862,809.40 were uninsured. Of these uninsured deposits, $862,809.40 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.
Waycross College Annual Financial Report FY 2006 19

B. Investments

At June 30, 2006, the carrying value of the College's investments was $ 310,950.55, 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 P ools Board of Regents Short-Term Fund Legal Fund Total Return Fund
Total Investment P ools

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

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 has no formal policy for managing interest rate risk since all investments are in the Board of Regents Investment Pool.
The Weighted Average Maturity of the Short-Term Fund is 1.3 years. Of the College's total investment of $41,276.86 in the Short-Term Fund, $40,723 is invested in debt securities.
The Weighted Average Maturity of the Legal Fund is 3.1 years. Of the College's total investment of $79,658.80 in the Legal Fund, $79,658.80 is invested in debt securities.
The Weighted Average Maturity of the Total Return Fund is 8.2 years. Of the College's total investment of $190,014.89 in the Total Return Fund, $61,339 is invested in debt securities.
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 has no formal policy for managing credit quality risk since all investments are in the Board of Regents Investment Pool. As previously stated, the Board of Regents Investment Pool is not rated.

Waycross College Annual Financial Report FY 2006 20

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 has no formal policy for managing custodial credit risk since all investments are in the Board of Regents Investment Pool.
At June 30, 2006, $310,950.55 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.

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$1,107.17 24,033.20 98,147.59 4,533.38 84,573.09 212,394.43
798.05
$211,596.38

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Food Services Phys ical Plant Other
Total

June 30, 2006
$60,867.51 4,613.73 12,135.66 519.90
$78,136.80

Note 5. Notes/Loans Receivable The College did not have Notes/Loans Receivable.

Waycross College Annual Financial Report FY 2006 21

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital A s s ets , Not Being Depreciated: La n d Capitalized Collections Cons truction W ork-in-Progres s
Total Capital A s s ets Not Being Depreciated
Capital A s s ets , Being Depreciated: Infras tructure Building and Building Improvements Facilities and Other Improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections Total A s s ets Being Depreciated
Les s : A ccumulated Depreciation Infras tructure Bu ild in g s Facilities and Other improvements Eq u ip me n t Capital Leas es Library Collections Capitalized Collections 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 7/1/2005
$358,789.49
75,045.60 433,835.09

Additions $0.00
0.00

Reductions
$0.00
75,045.60 75,045.60

Ending B al anc e 6/30/2006
$358,789.49 0.00 0.00
358,789.49

1,343,722.00 11,276,570.76
980,473.00 1,079,712.97
1,135,807.27
15,816,286.00

213,420.15 6,475.00
27,508.90
247,404.05

1,824.00 1,824.00

1,343,722.00 11,276,570.76
1,193,893.15 1,086,187.97
0.00 1,161,492.17
0.00 16,061,866.05

779,945.33 3,937,625.31
758,105.35 825,370.06
966,213.00
7,267,259.05
8,549,026.95
$8,982,862.04

55,928.64 349,476.21
20,158.02 63,605.09
41,751.00
530,918.96
(283,514.91)
($283,514.91)

1,824.00 1,824.00
0.00 $75,045.60

835,873.97 4,287,101.52
778,263.37 888,975.15
0.00 1,006,140.00
0.00 7,796,354.01
8,265,512.04
$8,624,301.53

Waycross College Annual Financial Report FY 2006 22

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $158,906.58 6,000.00 $164,906.58

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$0.00

Additions $0.00

Reductions

Ending Balance June 30, 2006

$0.00

$0.00

Current Portion
$0.00

186,760.48 186,760.48
$186,760.48

145,276.08 145,276.08
$145,276.08

133,076.03 133,076.03
$133,076.03

198,960.53 198,960.53
$198,960.53

157,415.05 157,415.05
$157,415.05

Note 9. Significant Commitments
Waycross College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $ 203,465.00 as of June 30, 2006. This amount is reflected only in the Reserve for Encumbrances in the Note for Unrestricted Net Assets 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 2006 23

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 2006, 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

2006 2005 2004

100% 100% 100%

$173,164.68 $165,277.62 $212,282.36

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.
Waycross College Annual Financial Report FY 2006 24

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 2006, 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 $70,959.45 (9.65%) and $36,766.44 (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 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 2006 amounted to $2,918.28 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.
Waycross College Annual Financial Report FY 2006 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. 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 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 Waycross College expects such amounts, if any, to be immaterial to its overall financial position.
Waycross College Annual Financial Report FY 2006 26

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, 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, 2006, there were 23 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Waycross College recognized as incurred $82,458.40 of expenditures, which was net of $35,017.00 of participant contributions.
Waycross College Annual Financial Report FY 2006 27

Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$1,086,754.04 90,617.26 314,569.66

$0.00

$0.00

$0.00 353,355.30 99,768.39

$0.00 318,403.53 83,634.33

$0.00 685,333.50 263,385.70

4,971.83
2,195.19 154,871.43
2,811.26

7,817.73
4,654.69 143,063.03 51,207.38

5,118.32
4,060.50 134,517.05
1,153.80

13,888.26 36,953.97
4,111.97 123,754.48
4,289.50

$1,656,790.67

$0.00

$0.00

$659,866.52

$546,887.53

$1,131,717.38

Pla n t Op e ra t io n s & Maintenance

Functional Classification FY2 0 0 6

Scholars hips & Fellows hips

A u xiliary Enterpris es

Un a llo c a t e d Expens es

Total Expens es

$0.00 256,763.20
87,825.03 (2,879.05)
62.44
173,063.07 150,939.10 465,278.33

$0.00 526,657.86

$0.00 60,131.59 11,075.97 2,879.05
46.48
906.12 360,274.86
6,178.69

$0.00

$1,086,754.04 1,764,604.38 860,259.08 0.00 31,905.06 563,611.83 188,991.54 1,067,419.95 530,918.96

$1,131,052.12

$526,657.86

$441,492.76

$0.00

$6,094,464.84

Waycross College Annual Financial Report FY 2006 28

Note 16. Component Units

Waycross College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Waycross College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The twenty 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 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, 2006, the Foundation distributed $60,852.05 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, Georgia 31503.

Investments for Component Units:

Waycross College Foundation holds endowment investments in the amount of $1.25 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, 2006:

Cos t

Fair Value

Georgia Investment Pools Short Term Funds BOR Total Return Fund

$29,788.82 1,382,509.86

$29,788.82 1,215,460.56

Total Inves tments

$1,412,298.68

$1,245,249.38

Waycross College Annual Financial Report FY 2006 29

UNIVERSITY OF WEST GEORGIA
Financial Report
For the Year Ended June 30, 2006

University of West Georgia Carrollton, Georgia

Dr. Thomas J. Hynes
Interim-President

William Gauthier
Vice President for Business & Finance

UNIVERSITY OF WEST GEORGIA ANNUAL FINANCIAL REPORT FY 2006
Table of Contents
Management's Discussion and Analysis ............................................................................. 1 Statement of Net Assets ..................................................................................................... 11 Statement of Revenues, Expenses, and Changes in Net Assets ......... .................... 12 Statement of Cash Flows ................................................................................................... 14 Note 1 Summary of Significant Accounting Policies ..................................................... 16 Note 2 Deposits and Investments.................................................................................... 22 Note 3 Accounts Receivable............................................................................................ 25 Note 4 Inventories............................................................................................................ 25 Note 5 Notes/Loans Receivable....................................................................................... 25 Note 6 Capital Assets....................................................................................................... 26 Note 7 Deferred Revenue................................................................................................. 27 Note 8 Long-Term Liabilities .......................................................................................... 27 Note 9 Significant Commitments.................................................................27 Note 10 Lease Obligations................................................................................................ 27 Note 11 Retirement Plans ................................................................................................. 29 Note 12 Risk Management................................................................................................ 32 Note 13 Contingencies...................................................................................................... 33 Note 14 Post-Employment Benefits Other Than Pension Benefits .................................. 33 Note 15 Natural Classifications With Functional Classifications..................................... 34 Note 16 Component Units ........................................................................ 35

UNIVERSITY OF WEST GEORGIA
Management's Discussion and Analysis

Introduction

University of West Georgia is one of the 35 institutions of higher education of the University System of Georgia. 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 (UWG) offers a range of disciplinary, interdisciplinary and professional programs at the baccalaureate level. There are 114 programs of study, including 60 at the Bachelors level, 52 at the Masters and Specialists level, and two 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 plateaued in fall 2005, our enrollment projections forecast that our solid 3% average historical increase will continue, toward our eventual student body of 15-16,000 students.

FY2006 FY2005 FY2004

Faculty
402 311 302

Students (Headcount)
10,154 10,216 10,255

Students (FTE)
8,907 8,898 8,865

Overview of the Financial Statements and Financial Analysis

University of West Georgia is proud to present its financial statements for fiscal year 2006. 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 2005 and FY 2006.

University of West Georgia Annual Financial Report FY 2006 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

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, 2006
$17,809,520.90 65,382,176.66 1,643,786.79 84,835,484.35
10,600,338.19 3,129,184.35
13,729,522.54
64,247,388.65
2,152,331.71
4,706,241.45 $71,105,961.81

June 30, 2005
$16,284,666.22 66,411,670.82 1,764,942.25 84,461,279.29
9,060,671.60 3,414,441.96 12,475,113.56
65,197,919.79
2,094,935.23
4,693,310.71 $71,986,165.73

The total assets of the institution increased by $374,205.06. The major change is reflected in the cash account, which is being held for the current liabilities due in the following period.
Within the long term assets the major change is in the capital account. The capital assets increased by $3.7 million dollars, offset by the booking of depreciation of $4.7 million, for an

University of West Georgia Annual Financial Report FY 2006 2

overall decrease from fiscal year 2005 of ($1,029,494.16). 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 $1,254,408.98, reflecting increased accounts payables and deposits. The payables reflect year end activity, which will be paid in July. The combination of the increase in total assets of $374,205.06 and the increase in total liabilities of $1,254,408.98 yields a decrease in net assets of ($880,203.92). Finally, within the net asset account, the decrease in capital assets of, ($950,531.14) is due to the booking of depreciation over and above the investment in capital. Compared to fiscal year 2005, capital spending was less primarily due to the booking of some major capital projects completed through The Georgia State Finance and Investment Commission, (GSFIC). The amounts were approximately $7 million in 2005 and $1.8 million in 2006. 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 2006 3

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

June 30, 2006

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

$54,392,014.69 101,334,990.21 (46,942,975.52)
44,254,419.93
(2,688,555.59) 1,808,351.67 (880,203.92) 71,986,165.73
0.00 71,986,165.73 $71,105,961.81

$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
0.00 64,705,179.28 $71,986,165.73

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:

University of West Georgia Annual Financial Report FY 2006 4

Revenue by Source For the Years Ended June 30, 2006 and June 30, 2005
June 30, 2006

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

$24,241,850.46
9,129,479.92 348,533.79
20,062,348.63 609,801.89
54,392,014.69
42,542,758.71
741,292.97 800,068.58 222,249.82 44,306,370.08
1,808,351.67
1,808,351.67 $100,506,736.44

June 30, 2005
$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

Operating Revenue:
For fiscal year 2006, overall operating revenues were $54,392,000, an increase of $6,295,000. The increase was attributed to an increase of $4,514,000 in tuition and fees, $1,602,000 in auxiliary service revenue and $179,000 in grants and other operating revenue.
Within the tuition account, the $4,514,000 increase is attributed to a base tuition increase of 5%, generating $1,264,000 and the addition of a facility fee to support the construction of the new Campus Center (student recreation center). That fee generated $1,558,000, and the building will be completed in August, 2006. Also, an exclusion of institutional waivers resulted in a recalculation of the scholarship allowance credit, causing an increase of $1,652,000.
The Auxiliary revenue increase of $1,602,000 was generated by an increase in residence hall revenue of $1,085,000, parking and transportation fees of $ 241,000, bookstore revenue of $143,000. All other services generated another $133,000.
The remaining categories of Grants and Contracts, and Sales and Service revenue were essentially consistent with the prior year.
University of West Georgia Annual Financial Report FY 2006 5

Non Operating Revenues:

Non operating revenues totaled $44,306,370, an increase of $3,588,000. State appropriation makes up the majority of the non-operating revenue category, and that increased by $3,204,000. Of the remaining $384,000 there was an increase of $366,000 in interest income. The remaining $18,000 was attributed to an increase in other income of $182,000 and a decrease of $164,000 in gifts.

Expenses (By Functional Classification) For the Years Ended June 30, 2006 and 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

June 30, 2006
$36,819,682.15 877,894.24 152,420.87
11,998,157.29 7,182,237.88 10,435,636.75 8,915,444.03 2,815,894.82 19,904,224.81 2,233,397.37
101,334,990.21
51,950.15
$101,386,940.36

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

Expense Analysis:
The functional classification on expenditures highlights the expense areas needed to run the university by function; Instruction, and the various support operations. The various categories are heavily weighted in personal services, not untypical for a university of our type. At University of West Georgia, 80% of our educational and general budget is personal services. Total expenditures for the year are at $101,386,940 or $12,344,000 higher than 2005, and represent an overall cost per student FTE, of $5,025 per student. A large part of the increase is from a 2% increase on the base wages that became effective January 1st. Within the various categories the following comments apply:
Instruction: Expenses are $1,620,000 higher than 2005. Personal benefits, including a 2% annual increase, which became effective January 1, 2006, represent 80% of the total.
Research: Down $94,000 from the prior year, reflecting lower billings for grant activity.
Public Service: Down $14,000 from the prior year.

University of West Georgia Annual Financial Report FY 2006 6

Academic Support: This category includes the primary functional support categories for the Instructional function, including Library services. Expenses are $1,200,000 higher than 2005. Of this amount, 37%, or $448,000 is personal services, $400,000 was allocated for supplies (primarily library materials), $60,000 for staff development, $246,000 for depreciation on instructional equipment and $46,000 in other expenses.
Student Services: This category includes the functional support for our customers, the students themselves. Expenses are higher by $2,136,000. The personal services increased by $191,000, the costs for licensing the Campus Center, during construction was $1,742,000, supplies and other $165,000, staff development of $24,000, utilities, scholarships and other, $14,000.
Institutional Support: This category includes the other administrative support functions, necessary to manage the academic and student programs. This includes the President, Business Operations (Bursar, Accounting, and Payroll), Public Relations, Marketing and Public Safety, and General Institutional Expense, which includes expenses like staff benefits that are not identified by to a particular group. Retiree benefits would be an example of this.
Expenses are higher by $2,290,000 for the year. In 2005, we received a credit, against employee benefits for $914,000, which is artificially inflating the 2006 amount. In other words, normal expense for 2005 would have been $9,060,114, which would make the increase this year $1,376,000.
Analyzing the increased amount of $1,376,000; Personal services accounts for $774,000 of the total, benefits. Within personal services, compensated absences are up $121,000, to $2,400,000. This represents the amount of accrued leave the University carries on its books. Supplies and other is up by $602,000. Within this category are operating supplies, marketing materials, advertising, staff development and the Goal Quest student recruiting, enrollment management program, which is critical to our Retention, Progression & Graduation (RPG) program.
Plant Operation and Maintenance: This category supports the physical facilities necessary to run our academic programs. The expenses are up by $1,379,000, accounted for by salary increases, supplies utilities, miscellaneous expense and depreciation.
Scholarships and Fellowships: Due to an exclusion of institutional waivers, a recalculation of the scholarship allowance credit caused an increase of $1,652,000.
Auxiliary Enterprises: These expenses are the offset to the revenue included above. Expenses support the cost of increasing the revenues, and in 2006 the operational expenses were $2,544,000 or $942,000 more than revenue. The apparent loss is affected by prior year adjustments of $1,161,000. The adjustments were $706,000 prior year expense, inflating residence hall expenses for 2006, and a $455,000 expense affecting the Food Service for amortization of capital improvements. However, an increase in non-operating revenues and credit from non-mandatory transfers resulted in a positive change in Auxiliary net assets of $1,100,000.
University of West Georgia Annual Financial Report FY 2006 7

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, 2006 and 2005, 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, 2006
($40,679,625.85) 43,644,126.94 (2,656,320.03) 800,068.58 1,108,249.64 13,353,012.10
$14,461,261.74

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

Capital Assets
During the 2006 fiscal year the University booked $4,326,946 in capital additions. The breakdown included $739,678 in library collections, $150,000 in facilities improvements, $240,498 in building improvements (Boykin Hall restrooms), $1,955,318 for new mechanical systems in the Richards College of Business and Tyus Hall and $1,241,452 in equipment additions.
We also had $2,066,101 booked as Construction Work in Progress for projects, mostly funded through GSFIC.
During 2007 we expect to start construction of the $32 million Health, Wellness and Lifelong Learning (HWELL) Building and the $5 million addition to the Callaway Building. These projects will be funded by GSFIC and are critical to future programming in the Arts & Sciences, and Health, Physical Education areas.
Projected funding by GSFIC in 2007 for MRR projects will be approximately the same.

University of West Georgia Annual Financial Report FY 2006 8

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements.
Long Term Debt and Liabilities
University of West Georgia had Long-Term Debt and Liabilities of $3,344,506.54 of which $1,510,322.19 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Debt and Liabilities, 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 FY2006. The University of West Georgia Foundation, Inc. had endowment investments of $13.6 million as of December 31, 2005, and long-term debt of $39.3 million. The UWG Real Estate Foundation, Inc. had longterm debt of $ 30.9 million in the form of one bond issue. Construction of the new Campus Center is near completion. The project is set to open in fiscal 2007. 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 which have a global effect on virtually all types of business operations.
We have experienced flat enrollment for the last three years, but we still feel that our solid 3% average historical increase will continue, toward our eventual student body of 15-16,000 students. The forecasts are encouraging, as we expect improved freshman classes in the fall of 2007.
What we are not sure of is the impact of the University System's guaranteed tuition program, which will go into effect in the fall of 2007. The four year guarantee will make it necessary for the students to take more hours, to complete in the twelve semester period. On the University's side, we will have to ensure the courses the students need are available. Another factor is our retention, persistence and graduation (RPG initiative) which is designed to improve overall retention and graduation rates. Our challenge is to balance our programming to maximize efficiency of course offerings with the student needs within the prescribed time frame, because we will be placing a cap on student revenue while absorbing the cost to educate those same students. A specific strategy we will employ is a review of institutional and Regent policies that affect summer programs.
We continue to challenge our ability to do more with less as we fight increasing costs, and uncertain economic conditions, such as the major hurricanes of the last two years. Although we
University of West Georgia Annual Financial Report FY 2006 9

did not get affected with major damage, we did feel the indirect impact of the storms, and the resulting aftermath of chaotic conditions. The university was a storm shelter during the month of September for Katrina victims, and of course we are all trying to find the resources necessary, within limited budgets, to offset higher energy costs. We are learning to be more resourceful with programs to reduce our use of natural gas, and electricity, as well as gasoline for travel. In fact we have created energy awareness by putting together an energy wide committee to reduce energy usage, and cut our costs. Dr. Thomas J. Hynes Interim President University of West Georgia William Gauthier Vice-President Business and Finance University of West Georgia
University of West Georgia Annual Financial Report FY 2006 10

Statement of Net Assets

Uni versi ty of West G eorgi a STATEMENT OF NET ASSETS
June 30, 2006

Component Units

Univers ity of
Wes t Georgia

Univers ity of Wes t Georgia Foundation,
Inc.

UW G Real Es tate Foundation, Inc.

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 - Other Due From Component Units Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items Other A s s ets Total Current A s s ets

$14,461,261.74 640,231.80
128,473.55 1,305,741.56
26,513.36
770,224.88 477,074.01
17,809,520.90

$3,147,617.00 4,036,180.00 104,105.00 69,887.00
7,357,789.00

$7,267,306.00
162,889.58 43,127.42 7,961.00
7,481,284.00

Noncurrent As s ets Inves tments (including Real Es tate) Notes Receivable, net Pledges Receivable Capital A s s ets , net (note 6) Other A s s ets Total Noncurrent A s s ets
TOTAL AS S ETS

1,643,786.79
65,382,176.66
67,025,963.45 84,835,484.35

13,605,710.00
57,750.00 33,754,802.00
978,142.00 48,396,404.00 55,754,193.00

27,066,600.00 786,799.00
27,853,399.00 35,334,683.00

LIAB ILITIES Current Liabilities A ccounts Payable Salaries Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Due to Primary Government Leas e Purchas e Obligations (current portion) Compens ated A bs ences (current portion) Revenue/M ortgage Bonds Payable (current) Due to Component Units Total Current Liabilities Noncurrent Liabilities Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) Compens ated A bs ences (noncurrent) Revenue/M ortgage Bonds Payable (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES

1,397,693.20 260,303.25 185,312.28 715,500.00
5,076,413.87 314,868.82
1,096,797.16
275,663.68 1,234,658.51
43,127.42 10,600,338.19
668,327.56 1,295,000.00 1,165,856.79
3,129,184.35 13,729,522.54

554,196.00
360,000.00 914,196.00
33,203,924.00 5,700,000.00
38,903,924.00 39,818,120.00

2,704,002.64
26,513.36 7,476.00
2,737,992.00
30,922,900.00 30,922,900.00 33,660,892.00

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

64,247,388.65
2,152,331.71 4,706,241.45 $71,105,961.81

(4,530,980.00)
9,195,532.00 6,302,488.00
4,969,033.00 $15,936,073.00

(52,948.00)
2,513,538.00 3,024,029.00 (3,810,828.00) $1,673,791.00

University of West Georgia Annual Financial Report FY 2006 11

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, 2006

REVENUES
Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) 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
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of University of West Georgia
Total Operating Expenses Operating Income (loss)

Univers ity of
West Georgia

Component Units

University of West Georgia Foundation,
Inc.

UWG Real Estate Foundation, Inc.

$28,088,526.70 3,846,676.24
7,245,669.42 946,049.89 937,760.61 348,533.79 11,864.00
7,764,040.77 3,492,850.58 3,700,975.20
882,316.96 1,395,469.48 2,403,510.40
423,185.24 597,937.89 54,392,014.69

$0.00 2,115,476.00
655,600.00
321,248.00 1,765,977.00
4,858,301.00

23,855,068.75 25,190,482.17 14,090,108.65
2,487.21 985,894.62 4,017,162.43 3,409,936.70 24,645,473.92 5,138,375.76
101,334,990.21 (46,942,975.52)

434,445.00 102,147.00
10,495.00
578,035.00 609,809.00 170,756.00 1,440,543.00 3,346,230.00 1,512,071.00

$0.00
1,742,000.00
1,742,000.00
43,696.00 43,696.00 1,698,304.00

University of West Georgia Annual Financial Report FY 2006 12

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, 2006

Un i ve rs i ty of
West Georgia

Component Units

University of West Georgia Foundation, Inc.

UW G Real Estate Fou n dati on ,
Inc.

NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 St at e Loss on Bond Retirement 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

42,542,758.71 741,292.97 800,068.58 (51,950.15) 222,249.82
44,254,419.93 (2,688,555.59)

562,867.00 (1,283,791.00)
(720,924.00) 791,147.00

1,808,351.67
1,808,351.67 (880,203.92)

(736,715.00) 610,279.00 (126,436.00) 664,711.00

71,986,165.73 0.00
71,986,165.73 $71,105,961.81

15,271,362.00 0.00
15,271,362.00 $15,936,073.00

507,841.00 (500,365.00)
7,476.00 1,705,780.00
0.00 1,705,780.00
(581,494.00) 549,505.00 (31,989.00) $1,673,791.00

University of West Georgia Annual Financial Report FY 2006 13

Statement of Cash Flows
Uni versity of West G eorgi a STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 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 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, 2006
$24,230,096.24
9,293,545.80 163,508.52
(42,740,137.44) (48,777,319.82)
(4,017,162.43) (451,604.73) 572,760.19
8,228,698.65 3,473,169.78 3,414,215.59
893,890.91 1,382,251.55 2,434,594.08
484,652.82 735,214.44 (40,679,625.85)
42,542,758.71 127,777.68 973,590.55
43,644,126.94
(2,334,609.49) (269,760.39) (51,950.15)
(2,656,320.03)
800,068.58 800,068.58 1,108,249.64 13,353,012.10 $14,461,261.74

University of West Georgia Annual Financial Report FY 2006 14

Statement of Cash Flows, Continued
Uni versity of West G eorgi a STATEMENT OF CASH FLOWS For the Year Ended June 30, 2006
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 Prepaid Items Notes Receivable, Net 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

June 30, 2006
($46,942,975.52)
5,138,375.76 (268,355.78)
29,554.94 (153,772.40) 121,155.46 774,522.89 357,023.62
23,176.18 241,669.00 ($40,679,625.85)
($1,808,351.67)

University of West Georgia Annual Financial Report FY 2006 15

UNIVERSITY OF WEST GEORGIA NOTES TO THE FINANCIAL STATEMENTS
June 30, 2006
Note 1. Summary of Significant Accounting Policies
Nature of Operations The 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-five (35) 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 2005. 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 FY2006, University of West Georgia is reporting the activity for the University of West Georgia Foundation, Inc. and the UWG Real Estate Foundation, Inc.
See Note 16, Component Units, for foundation notes.
University of West Georgia Annual Financial Report FY 2006 16

Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia 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
University of West Georgia Annual Financial Report FY 2006 17

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, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool 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 first-in, first-out ("FIFO") method.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 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, 2006, GSFIC did not transfer any capital additions to University of West Georgia.
University of West Georgia Annual Financial Report FY 2006 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. University of West Georgia had accrued liability for compensated absences in the amount of $2,158,846.30 as of 7-1-2005. For FY2006, $1,701,217.59 was earned in compensated absences and employees were paid $1,459,548.59, for a net increase of $241,669.00. The ending balance as of 6-30-2006 in accrued liability for compensated absences was $2,400,515.30.
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 2006 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:

Federal Loans Ins titutional Loans Total Res tricted Expendable

June 30, 2006
$1,889,383.13 262,948.58
$2,152,331.71

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, 2006
$3,000,688.85 3,032,613.85
124,493.93 (1,451,555.18) $4,706,241.45

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.

University of West Georgia Annual Financial Report FY 2006 20

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. 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 2006 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, 2006, the carrying value of deposits was $2,046,577.61 and the bank balance was $3,592,523.74. Of the university's deposits, $3,292,423.74 were uninsured. Of these uninsured deposits, $540,231.80 were collateralized with securities held by the financial institution's trust department or agent in the university's name, and $2,752,191.94 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 2006 22

B. Investments

At June 30, 2006, the carrying value of the University's investments was $13,033,765.93, 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 P ools Board of Regents Short-Term Fund Sub Total
Office of Treasury and Fiscal Services Georgia Fund 1
Sub Total
Total Investment Pools

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

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. Participation in the Georgia Fund 1 Investment Pool is voluntary. 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 28 days.
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.
The Weighted Average Maturity of the Short Term Fund is 1.3 years. Of the University's total investment of $1,927,285.56 in the Short Term Fund, $1,894,595 is invested in debt securities.

University of West Georgia Annual Financial Report FY 2006 23

As previously stated, the Weighted Average Maturity of the Georgia Fund 1 investment pool is 28 days. 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, 2006, $1,927,285.56 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. The Board of Regents Short Term Fund is not rated. The Georgia Fund 1 investment pool is rated AAAm by Standard and Poor's.
University of West Georgia Annual Financial Report FY 2006 24

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2006.

June 30, 2006

Student Tuition and Fees A uxiliary Enterpris es and Other Operating A ctivities Federal Financial A s s is tance Georgia State Financing and Inves tment Commis s ion Due from Component Units Other
Les s A llowance for Doubtful A ccounts
Net A ccounts Receivable

$561,651.79 464,137.45 128,473.55
30,827.31 26,513.36 554,148.25 1,765,751.71 305,023.24
$1,460,728.47

Note 4. Inventories Inventories consisted of the following at June 30, 2006.

Books tore Phys ical Plant
Total

June 30, 2006
$632,110.15 138,114.73
$770,224.88

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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, 2006.

University of West Georgia Annual Financial Report FY 2006 25

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2006:

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: In fras t ru ct u 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 t ru ct u 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 7/1/2005
$554,184.25 0.00
3,232,962.01 3,787,146.26

Additions
$0.00
$2,066,100.98 2,066,100.98

Reductions
$0.00
$2,114,998.10 2,114,998.10

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

240,498.00 150,000.00 3,196,769.54
739,677.96
4,326,945.50

303,102.51 106,915.94 199,836.65
609,855.10

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

113,204.89 2,751,396.86
92,516.88 1,309,375.06
186,134.92 685,409.24
337.91 5,138,375.76
(811,430.26)
$1,254,670.72

240,851.67 199,836.65 440,688.32 169,166.78 $2,284,164.88

Ending Balance 6/30/2006
$554,184.25 0.00
3,184,064.89 3,738,249.14
3,144,580.30 87,927,664.06 1,982,926.69 15,743,295.84 1,402,886.73 14,098,836.18
13,516.00 124,313,705.80
198,108.56 39,645,735.91
795,876.59 11,007,342.37
420,860.71 10,593,820.03
8,034.11 62,669,778.28
61,643,927.52
$65,382,176.66

University of West Georgia Annual Financial Report FY 2006 26

Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue
T o t a ls

June 30, 2006 $3,063,337.49 2,013,076.38 $5,076,413.87

Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2006 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences Total
Total Long TermObligations

Beginning Balance July 1, 2005
$1,213,751.63

Additions $0.00

Reductions

Ending Balance June 30, 2006

$269,760.39

$943,991.24

2,158,846.30 2,158,846.30
$3,372,597.93

1,701,217.59 1,701,217.59
$1,701,217.59

1,459,548.59 1,459,548.59
$1,729,308.98

2,400,515.30 2,400,515.30
$3,344,506.54

Current Portion $275,663.68
1,234,658.51 1,234,658.51 $1,510,322.19

Note 9. Significant Commitments
The University of West Georgia had no significant unearned, outstanding, construction or renovation contracts that were executed as of June 30, 2006 but 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 (buildings and office facilities) and equipment, and also is obligated under a capital lease for the acquisition of equipment.
CAPITAL LEASES
The University of West Georgia has one capital lease expiring in 2010 with a third-party for PBX equipment. Expenses for fiscal year 2006 were $321,710.54 of which $51,950.15 represented interest. Total principal paid on capital leases was $269,760.39 for the fiscal year ended June 30, 2006. The interest rate was 4.71%.

University of West Georgia Annual Financial Report FY 2006 27

The following is a summary of the carrying values of assets held under capital lease at June 30, 2006:

Equipment

$982,026.02

OPERATING LEASES
University of West Georgia's operating leases having remaining terms of more than one year expire in various fiscal years from 20072036. 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 five real estate leases. Two of the leases are with third-party lessors and include the lease for our bookstore and a rental agreement for use of a stadium. The remaining three leases are with related parties and include a lease for the University Suites and Arbor View Apartments, both housing facilities leased by the University of West Georgia Foundation, and the lease for the Campus Center by UWG Real Estate Foundation.
The future commitments for capital lease (which include installment purchase agreements), real estate lease and operating lease agreements having terms in excess of one year are as follows:

Year Ending June 30: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 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

Real Property and Equipment

Capital Leas es

Operating Leas es

$314,225.28 314,225.28 314,225.28 77,279.36
1,019,955.20 75,963.96 0.00
$943,991.24

$4,736,376.65 4,749,302.97 4,782,069.44 4,809,213.09 4,768,695.40
23,996,826.58 25,467,329.44 27,093,902.56 23,433,259.32
8,600,000.00 $132,436,975.45

University of West Georgia FY2006 expense for rental of real property and equipment under operating leases was 3,798,952.12.

University of West Georgia Annual Financial Report FY 2006 28

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 2006, 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

2006 2005 2004

100% 100% 100%

$2,242,016.63 $2,177,219.12 $2,202,322.42

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 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to

University of West Georgia Annual Financial Report FY 2006 29

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, 2006, for employees covered by ERS was $78,737.93. The University's total payroll for all employees was $49,045,550.92.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted 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 2006 amounted to $9,408.53, of which $8,229.20 was made by the University and $1,179.33 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, 2006, financial report, which may be obtained through ERS.
University of West Georgia Annual Financial Report FY 2006 30

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2006, 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 $1,907,117.64 (9.65%) and $988,247.60 (5.0%), 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 2006 31

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 2006 amounted to $73,389.70 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 2006 32

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, 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, 2006, there were 386 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, University of West Georgia recognized as incurred $1,500,984.43 of expenditures, which was net of $579,214.15 of participant contributions.
University of West Georgia Annual Financial Report FY 2006 33

Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2006 are shown below:

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

Functional Classification FY2006

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

$23,411,209.98 4,093,660.43 6,728,898.71
456,604.47 18,899.73 121,247.67
1,772,146.73 217,014.43

$173,293.74 296,048.04 80,090.90
33,246.62
399.93 214,807.16 80,007.85

$0.00 108,452.45 27,071.78
5,992.63
93.60 10,810.41

$202,880.48 5,673,856.87 1,532,775.73
177,299.82
46,009.96 3,268,756.97 1,096,577.46

$13,320.94 3,115,036.52 745,480.08
96,311.51 11,300.00 25,221.40 3,170,844.60 4,722.83

$44,363.61 4,690,115.22 2,911,337.83
2,487.21 99,047.51 316,699.11 40,364.41 2,251,393.04 79,828.81

$36,819,682.15

$877,894.24

$152,420.87

$11,998,157.29

$7,182,237.88

$10,435,636.75

Plant Operations & Maintenance

Functional Classification FY2006

Sch o lars h ip s & Fellowships

A u xiliary En terp ris es

Unallocated Exp en s es

Total Exp en s es

$0.00 3,850,903.55 1,240,464.99 (2,087,461.09)
13,149.70
2,675,583.95 2,825,128.02
397,674.91

$0.00 2,815,894.82

$10,000.00 3,362,409.09
823,988.63 2,087,461.09
104,242.36 854,368.77 501,015.78 11,131,586.99 1,029,152.10

$0.00 2,233,397.37

$23,855,068.75 25,190,482.17 14,090,108.65 2,487.21 985,894.62 4,017,162.43 3,409,936.70 24,645,473.92 5,138,375.76

$8,915,444.03

$2,815,894.82

$19,904,224.81

$2,233,397.37

$101,334,990.21

University of West Georgia Annual Financial Report FY 2006 34

Note 16. Component Units

University of West Georgia Foundation, Inc. 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.

During the year ended December 31, 2005, the Foundation distributed $1,440,543 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 $13.6 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, Inc. 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 amount is retained in each endowment account.

Investments are comprised of the following amounts at December 31, 2005:

Cost

Fair Value

Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Managed Futures
Total Investments

$265,146.00 2,956,400.00
515,348.00 7,929,520.00
200,000.00
$11,866,414.00

$265,146.00 2,931,474.00
499,686.00 9,636,486.00
272,918.00
$13,605,710.00

University of West Georgia Annual Financial Report FY 2006 35

Capital Assets for Component Units:

The University of West Georgia Foundation, Inc. holds the following Capital Assets as of December 31, 2005:

December 31,2005

Capital Assets not being Depreciated: Land and other Assets
Total Capital Assets not being Depreciated
Capital Assets being Depreciated: Buildings and Improvements
Total Capital Assets being Depreciated
Less Total Accumulated Depreciation
Total Capital Assets being Depreciated, Net
Capital Assets, Net

$1,918,366.00 1,918,366.00
32,534,437.00 32,534,437.00
698,001.00 31,836,436.00 $33,754,802.00

Long-term Liabilities for Component Units:
Student Housing Bonds were issued by the University of West Georgia Foundation, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at University of West Georgia.
Series 2004A bonds were issued on October 1, 2004 in the amount of $19,175,000 to fund the Construction of Phase II. The bonds bear interest rates ranging from 3.0% to 5.0%.
Series 2004B bonds were issued on October 1, 2004 in the amount of $180,000 to fund the Construction of Phase II. The bonds bear interest at a rate of 3.4%.
Series 2005 bonds were issued on March 1, 2005 in the amount of $13,860,000 as a result of refunding the Series 2003 bonds. These bonds funded the construction of Phase I, University Suites. The bonds bear interest rates ranging from 3.375% to 5.0%
In October 2004, the Foundation obtained a mortgage collateralized by an apartment complex purchased by the Foundation. The principal amount of the loan is $5,700,000.
The mortgage note payable is payable in monthly installments of interest computed at the rate of London Interbank Offered Rate (LIBOR) plus 1.2% per annum adjusted monthly as of the first business day of each month. At December 31, 2005 the rate was 5.49%. Principal is due at September 29, 2007.

University of West Georgia Annual Financial Report FY 2006 36

Long-term liability activity for the Foundation for the year ended December 31, 2005 was as follows:

Beginning Balance January 1, 2005

Additions

Reductions

Ending Balance December 31, 2005

Amounts due within
One Year

Notes and Loans Payable Revenue/Mortgage Bonds Payable Bond Premium
Total Long Term Debt

$5,700,000.00 32,560,000.00
363,667.00
$38,623,667.00

$0.00 13,860,000.00
0.00
$13,860,000.00

$0.00 13,205,000.00
14,743.00
$13,219,743.00

$5,700,000.00 33,215,000.00
348,924.00
$39,263,924.00

$0.00 360,000.00
0.00
$360,000.00

Debt Service Obligations

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

Year ending December 31,2005
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025 2026 through 2029

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

Series 2004 A and B Bonds

Principal

Interest

Total

$0.00 455,000.00 485,000.00 535,000.00 600,000.00 3,285,000.00 3,980,000.00 5,030,000.00 4,985,000.00

$856,626.00 856,626.00 842,256.00 827,706.00 806,306.00
3,710,880.00 3,017,075.00 1,968,875.00
607,658.00

$856,626.00 1,311,626.00 1,327,256.00 1,362,706.00 1,406,306.00 6,995,880.00 6,997,075.00 6,998,875.00 5,592,658.00

$19,355,000.00

$13,494,008.00

$32,849,008.00

Year ending December 31,2005
2006 2007 2008 2009 2010 2011 through 2015 2016 through 2020 2021 through 2025
2026 through 2029

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

Principal

Series 2005 Bonds Interest

$360,000.00 370,000.00 385,000.00 375,000.00 400,000.00
2,290,000.00 2,845,000.00 3,480,000.00
3,355,000.00

$574,662.00 562,063.00 549,112.00 535,638.00 522,512.00
2,339,176.00 1,817,787.00 1,189,131.00
374,937.00

$13,860,000.00

$8,465,018.00

Total
$934,662.00 932,063.00 934,112.00 910,638.00 922,512.00
4,629,176.00 4,662,787.00 4,669,131.00 3,729,937.00
$22,325,018.00

University of West Georgia Annual Financial Report FY 2006 37

Annual debt service requirements to maturity for Mortgage loans for the Foundation are as follows:

Year ending December 31,2005
2006 2007

Year
1 2

Mortgage Note Payable

Principal

Interest

$0.00 5,700,000.00

$0.00 0.00

Total
$0.00 5,700,000.00

$5,700,000.00

$0.00

$5,700,000.00

UWG Real Estate Foundation, Inc. UWG Real Estate Foundation, Inc. (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 four University administrative positions plus five community directors, who are 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 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.
Construction and equipment valued at $27 million and the associated long-term debt of $30.9 million are included in the financial statements of the Foundation. Complete financial statements for the Foundation can be obtained from the Treasurer, Office of Business and Finance 1601 Maple Street, Carrollton, Georgia 30118.
Prior Year Adjustment A prior year adjustment was necessary to restate the beginning unrestricted net assets for interest not properly accrued or capitalized in fiscal year 2005.

University of West Georgia Annual Financial Report FY 2006 38

Capital Assets for Component Units:

UWG Real Estate Foundation, Inc. holds the following Capital Assets as of June 30, 2006:

June 30, 2006

Capital Assets not being Depreciated: Construction in Progress
Total Capital Assets not being Depreciated
Capital Assets, Net

$27,066,600.00 27,066,600.00
$27,066,600.00

Long-term Liabilities for Component Units:

Resident Instruction Bonds were issued by the UWG Real Estate Foundation, Inc. to finance Student Center facilities at University of West Georgia. The bonds mature serially and are serviced by a pledge of a portion of student fee and appropriations formerly used for square footage support. The interest rate can fluctuate between 3% and 5.25% over the term of the bonds.

Changes in long-term liabilities for UWG Real Estate Foundation for the fiscal year ended June 30, 2006 are shown below:

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30, 2006

Amounts due within
One Year

Revenue/Mortgage Bonds Payable Bond Premium, net
Total Long Term Debt

$30,720,000.00 217,852.00
$30,937,852.00

$0.00 0.00
$0.00

$0.00 7,476.00
$7,476.00

$30,720,000.00 210,376.00
$30,930,376.00

$0.00 7,476.00
$7,476.00

University of West Georgia Annual Financial Report FY 2006 39

Debt Service Obligations

Annual debt service requirements to maturity for Student Housing (Real Estate Foundation) revenue bonds payable are as follows:

Year ending June 30:
2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036

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

Bonds Payable

Principal

Interest

Total

$0.00 360,000.00 390,000.00 425,000.00 465,000.00 2,950,000.00 4,265,000.00 6,235,000.00 8,355,000.00 7,275,000.00

$1,427,520.00 1,422,120.00 1,410,383.00 1,395,545.00 1,378,326.00 6,600,594.00 5,898,985.00 4,660,094.00 2,759,945.00 695,039.00

$1,427,520.00 1,782,120.00 1,800,383.00 1,820,545.00 1,843,326.00 9,550,594.00
10,163,985.00 10,895,094.00 11,114,945.00
7,970,039.00

$30,720,000.00

$27,648,551.00

$58,368,551.00

University of West Georgia Annual Financial Report FY 2006 40

University System of Georgia
Consolidated Balance Sheet (Non-GAAP Basis) Consolidated Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories Other Assets
Total Assets

$ 278,274,455.60 28,150,306.77
61,494,820.38 125,259,575.41
29,546,161.88 4,028,115.63 936,146.88
$ 527,689,582.55

LIABILITIES AND FUND EQUITY
Liabilities Contracts Payable Grants Payable Accrued Payroll Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Early Retirement Program Unreserved Surplus Regular Tobacco Settlement Funds
Total Fund Balances

$

1,924,509.73

1,685.93

11,070,771.35

160,168,612.96

141,292,189.00

17,516,356.19

9,508,722.75

$ 341,482,847.91

$ 11,926,258.47 8,034,129.17
38,181,191.11 7,962,518.94
94,557,677.98 9,626,105.07 3,024,181.27 4,029,685.85 7,382,845.53
1,478,679.98 3,461.27
$ 186,206,734.64

Total Liabilities and Fund Balances

$ 527,689,582.55

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

UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

ORIGINAL BUDGET

FINAL BUDGET

ACTUAL

REVENUES

State Appropriation State General Funds Tobacco Funds
Federal Funds Other Funds

$ 1,796,565,144.00 $ 1,802,771,336.00 $ 1,802,771,336.00 $

5,750,000.00

16,232,554.00

16,232,554.00

1,510,212,952.00

1,633,079,639.00

1,224,371,809.27

1,153,837,759.00

1,385,735,986.00

1,362,586,638.89

Total Revenues

$ 4,466,365,855.00 $ 4,837,819,515.00 $ 4,405,962,338.16 $

EXPENDITURES

Center/EDI Agricultural Experiment Station Athens Tifton Veterinary Laboratories Center for Assistive Technology & Environmental
Access Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia Eminent Scholar Endowment Trust Fund Georgia Military College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute MCG Hopitals and Clinics Marine Institute Marine Resources Extension Center Office of Minority Business Payments to Georgia Cancer Coalition Public Libraries Regents Central Office Research Consortium Skidaway Institute of Oceanography Special Funding Initiative Student Education Enrichment Program Teaching Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital

$

22,346,381.00 $

24,044,266.00 $

20,549,209.36 $

70,923,128.00

81,345,007.00

73,553,545.45

4,695,512.00

6,695,512.00

5,601,148.23

7,685,074.00 54,873,885.00
632,486.00 3,011,535.00
0.00 2,500,092.00 31,178,349.00 3,625,810.00 129,760,053.00 31,703,580.00 1,690,798.00 2,611,550.00
860,499.00 0.00
38,257,751.00 7,264,505.00
21,287,489.00 7,190,477.00 29,821,275.00
304,035.00 3,983,814,634.00
3,148,784.00 7,178,173.00

5,067,421.00 60,453,885.00
1,036,486.00 6,196,960.00
500,000.00 2,896,734.00 31,182,940.00 3,625,810.00 142,454,864.00 31,510,080.00 1,729,858.00 4,293,550.00
860,499.00 10,482,554.00 40,701,477.00
7,576,837.00 22,712,489.00 7,218,881.00 30,231,275.00
304,035.00 4,300,771,138.00
3,148,784.00 10,778,173.00

3,961,959.02 57,307,305.83
914,860.38 5,599,895.68
500,000.00 2,896,734.00 16,958,649.00
0.00 141,105,420.48 31,510,080.00
1,364,837.05 3,266,208.92
859,814.43 10,479,092.73 39,739,713.95
7,557,086.75 22,168,020.74 7,678,229.19 30,175,631.43
304,034.56 3,908,948,254.52
3,148,784.00 10,049,719.85

Total Expenditures

$ 4,466,365,855.00 $ 4,837,819,515.00 $ 4,406,198,235.55 $

Excess of Funds Available over Expenditures $

0.00 $

0.00 $

(235,897.39) $

FUND BALANCE JULY 1

Reserved Unreserved

184,174,022.78 1,781,031.54

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to the Office of Treasury and Fiscal Services Year Ended June 30, 2005
Mandatory Transfers - Restricted Non-Mandatory Transfers Other Additions/Deletions

6,091,535.97 (1,004,009.20)
(1,781,031.54) (327,283.83)
(2,493,042.38) 1,408.69

FUND BALANCE JUNE 30

$ 186,206,734.64

VARIANCE
0.00 0.00 (408,707,829.73) (23,149,347.11)
(431,857,176.84)
3,495,056.64 7,791,461.55 1,094,363.77
1,105,461.98 3,146,579.17
121,625.62 597,064.32
0.00 0.00 14,224,291.00 3,625,810.00 1,349,443.52 0.00 365,020.95 1,027,341.08 684.57 3,461.27 961,763.05 19,750.25 544,468.26 (459,348.19) 55,643.57 0.44 391,822,883.48 0.00 728,453.15
431,621,279.45
(863,478,456.29)

UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Early Retirement Program
Total Reserved
Unreserved Surplus

$

11,926,258.47

8,034,129.17

38,181,191.11

7,962,518.94

94,557,677.98

9,626,105.07

3,024,181.27

4,029,685.85

7,382,845.53

$ 184,724,593.39

1,482,141.25

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 186,206,734.64

Abraham Baldwin Agricultural College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

ABRAHAM BALDWIN AGRICULTURAL COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Contracts Payable Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

107,076.13

2,017,155.65 18,298.00

$

2,142,529.78

$

27,500.00

269,268.19

1,329,297.72

46,389.51

82,314.86

$

1,754,770.28

$

46,904.06

131,796.97

122,980.63

71,092.41

14,985.43

$

387,759.50

$

2,142,529.78

ABRAHAM BALDWIN AGRICULTURAL COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
12,831,442.00 $ 7,251,231.00 5,674,753.00 25,757,426.00 $
156,005.00 $ 25,601,421.00 25,757,426.00 $
0.00 $

FINAL BUDGET
12,886,704.00 $ 7,438,636.00 5,999,590.00 26,324,930.00 $
156,005.00 $ 26,168,925.00 26,324,930.00 $
0.00 $
$

ACTUAL

VARIANCE

12,886,704.00 $ 6,065,273.79 7,443,833.58
26,395,811.37 $

0.00 (1,373,362.21) 1,444,243.58
70,881.37

166,857.49 $ 26,052,568.02
26,219,425.51 $
176,385.86 $

(10,852.49) 116,356.98
105,504.49
(34,623.12)

208,961.90 734.02

2,411.74
(734.02) 387,759.50

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

46,904.06

131,796.97

122,980.63

71,092.41

$

372,774.07

14,985.43

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

387,759.50

Albany State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

ALBANY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,858,278.06

290,491.83 8,395.00

$

2,157,164.89

$

192,347.19

627,109.64

24,684.80

280,360.25

(323,082.13)

$

801,419.75

$

30,039.80

533,383.55

591,714.95

(1,339.78)

201,895.91

50.71

$

1,355,745.14

$

2,157,164.89

ABLANY STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Office of Minority Business

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
20,001,082.00 $ 28,000,000.00 10,521,257.00 58,522,339.00 $
93,807.00 $ 897,987.00 57,830,545.00 58,822,339.00 $ (300,000.00) $

FINAL BUDGET
20,034,396.00 $ 23,143,872.00 12,094,019.00 55,272,287.00 $
93,807.00 $ 597,987.00 54,580,493.00 55,272,287.00 $
0.00 $
$

ACTUAL

VARIANCE

20,034,396.00 $ 14,716,449.45 13,156,590.43
47,907,435.88 $

0.00 (8,427,422.55) 1,062,571.43
(7,364,851.12)

93,807.00 $ 553,645.15 45,903,833.74
46,551,285.89 $
1,356,149.99 $

0.00 44,341.85 8,676,659.26
8,721,001.11
(16,085,852.23)

444,802.09 217,470.06

44,600.57 (489,807.51)
(217,470.06) 1,355,745.14

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

30,039.80

533,383.55

591,714.95

(1,339.78)

201,895.91

$

1,355,694.43

50.71

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,355,745.14

Armstrong Atlantic State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

ARMSTRONG ATLANTIC STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,452,563.14

13,534.62

1,165,515.80 531,474.99 67,495.35

$

4,230,583.90

$

184,127.43

474,663.46

2,455,659.38

$

3,114,450.27

$

103,454.67

462,867.69

218,591.48

265,709.50

65,510.29

$

1,116,133.63

$

4,230,583.90

ARMSTRONG ATLANTIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Research Consortium

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues

FUND BALANCE JUNE 30

ORIGINAL BUDGET
29,505,657.00 $ 6,483,733.00 18,796,484.00 54,785,874.00 $
534,170.00 $ 349,013.00 53,902,691.00 54,785,874.00 $
0.00 $

FINAL BUDGET
29,717,480.00 $ 7,803,767.00 18,193,069.00 55,714,316.00 $
534,170.00 $ 352,013.00 54,828,133.00 55,714,316.00 $
0.00 $
$

ACTUAL

VARIANCE

29,717,480.00 $ 8,637,011.46 23,454,142.22
61,808,633.68 $

0.00 833,244.46 5,261,073.22
6,094,317.68

534,170.00 $ 352,013.00 60,329,746.49
61,215,929.49 $
592,704.19 $

0.00 0.00 (5,501,613.49)
(5,501,613.49)
11,595,931.17

513,188.51

9,121.93 1,119.00
1,116,133.63

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

103,454.67

462,867.69

218,591.48

265,709.50

65,510.29

$

1,116,133.63

Atlanta Metropolitan College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

ATLANTA METROPOLITAN COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Other Liabilities
Total Liabilities
Fund Balances Reserved Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,406,329.39

117,123.82 668,106.55 13,632.76 57,887.29

$

2,263,079.81

$

219,864.99

1,725,645.95

27,692.85

5,186.70

$

1,978,390.49

$

129,417.71

28,222.58

17,283.50

51,337.30

58,428.23

$

284,689.32

$

2,263,079.81

ATLANTA METROPOLITAN COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Office of Minority Business

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
7,521,045.00 $ 4,500,000.00 3,691,260.00 15,712,305.00 $
156,345.00 $ 6,485.00
15,549,475.00 15,712,305.00 $
0.00 $

FINAL BUDGET
7,558,709.00 $ 4,252,856.00 4,175,202.00 15,986,767.00 $
156,345.00 $ 6,485.00
15,823,937.00 15,986,767.00 $
0.00 $
$

ACTUAL

VARIANCE

7,558,709.00 $ 3,879,792.55 4,289,786.81
15,728,288.36 $

0.00 (373,063.45) 114,584.81
(258,478.64)

155,660.43 $ 6,352.50
15,403,960.28
15,565,973.21 $
162,315.15 $

684.57 132.50 419,976.72
420,793.79
(679,272.43)

171,396.25 17,398.07

9,504.68 (58,526.76)
(17,398.07) 284,689.32

SUMMARY OF FUND BALANCE
Reserved Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

129,417.71

28,222.58

17,283.50

51,337.30

$

226,261.09

58,428.23

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

284,689.32

Augusta State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

AUGUSTA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Payroll Withholdings Accounts Payable Deferred Revenue Funds Held for Others
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,491,478.12

1,708,906.38

4,590,395.90 1,332,743.56
36,881.05

$

9,160,405.01

$

183,332.57

26,829.44

2,214,363.28

6,183,977.67

2,570.35

$

8,611,073.31

$

35,887.54

63,031.78

173.90

182,452.04

225,887.97

37,325.02

4,573.45

$

549,331.70

$

9,160,405.01

AUGUSTA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Office of Minority Business

$

Research Consortium

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
25,161,536.00 $ 6,941,637.00 15,949,022.00 48,052,195.00 $
156,345.00 $ 196,858.00 47,698,992.00 48,052,195.00 $
0.00 $

FINAL BUDGET
25,218,336.00 $ 7,504,568.00 17,352,596.00 50,075,500.00 $
156,345.00 $ 199,858.00 49,719,297.00 50,075,500.00 $
0.00 $
$

ACTUAL

VARIANCE

25,218,336.00 $ 7,169,587.99 17,418,395.65
49,806,319.64 $

0.00 (334,980.01)
65,799.65
(269,180.36)

156,345.00 $
200,679.19 49,436,858.11
49,793,882.30 $ 12,437.34 $

0.00 0.00 (821.19) 282,438.89
281,617.70
(550,798.06)

531,735.92 4,849.53

9,639.59 (4,481.15)
(4,849.53) 549,331.70

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

35,887.54

63,031.78

173.90

182,452.04

225,887.97

37,325.02

$

544,758.25

4,573.45

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

549,331.70

Bainbridge College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

BAINBRIDGE COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,524,548.78

708,892.14 6,060.10 8,599.77

$

2,248,100.79

$

54,332.95

1,063,664.21

5,741.66

813,685.29

42.00

(74,664.40)

$

1,862,801.71

$

59,536.03

30,222.58

107,086.97

24,783.54

60,074.92

14,340.32

89,254.72

$

385,299.08

$

2,248,100.79

BAINBRIDGE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
7,417,766.00 $ 4,675,273.00 3,567,943.00 15,660,982.00 $
3,339.00 $ 15,657,643.00 15,660,982.00 $
0.00 $

FINAL BUDGET
7,390,655.00 $ 6,020,545.00 4,562,306.00 17,973,506.00 $
3,339.00 $ 17,970,167.00 17,973,506.00 $
0.00 $
$

ACTUAL

VARIANCE

7,390,655.00 $ 6,038,414.31 4,992,257.17
18,421,326.48 $

0.00 17,869.31 429,951.17
447,820.48

3,220.22 $ 18,292,241.99
18,295,462.21 $
125,864.27 $

118.78 (322,074.99)
(321,956.21)
769,776.69

244,953.04 89,833.97

14,481.77
(89,833.97) 385,299.08

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

59,536.03

30,222.58

107,086.97

24,783.54

60,074.92

14,340.32

$

296,044.36

89,254.72

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

385,299.08

Clayton State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

CLAYTON STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,403,318.24

285,368.26 980,106.38 29,356.95

$

2,698,149.83

$

146,562.36

1,093,910.26

1,185,961.97

3,787.85

$

2,430,222.44

$

26,861.23

197,118.56

(38,219.77)

82,167.37

$

267,927.39

$

2,698,149.83

CLAYTON STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues

FUND BALANCE JUNE 30

ORIGINAL BUDGET
21,742,236.00 $ 9,150,000.00 21,549,964.00 52,442,200.00 $
216,600.00 $ 52,225,600.00 52,442,200.00 $
0.00 $

FINAL BUDGET
21,783,648.00 $ 9,626,658.00 21,804,158.00 53,214,464.00 $
219,600.00 $ 52,994,864.00 53,214,464.00 $
0.00 $
$

ACTUAL

VARIANCE

21,783,648.00 $ 9,207,791.74 22,060,390.74
53,051,830.48 $

0.00 (418,866.26) 256,232.74
(162,633.52)

217,780.00 $ 52,776,331.76
52,994,111.76 $
57,718.72 $

1,820.00 218,532.24
220,352.24
(382,985.76)

271,704.59

90,014.01 (151,509.93)
267,927.39

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

26,861.23

197,118.56

(38,219.77)

82,167.37

$

267,927.39

Coastal Georgia Community College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

COASTAL GEORGIA COMMUNITY COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

251,604.65

16,110.94

221,932.93 1,139,522.38
7,138.36 24,599.47

$

1,660,908.73

$

277,214.75

260,647.25

38,779.20

896,874.50

(3,113.37)

$

1,470,402.33

$

57,282.39

45,596.21

33,853.04

32,671.64

21,000.00

103.12

$

190,506.40

$

1,660,908.73

COASTAL GEORGIA COMMUNITY COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
9,317,866.00 $ 6,000,000.00 4,461,500.00 19,779,366.00 $
164,652.00 $ 19,614,714.00 19,779,366.00 $
0.00 $

FINAL BUDGET
9,355,134.00 $ 6,250,000.00 5,817,556.00 21,422,690.00 $
164,652.00 $ 21,258,038.00 21,422,690.00 $
0.00 $
$

ACTUAL

VARIANCE

9,355,134.00 $ 5,772,360.00 5,702,232.83
20,829,726.83 $

0.00 (477,640.00) (115,323.17)
(592,963.17)

164,652.00 $ 20,549,210.44
20,713,862.44 $
115,864.39 $

0.00 708,827.56
708,827.56
(1,301,790.73)

113,865.00 23,312.39

103.12 (39,326.11)
(23,312.39) 190,506.40

SUMMARY OF FUND BALANCE
Reserved Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

57,282.39

45,596.21

33,853.04

32,671.64

21,000.00

$

190,403.28

103.12

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

190,506.40

Columbus State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

COLUMBUS STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

7,251,730.91

779,733.48

458,093.01 1,680,470.03
306,373.93

$ 10,476,401.36

$

185,859.47

5,594,028.67

29,072.62

2,829,884.15

20,262.25

$

8,659,107.16

$

435,427.00

209,263.47

125,949.85

952,319.29

1,330.49

93,004.10

$

1,817,294.20

$ 10,476,401.36

COLUMBUS STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
31,640,629.00 $ 28,000,000.00 20,568,800.00 80,209,429.00 $
163,448.00 $ 80,045,981.00 80,209,429.00 $
0.00 $

FINAL BUDGET
31,675,979.00 $ 15,312,277.00 21,557,844.00 68,546,100.00 $
166,448.00 $ 68,379,652.00 68,546,100.00 $
0.00 $
$

ACTUAL

VARIANCE

31,675,979.00 $ 12,688,351.73 22,469,360.65
66,833,691.38 $

0.00 (2,623,925.27)
911,516.65
(1,712,408.62)

166,448.00 $ 66,241,509.17
66,407,957.17 $
425,734.21 $

0.00 2,138,142.83
2,138,142.83
(3,850,551.45)

1,307,675.20 82,684.42

84,773.63 (888.84)
(82,684.42) 1,817,294.20

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

435,427.00

209,263.47

125,949.85

952,319.29

1,330.49

$

1,724,290.10

93,004.10

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,817,294.20

Dalton State College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

DALTON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

386,405.54

321,688.86 389,377.52 15,906.20
6,393.32

$

1,119,771.44

$

480,661.49

416,469.95

13,169.15

12,649.26

$

922,949.85

$

2,336.94

165,694.35

8,904.90

19,885.40

$

196,821.59

$

1,119,771.44

DALTON STATE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
12,137,682.00 $ 7,750,000.00 6,178,750.00 26,066,432.00 $
60,630.00 $ 26,005,802.00 26,066,432.00 $
0.00 $

FINAL BUDGET
12,117,039.00 $ 7,538,885.00 11,408,250.00 31,064,174.00 $
25,044.00 $ 31,039,130.00 31,064,174.00 $
0.00 $
$

ACTUAL

VARIANCE

12,117,039.00 $ 6,970,897.56 11,220,337.09
30,308,273.65 $

0.00 (567,987.44) (187,912.91)
(755,900.35)

22,044.00 $ 30,224,162.95
30,246,206.95 $
62,066.70 $

3,000.00 814,967.05
817,967.05
(1,573,867.40)

126,494.01 68,318.27

8,260.88
(68,318.27) 196,821.59

SUMMARY OF FUND BALANCE
Reserved Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office"
Total Reserved
Unreserved Surplus

$

2,336.94

165,694.35

8,904.90

$

176,936.19

19,885.40

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

196,821.59

Darton College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

DARTON COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Payroll Withholdings Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,319,791.35

751,409.09 213,113.28 39,834.30

$

2,324,148.02

$

671,657.92

16,520.99

1,141,409.79

13,360.82

300.00

(25,082.79)

$

1,818,166.73

$

9,706.23

131,365.38

55,654.38

(42,740.71)

306,687.86

45,308.15

$

505,981.29

$

2,324,148.02

DARTON COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
13,820,663.00 $ 5,500,000.00 7,012,172.00 26,332,835.00 $
244,227.00 $ 26,088,608.00 26,332,835.00 $
0.00 $

FINAL BUDGET
13,845,265.00 $ 8,554,448.00 8,692,172.00 31,091,885.00 $
244,227.00 $ 30,847,658.00 31,091,885.00 $
0.00 $
$

ACTUAL

VARIANCE

13,845,265.00 $ 8,286,496.53 8,083,331.49
30,215,093.02 $

0.00 (267,951.47) (608,840.51)
(876,791.98)

244,227.00 $ 29,903,717.44
30,147,944.44 $
67,148.58 $

0.00 943,940.56
943,940.56
(1,820,732.54)

438,289.71 221.49

543.00
(221.49) 505,981.29

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

9,706.23

131,365.38

55,654.38

(42,740.71)

306,687.86

45,308.15

$

505,981.29

East Georgia College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

EAST GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,035,084.74

25,891.56

6,033.78 105,924.73 137,062.72
1,329.24

$

1,311,326.77

$

26,236.97

845,588.09

304,005.00

63,031.61

$

1,238,861.67

$

21,646.79

3,056.43

3,648.46

9,335.67

4,677.66

350.00

29,750.09

$

72,465.10

$

1,311,326.77

EAST GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Veterinary Medicine Experiment Station

Veterinary Medicine Teaching Hospital

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
5,111,132.00 $ 2,250,000.00 2,184,467.00 9,545,599.00 $
733,005.00 $ 8,812,594.00
9,545,599.00 $ 0.00 $

FINAL BUDGET
5,119,462.00 $ 2,869,599.00 4,256,646.00 12,245,707.00 $
733,005.00 $ 11,512,702.00 12,245,707.00 $
0.00 $
$

ACTUAL

VARIANCE

5,119,462.00 $ 2,443,594.64 4,140,202.84
11,703,259.48 $

0.00 (426,004.36) (116,443.16)
(542,447.52)

730,159.14 $ 10,963,622.62
11,693,781.76 $ 9,477.72 $

2,845.86 549,079.38
0.00 0.00
551,925.24
(1,094,372.76)

39,140.64 2,311.66

25,901.90 (2,055.16)
(2,311.66) 72,465.10

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

21,646.79

3,056.43

3,648.46

9,335.67

4,677.66

350.00

$

42,715.01

29,750.09

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

72,465.10

Fort Valley State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

FORT VALLEY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Other Liabilities
Total Liabilities
Fund Balances Reserved Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Deficit
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

(2,874,460.34)

1,453,288.72 512,126.52 46,186.66 (92.50)

$

(862,950.94)

$

153,799.81

756,577.21

(91,950.81)

$

818,426.21

$

(0.01)

(528,861.39)

27,312.56

(1,179,828.31)

$ (1,681,377.15)

$

(862,950.94)

FORT VALLEY STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Receivables/Revenues

FUND BALANCE JUNE 30

ORIGINAL BUDGET
19,207,164.00 $ 22,000,000.00 7,575,931.00 48,783,095.00 $
1,757,676.00 $ 47,025,419.00 48,783,095.00 $
0.00 $

FINAL BUDGET
19,057,949.00 $ 31,798,731.00 8,783,962.00 59,640,642.00 $
1,757,676.00 $ 57,882,966.00 59,640,642.00 $
0.00 $
$

ACTUAL

VARIANCE

19,057,949.00 $ 17,830,810.38 8,253,212.77
45,141,972.15 $

0.00 (13,967,920.62)
(530,749.23)
(14,498,669.85)

1,754,540.57 $ 44,921,762.89
46,676,303.46 $
(1,534,331.31) $

3,135.43 12,961,203.11
12,964,338.54
(27,463,008.39)

(96,159.03)

(50,886.81) (1,681,377.15)

SUMMARY OF FUND BALANCE
Reserved Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Deficit

$

(0.01)

(528,861.39)

27,312.56

$

(501,548.84)

(1,179,828.31)

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

(1,681,377.15)

Georgia College and State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA COLLEGE AND STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

4,839,755.32

497,486.65

2,197,672.01 186,728.16

$

7,721,642.14

$

205,183.31

2,222,202.51

2,789,271.58

355,987.25

$

5,572,644.65

$

40,707.12

380,374.00

69,969.37

45,013.43

1,507,648.11

59,780.95

45,504.51

$

2,148,997.49

$

7,721,642.14

GEORGIA COLLEGE AND STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Georgia Eminent Scholar Endowment Trust Fund

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues

FUND BALANCE JUNE 30

ORIGINAL BUDGET
29,322,896.00 $ 15,500,000.00 20,488,532.00 65,311,428.00 $
0.00 $ 1,651,578.00 63,659,850.00 65,311,428.00 $
0.00 $

FINAL BUDGET
30,074,288.00 $ 5,200,152.00 22,128,578.00 57,403,018.00 $
500,000.00 $ 1,754,578.00 55,148,440.00 57,403,018.00 $
0.00 $
$

ACTUAL

VARIANCE

30,074,288.00 $ 5,431,969.10 22,588,675.86
58,094,932.96 $

0.00 231,817.10 460,097.86
691,914.96

500,000.00 $ 1,752,541.74 55,372,925.99
57,625,467.73 $
469,465.23 $

0.00 2,036.26 (224,485.99)
(222,449.73)
914,364.69

1,692,109.55

13,998.52 (26,575.81)
2,148,997.49

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

40,707.12

380,374.00

69,969.37

45,013.43

1,507,648.11

59,780.95

$

2,103,492.98

45,504.51

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,148,997.49

Gainesville State College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GAINESVILLE STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,930,237.12

478,400.26 613,133.15

$

4,021,770.53

$

2,658,783.87

1,172,581.03

(6,459.95)

8,990.76

$

3,833,895.71

$

118,693.65

9,336.59

71,154.36

(11,309.78)

$

187,874.82

$

4,021,770.53

GAINESVILLE STATE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
16,039,511.00 $ 1,389,361.00 10,376,560.00 27,805,432.00 $
9,384.00 $ 27,796,048.00 27,805,432.00 $
0.00 $

FINAL BUDGET
16,055,134.00 $ 3,133,555.00 10,482,917.00 29,671,606.00 $
9,384.00 $ 29,662,222.00 29,671,606.00 $
0.00 $
$

ACTUAL

VARIANCE

16,055,134.00 $ 3,054,047.32 10,372,238.44
29,481,419.76 $

0.00 (79,507.68) (110,678.56)
(190,186.24)

9,384.00 $ 29,340,746.81
29,350,130.81 $
131,288.95 $

0.00 321,475.19
321,475.19
(511,661.43)

58,457.48 5,899.49

(1,871.61)
(5,899.49) 187,874.82

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

118,693.65

9,336.59

71,154.36

(11,309.78)

$

187,874.82

Georgia Perimeter College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA PERIMETER COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 10,172,114.97 2,593,058.44 2,018,487.82 3,296.40 165,926.69
$ 14,952,884.32

$

549,666.82

6,749,209.51

3,271,857.13

(626.76)

$ 10,570,106.70

$

1,000,215.54

71,786.38

154,541.28

1,559,909.97

(15,938.09)

1,065,951.78

159,000.00

387,310.76

$

4,382,777.62

$ 14,952,884.32

GEORGIA PERIMETER COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
57,251,569.00 $ 17,500,000.00 42,113,503.00 116,865,072.00 $
21,847.00 $ 116,843,225.00 116,865,072.00 $
0.00 $

FINAL BUDGET
57,544,398.00 $ 18,500,000.00 43,344,758.00 119,389,156.00 $
21,847.00 $ 119,367,309.00 119,389,156.00 $
0.00 $
$

ACTUAL
57,544,398.00 $ 17,909,746.38 48,985,338.93 124,439,483.31 $
21,847.00 $ 122,397,788.99 122,419,635.99 $
2,019,847.32 $
2,299,973.26 78,004.87
62,957.04
(78,004.87) 4,382,777.62

VARIANCE
0.00 (590,253.62) 5,640,580.93 5,050,327.31
0.00 (3,030,479.99) (3,030,479.99) 8,080,807.30

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

1,000,215.54

71,786.38

154,541.28

1,559,909.97

(15,938.09)

1,065,951.78

159,000.00

$

3,995,466.86

387,310.76

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

4,382,777.62

Georgia State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus Regular Tobacco Settlement Funds
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 47,783,330.05 1,514.73
18,001,489.74 3,034,944.54 107,726.83
$ 68,929,005.89

$

562,236.04

14,834,432.12

20,797,055.65

474,512.59

$ 36,668,236.40

$

67,860.63

515,813.07

14,156,319.45

2,708,149.97

9,494,685.32

4,169,186.58

89,732.15

1,055,561.05 3,461.27
$ 32,260,769.49

$ 68,929,005.89

GEORGIA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Tobacco Funds

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Payments to Georgia Cancer Coalition

$

Research Consortium

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
183,432,169.00 $ 0.00
105,000,000.00 134,093,086.00 422,525,255.00 $
0.00 $ 158,147.00 416,465.00 421,950,643.00 422,525,255.00 $
0.00 $

FINAL BUDGET
184,585,501.00 $ 10,482,554.00 115,000,000.00 169,518,032.00 479,586,087.00 $
10,482,554.00 $ 665,189.00 449,969.00
467,988,375.00 479,586,087.00 $
0.00 $
$

ACTUAL

VARIANCE

184,585,501.00 $ 10,482,554.00 79,105,702.96 136,705,170.01
410,878,927.97 $

0.00
(35,894,297.04) (32,812,861.99)
(68,707,159.03)

10,479,092.73 $ 658,411.53 419,106.11
397,258,351.69
408,814,962.06 $
2,063,965.91 $

3,461.27 6,777.47 30,862.89 70,730,023.31
70,771,124.94
(139,478,283.97)

29,488,374.31 228,175.43

2,291.44 706,137.83
(228,175.43) 32,260,769.49

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

67,860.63

515,813.07

14,156,319.45

2,708,149.97

9,494,685.32

4,169,186.58

89,732.15

$

31,201,747.17

1,059,022.32

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

32,260,769.49

Georgia Gwinnett College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA GWINNETT COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS Cash and Cash Equivalents Accounts Receivable
Other
Total Assets
LIABILITIES AND FUND EQUITY Liabilities
Payroll Withholdings Accounts Payable Other Liabilities
Total Liabilities Fund Balances
Reserved Technology Fees
Unreserved Surplus Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,343,872.17

134,078.45

$

1,477,950.62

$

2,976.31

1,370,620.07

52,354.24

$

1,425,950.62

$

50,000.00

2,000.00

$

52,000.00

$

1,477,950.62

GEORGIA GWINNETT COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Other Funds

Total Revenues

$

EXPENDITURES

Teaching

$

Total Expenditures

$

Excess of Funds Available over Expenditures $

ORIGINAL BUDGET
7,097,807.00 $ 0.00
7,097,807.00 $
7,097,807.00 $ 7,097,807.00 $
0.00 $

FINAL BUDGET
7,663,329.00 $ 4,634,312.00 12,297,641.00 $
12,297,641.00 $ 12,297,641.00 $
0.00 $

ACTUAL

VARIANCE

7,663,329.00 $ 4,413,004.20
12,076,333.20 $

0.00 (221,307.80)
(221,307.80)

12,024,333.20 $ 12,024,333.20 $
52,000.00 $

273,307.80 273,307.80 (494,615.60)

FUND BALANCE JUNE 30

$

52,000.00

SUMMARY OF FUND BALANCE
Reserved Technology Fees
Total Reserved
Unreserved Surplus

$

50,000.00

$

50,000.00

2,000.00

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

52,000.00

Georgia Highlands College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA HIGHLANDS COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

778,365.78

73,674.44 1,167,208.84
474,961.03 6,094.76

$

2,500,304.85

$

467,851.30

8,882.11

1,826,728.04

674.31

$

2,304,135.76

$

12,429.73

75,311.29

102,333.31

6,094.76

$

196,169.09

$

2,500,304.85

GEORGIA HIGHLANDS COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues

FUND BALANCE JUNE 30

ORIGINAL BUDGET
12,188,056.00 $ 3,318,316.00 5,894,924.00 21,401,296.00 $
178,782.00 $ 21,222,514.00 21,401,296.00 $
0.00 $

FINAL BUDGET
12,203,145.00 $ 3,987,663.00 6,181,962.00 22,372,770.00 $
178,782.00 $ 22,193,988.00 22,372,770.00 $
0.00 $
$

ACTUAL

VARIANCE

12,203,145.00 $ 3,485,497.93 6,681,485.05
22,370,127.98 $

0.00 (502,165.07) 499,523.05
(2,642.02)

178,716.09 $ 21,976,682.51
22,155,398.60 $
214,729.38 $

65.91 217,305.49
217,371.40
(220,013.42)

450,316.63

(11,998.45) (456,878.47)
196,169.09

SUMMARY OF FUND BALANCE
Reserved Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

12,429.73

75,311.29

102,333.31

6,094.76

$

196,169.09

Gordon College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GORDON COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Contracts Payable Accrued Payroll Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,162,414.37

(2,556.66) 432,703.64
6,836.19 19,330.86

$

2,618,728.40

$

1,897,009.73

91,268.97

540,123.71

$

2,528,402.41

$

7,847.03

14,846.37

11,567.00

25,683.80

30,381.79

$

90,325.99

$

2,618,728.40

GORDON COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
11,069,903.00 $ 3,161,523.00 5,301,546.00 19,532,972.00 $
248,485.00 $ 19,284,487.00 19,532,972.00 $
0.00 $

FINAL BUDGET
11,008,074.00 $ 3,161,523.00 6,145,327.00 20,314,924.00 $
173,172.00 $ 20,141,752.00 20,314,924.00 $
0.00 $
$

ACTUAL

VARIANCE

11,008,074.00 $ 3,594,461.09 6,555,261.14
21,157,796.23 $

0.00 432,938.09 409,934.14
842,872.23

173,170.97 $ 21,201,753.53
21,374,924.50 $
(217,128.27) $

1.03 (1,060,001.53)
(1,060,000.50)
1,902,872.73

98,272.98 146.33

12,597.28 7,517.00
(146.33) 189,067.00 90,325.99

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

7,847.03

14,846.37

11,567.00

25,683.80

$

59,944.20

30,381.79

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

90,325.99

Georgia Southern University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA SOUTHERN UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 16,762,778.06 1,091,437.95
1,805,908.99 773,107.04
2,946,135.33 100,360.62
$ 23,479,727.99

$

453,196.62

14,311,245.12

71,904.71

6,334,708.15

34,219.58

155,149.04

$ 21,360,423.22

$

263,987.62

663,049.47

779,447.24

133,687.76

79,299.99

124,000.00

75,832.69

$

2,119,304.77

$ 23,479,727.99

GEORGIA SOUTHERN UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Research Consortium

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
78,430,484.00 $ 25,000,000.00 47,424,798.00 150,855,282.00 $
389,859.00 $ 793,606.00 149,671,817.00 150,855,282.00 $
0.00 $

FINAL BUDGET
79,188,689.00 $ 25,000,000.00 55,193,895.00 159,382,584.00 $
389,859.00 $ 796,606.00 158,196,119.00 159,382,584.00 $
0.00 $
$

ACTUAL
79,188,689.00 $ 17,959,758.23 52,499,954.64 149,648,401.87 $
389,859.00 $ 796,606.00 148,852,171.13 150,038,636.13 $ (390,234.26) $
1,451,603.98 99,136.31
43,126.05
(99,136.31) 1,014,809.00 2,119,304.77

VARIANCE
0.00 (7,040,241.77) (2,693,940.36) (9,734,182.13)
0.00 0.00 9,343,947.87 9,343,947.87 (19,078,130.00)

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

263,987.62

663,049.47

779,447.24

133,687.76

79,299.99

124,000.00

$

2,043,472.08

75,832.69

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,119,304.77

Georgia Southwestern State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA SOUTHWESTERN STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,688,038.54

182,480.37

(2,068.92) (675,821.81) 115,714.70
36,004.87

$

2,344,347.75

$

83,750.58

803,140.50

1,021,970.99

17,848.32

41,311.40

$

1,968,021.79

$

108.83

147,551.26

21,811.22

151,277.49

18,839.59

36,500.00

237.57

$

376,325.96

$

2,344,347.75

GEORGIA SOUTHWESTERN STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
11,948,977.00 $ 7,147,457.00 7,691,925.00 26,788,359.00 $
136,682.00 $ 26,651,677.00 26,788,359.00 $
0.00 $

FINAL BUDGET
12,160,586.00 $ 7,145,757.00 8,638,651.00 27,944,994.00 $
139,682.00 $ 27,805,312.00 27,944,994.00 $
0.00 $
$

ACTUAL

VARIANCE

12,160,586.00 $ 6,152,722.78 8,842,759.33
27,156,068.11 $

0.00 (993,034.22) 204,108.33
(788,925.89)

139,682.00 $ 27,025,599.68
27,165,281.68 $
(9,213.57) $

0.00 779,712.32
779,712.32
(1,568,638.21)

384,744.96 2,111.56

4,422.77 (3,628.20)
(2,111.56) 376,325.96

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

108.83

147,551.26

21,811.22

151,277.49

18,839.59

36,500.00

$

376,088.39

237.57

$

376,325.96

Kennesaw State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

KENNESAW STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

9,003,352.14

1,000,000.00

1,463,778.41 3,565,101.32 3,548,374.52

$ 18,580,606.39

$

331,997.65

5,582,045.34

10,543,568.44

$ 16,457,611.43

$

305,975.48

895,049.74

163,809.15

210,527.70

547,632.88

0.01

$

2,122,994.96

$ 18,580,606.39

KENNESAW STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Research Consortium

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Unreserved Fund Balance (Surplus) Returned to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
69,512,502.00 $ 9,731,828.00 56,027,065.00 135,271,395.00 $
241,999.00 $ 233,530.00 134,795,866.00 135,271,395.00 $
0.00 $

FINAL BUDGET
69,620,849.00 $ 17,848,424.00 59,142,700.00 146,611,973.00 $
241,999.00 $ 236,530.00 146,133,444.00 146,611,973.00 $
0.00 $
$

ACTUAL
69,620,849.00 $ 14,088,124.23 57,813,422.59 141,522,395.82 $
241,994.90 $ 236,530.00 141,497,684.27 141,976,209.17 $ (453,813.35) $
1,510,582.31 82,761.64
(82,761.64) 1,066,226.00 2,122,994.96

VARIANCE
0.00 (3,760,299.77) (1,329,277.41) (5,089,577.18)
4.10 0.00 4,635,759.73 4,635,763.83 (9,725,341.01)

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

305,975.48

895,049.74

163,809.15

210,527.70

547,632.88

$

2,122,994.95

0.01

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,122,994.96

Macon State College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

MACON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Grants Payable Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

2,485,564.24

525,739.83

53,786.76 2,917,356.93
103,554.75

$

6,086,002.51

$

818.70

71,367.11

820,456.94

4,413,076.94

125,188.24

$

5,430,907.93

$

53,430.60

135,992.37

81,043.36

20,726.49

350,470.23

5,564.01

7,867.52

$

655,094.58

$

6,086,002.51

MACON STATE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
17,958,515.00 $ 7,260,181.00 10,123,175.00 35,341,871.00 $
22,041.00 $ 35,319,830.00 35,341,871.00 $
0.00 $

FINAL BUDGET
18,556,489.00 $ 8,862,725.00 14,014,751.00 41,433,965.00 $
203,691.00 $ 41,230,274.00 41,433,965.00 $
0.00 $
$

ACTUAL

VARIANCE

18,556,489.00 $ 8,711,938.77 13,027,341.16
40,295,768.93 $

0.00 (150,786.23) (987,409.84)
(1,138,196.07)

203,691.00 $ 40,132,746.78
40,336,437.78 $
(40,668.85) $

0.00 1,097,527.22
1,097,527.22
(2,235,723.29)

692,760.32 12,879.17

3,023.11 (20.00)
(12,879.17) 655,094.58

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

53,430.60

135,992.37

81,043.36

20,726.49

350,470.23

5,564.01

$

647,227.06

7,867.52

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

655,094.58

Medical College of Georgia
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

MEDICAL COLLEGE OF GEORGIA BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Payroll Withholdings Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Early Retirement Program Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 28,522,010.55 8,570,709.44
3,818,374.82 11,350,470.57
9,128,144.00 8,007,830.60
117,543.74
$ 69,515,083.72

$

1,293,725.46

94,392.54

15,186,465.33

4,885,537.85

$ 21,460,121.18

$

561,522.47

760,814.88

6,552,134.71

137,982.45

32,438,015.40

15,274.40

86,562.52

7,382,845.53

119,810.18

$ 48,054,962.54

$ 69,515,083.72

MEDICAL COLLEGE OF GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Tobacco Funds

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Georgia Radiation Therapy Center

$

Research Consortium

Special Funding Initiative

Student Education Enrichment Program

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
120,156,279.00 $ 5,000,000.00
312,933,917.00 44,409,142.00 482,499,338.00 $
3,625,810.00 $ 0.00
10,344,704.00 304,035.00
468,224,789.00 482,499,338.00 $
0.00 $

FINAL BUDGET
120,562,074.00 $ 5,750,000.00
346,785,816.00 54,614,660.00 527,712,550.00 $
3,625,810.00 $ 807,000.00
10,344,704.00 304,035.00
512,631,001.00 527,712,550.00 $
0.00 $
$

ACTUAL

VARIANCE

120,562,074.00 $ 5,750,000.00
338,036,114.98 46,700,803.91
511,048,992.89 $

0.00 0.00 (8,749,701.02) (7,913,856.09)
(16,663,557.11)

0.00 $ 806,999.20 10,344,704.00 304,034.56 501,527,191.55
512,982,929.31 $
(1,933,936.42) $

3,625,810.00 0.80 0.00 0.44
11,103,809.45
14,729,620.69
(31,393,177.80)

49,876,064.91 226,017.59

131,245.57 (18,411.52)
(226,017.59) 48,054,962.54

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Early Retirement Program
Total Reserved
Unreserved Surplus

$

561,522.47

760,814.88

6,552,134.71

137,982.45

32,438,015.40

15,274.40

86,562.52

7,382,845.53

$

47,935,152.36

119,810.18

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

48,054,962.54

Middle Georgia College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

MIDDLE GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
State Appropriaton Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,530,701.17

(3,141.00) 246,001.19 554,269.56 11,164.27 12,720.32

$

2,351,715.51

$

136,094.55

1,853,772.47

157,609.28

(34,570.71)

$

2,112,905.59

$

900.48

7,258.26

105,871.31

46,636.44

40,075.30

8,582.10

29,486.03

$

238,809.92

$

2,351,715.51

MIDDLE GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
11,509,777.00 $ 3,600,000.00 4,384,831.00 19,494,608.00 $
770,060.00 $ 18,724,548.00 19,494,608.00 $
0.00 $

FINAL BUDGET
11,528,060.00 $ 3,641,156.00 5,495,051.00 20,664,267.00 $
770,060.00 $ 19,894,207.00 20,664,267.00 $
0.00 $
$

ACTUAL

VARIANCE

11,528,060.00 $ 3,670,375.06 8,584,698.72
23,783,133.78 $

0.00 29,219.06 3,089,647.72
3,118,866.78

768,923.79 $ 22,890,849.64
23,659,773.43 $
123,360.35 $

1,136.21 (2,996,642.64)
(2,995,506.43)
6,114,373.21

101,838.79 892.80

28,761.17 (15,150.39)
(892.80) 238,809.92

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

900.48

7,258.26

105,871.31

46,636.44

40,075.30

8,582.10

$

209,323.89

29,486.03

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

238,809.92

North Georgia College and State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

NORTH GEORGIA COLLEGE & STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006

ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories

$

2,617,841.90

59,658.56 1,023,125.07
781,403.94 43,875.08

Total Assets

$

4,525,904.55

LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances

$

142,466.35

1,707,031.41

28,714.45

1,830,483.63

261,949.40

15,702.54

$

3,986,347.78

$

110,622.14

151,105.82

22,065.10

42,412.73

162,096.05

42,984.03

8,270.90

$

539,556.77

Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

4,525,904.55

NORTH GEORGIA COLLEGE & STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Mandatory Transfers - Restricted

FUND BALANCE JUNE 30

ORIGINAL BUDGET
21,881,183.00 $ 3,028,618.00 13,554,002.00 38,463,803.00 $
627,973.00 $ 37,835,830.00 38,463,803.00 $
0.00 $

FINAL BUDGET
22,336,657.00 $ 4,388,483.00 15,392,953.00 42,118,093.00 $ 1,060,627.00 $ 41,057,466.00 42,118,093.00 $
0.00 $
$

ACTUAL

VARIANCE

22,336,657.00 $ 4,068,686.42 14,380,414.24
40,785,757.66 $

0.00 (319,796.58) (1,012,538.76)
(1,332,335.34)

1,060,621.80 $ 39,546,907.41
40,607,529.21 $
178,228.45 $

5.20 1,510,558.59
1,510,563.79
(2,842,899.13)

375,796.96 7,245.32

2,320.75
(7,245.32) (16,789.39) 539,556.77

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

110,622.14

151,105.82

22,065.10

42,412.73

162,096.05

42,984.03

$

531,285.87

8,270.90

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

539,556.77

Savannah State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

SAVANNAH STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

546,269.10

1,275,072.72 1,500,283.95
19,032.89 43,403.20

$

3,384,061.86

$

269,725.54

1,846,381.09

40,911.83

$

2,157,018.46

$

24,154.54

702,120.45

171,229.85

38,860.22

290,678.34

$

1,227,043.40

$

3,384,061.86

SAVANNAH STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Payables/Expenditures

FUND BALANCE JUNE 30

ORIGINAL BUDGET
17,391,802.00 $ 9,805,178.00 9,203,322.00 36,400,302.00 $
448,847.00 $ 35,951,455.00 36,400,302.00 $
0.00 $

FINAL BUDGET
17,413,552.00 $ 15,168,752.00 11,505,355.00 44,087,659.00 $
448,847.00 $ 43,638,812.00 44,087,659.00 $
0.00 $
$

ACTUAL

VARIANCE

17,413,552.00 $ 13,831,408.58 12,109,822.87
43,354,783.45 $

0.00 (1,337,343.42)
604,467.87
(732,875.55)

451,283.58 $ 42,778,612.93
43,229,896.51 $
124,886.94 $

(2,436.58) 860,199.07
857,762.49
(1,590,638.04)

820,507.00

281,649.46 1,227,043.40

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

24,154.54

702,120.45

171,229.85

38,860.22

290,678.34

$

1,227,043.40

Skidaway Institute of Oceanography
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

SKIDAWAY INSTITUTE OF OCEANOGRAPHY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS Cash and Cash Equivalents Accounts Receivable
Other
Total Assets
LIABILITIES AND FUND EQUITY Liabilities
Accounts Payable Deferred Revenue
Total Liabilities Fund Balances
Reserved Indirect Cost Recoveries
Unreserved Surplus Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

178,388.93

434,874.65

$

613,263.58

$

2,978.07

101,275.03

$

104,253.10

$

509,009.49

0.99

$

509,010.48

$

613,263.58

SKIDAWAY INSTITUTE OF OCEANOGRAPHY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Skidaway Institute of Oceanography

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues

FUND BALANCE JUNE 30

ORIGINAL BUDGET
2,145,641.00 $ 4,113,000.00 1,520,000.00 7,778,641.00 $
7,190,477.00 $ 588,164.00
7,778,641.00 $ 0.00 $

FINAL BUDGET
2,149,045.00 $ 4,113,000.00 1,545,000.00 7,807,045.00 $
7,218,881.00 $ 588,164.00
7,807,045.00 $ 0.00 $
$

ACTUAL

VARIANCE

2,149,045.00 $ 4,089,567.78 2,120,329.27
8,358,942.05 $

0.00 (23,432.22) 575,329.27
551,897.05

7,678,229.19 $ 588,164.00
8,266,393.19 $
92,548.86 $

(459,348.19) 0.00
(459,348.19)
1,011,245.24

416,920.60

(354,505.64) 354,046.66
509,010.48

SUMMARY OF FUND BALANCE
Reserved Indirect Cost Recoveries
Total Reserved
Unreserved Surplus

$

509,009.49

$

509,009.49

0.99

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

509,010.48

South Georgia College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

SOUTH GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

(449,665.06)

125,863.51 457,985.90
9,510.50

$

143,694.85

$

1,739.84

48,183.44

750.00

$

50,673.28

$

4,053.04

60,152.14

19,000.00

9,816.39

$

93,021.57

$

143,694.85

SOUTH GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
5,826,470.00 $ 3,029,500.00 2,818,100.00 11,674,070.00 $
3,692.00 $ 11,670,378.00 11,674,070.00 $
0.00 $

FINAL BUDGET
5,834,946.00 $ 2,537,000.00 3,563,808.00 11,935,754.00 $
3,692.00 $ 11,932,062.00 11,935,754.00 $
0.00 $
$

ACTUAL

VARIANCE

5,834,946.00 $ 2,303,550.72 3,678,907.86
11,817,404.58 $

0.00 (233,449.28) 115,099.86
(118,349.42)

3,692.00 $ 11,805,199.62
11,808,891.62 $
8,512.96 $

0.00 126,862.38
126,862.38
(245,211.80)

75,742.51 189.70

8,766.10
(189.70) 93,021.57

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

4,053.04

60,152.14

19,000.00

$

83,205.18

9,816.39

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

93,021.57

Southern Polytechnic State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

SOUTHERN POLYTECHNIC STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Other Assets
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,289,586.95

1,221,738.88

240,428.54 1,262,327.49
726,688.28 848,371.34

$

5,589,141.48

$

144,318.19

1,463,284.98

15,362.11

2,070,847.23

1,333.74

(8,323.27)

$

3,686,822.98

$

12,602.58

37,609.20

99,331.02

6,223.47

1,313,014.55

336,173.77

97,363.91

$

1,902,318.50

$

5,589,141.48

SOUTHERN POLYTECHNIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Research Consortium

$

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
19,763,344.00 $ 3,000,000.00 12,857,168.00 35,620,512.00 $
97,128.00 $ 10,613.00 35,512,771.00 35,620,512.00 $
0.00 $

FINAL BUDGET
19,874,616.00 $ 3,200,000.00 13,730,676.00 36,805,292.00 $
187,039.00 $ 10,613.00
36,607,640.00 36,805,292.00 $
0.00 $
$

ACTUAL

VARIANCE

19,874,616.00 $ 2,729,041.68 15,021,637.94
37,625,295.62 $

0.00 (470,958.32) 1,290,961.94
820,003.62

182,337.24 $ 10,613.00
37,357,818.76
37,550,769.00 $
74,526.62 $

4,701.76 0.00
(750,178.76)
(745,477.00)
1,565,480.62

1,679,046.38 55,008.70

89,375.54 (209,750.04)
(55,008.70) 269,120.00 1,902,318.50

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus

$

12,602.58

37,609.20

99,331.02

6,223.47

1,313,014.55

336,173.77

$

1,804,954.59

97,363.91

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

1,902,318.50

Georgia Institute of Technology
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office"
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 19,770,433.45 29,235,536.57 22,955,461.52 3,341,974.88 271,372.86
$ 75,574,779.28

$ 24,427,933.63 14,905,565.72 17,204,552.75 7,422,620.25
$ 63,960,672.35

$

8,930,146.71

644,588.68

890,339.69

254,867.28

894,164.57

$ 11,614,106.93

$ 75,574,779.28

GEORGIA INSTITUTE OF TECHNOLOGY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Center/EDI

$

Center for Assistive Technology & Environmental

Access

Georgia Tech Research Institute

Research Consortium

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
225,711,903.00 $ 353,029,230.00 280,561,319.00 859,302,452.00 $
22,346,381.00 $ 7,685,074.00 129,760,053.00 9,912,576.00
490,060.00 689,108,308.00 859,302,452.00 $
0.00 $

FINAL BUDGET
233,962,236.00 $ 378,393,219.00 303,419,562.00 915,775,017.00 $
24,044,266.00 $ 5,067,421.00 142,454,864.00 15,861,611.00
805,461.00 727,541,394.00 915,775,017.00 $
0.00 $
$

ACTUAL

VARIANCE

233,962,236.00 $ 328,231,290.69 284,383,731.98
846,577,258.67 $

0.00 (50,161,928.31) (19,035,830.02)
(69,197,758.33)

20,549,209.36 $
3,961,959.02 141,105,420.48 15,853,626.87
837,268.08 676,594,647.82
858,902,131.63 $
(12,324,872.96) $

3,495,056.64
1,105,461.98 1,349,443.52
7,984.13 (31,807.08) 50,946,746.18
56,872,885.37
(126,070,643.70)

24,464,248.08

4,989,302.78 (413,011.72) (5,101,559.25)
11,614,106.93

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office"
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

8,930,146.71

644,588.68

890,339.69

254,867.28

894,164.57

$

11,614,106.93

University of Georgia
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

UNIVERSITY OF GEORGIA BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 89,437,769.03 14,403,956.44 29,523,846.01 3,255,782.29 2,286,460.09
$ 138,907,813.86

$

2,385,669.34

32,063,649.50

46,383,597.69

1,228,743.23

$ 82,061,659.76

$

1,259,772.82

2,865,904.84

11,335,865.18

663,190.01

38,279,897.81

134,660.79

1,487,000.00

525,000.00

294,862.65

$ 56,846,154.10

$ 138,907,813.86

UNIVERSITY OF GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

ORIGINAL BUDGET

FINAL BUDGET

ACTUAL

REVENUES

State Appropriation State General Funds
Federal Funds Other Funds

$ 415,511,428.00 $ 419,017,862.00 $ 419,017,862.00 $

440,573,086.00

459,973,086.00

221,354,338.99

311,831,397.00

330,985,435.00

369,032,832.85

Total Revenues

$ 1,167,915,911.00 $ 1,209,976,383.00 $ 1,009,405,033.84 $

EXPENDITURES

Agricultural Experiment Station Athens Tifton Veterinary Laboratories Cooperative Extension Service Forestry Cooperative Extension Forestry Research Marine Institute Marine Resources Extension Center Office of Minority Business Research Consortium Special Funding Initiative Teaching Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital

$

70,923,128.00 $

81,345,007.00 $

4,695,512.00

6,695,512.00

54,873,885.00

60,453,885.00

632,486.00

1,036,486.00

3,011,535.00

6,196,960.00

1,690,798.00

1,729,858.00

2,611,550.00

4,293,550.00

454,002.00

454,002.00

1,315,681.00

4,025,622.00

357,060.00

374,060.00

1,017,023,317.00

1,029,444,484.00

3,148,784.00

3,148,784.00

7,178,173.00

10,778,173.00

73,553,545.45 $ 5,601,148.23 57,307,305.83
914,860.38 5,599,895.68 1,364,837.05 3,266,208.92
454,002.00 3,500,622.00
368,208.51 840,405,289.96
3,148,784.00 10,049,719.85

Total Expenditures

$ 1,167,915,911.00 $ 1,209,976,383.00 $ 1,005,534,427.86 $

Excess of Funds Available over Expenditures $

0.00 $

0.00 $

3,870,605.98 $

FUND BALANCE JULY 1

Reserved Unreserved

53,185,355.62 281,810.74

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Mandatory Transfers - Restricted Non-Mandatory Transfers

387,943.41 (47,009.70)
(281,810.74) (310,494.44) (240,246.77)

FUND BALANCE JUNE 30

$

56,846,154.10

VARIANCE
0.00 (238,618,747.01)
38,047,397.85
(200,571,349.16)
7,791,461.55 1,094,363.77 3,146,579.17
121,625.62 597,064.32 365,020.95 1,027,341.08
0.00 525,000.00
5,851.49 189,039,194.04
0.00 728,453.15
204,441,955.14
(405,013,304.30)

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office"
Total Reserved
Unreserved Surplus

$

1,259,772.82

2,865,904.84

11,335,865.18

663,190.01

38,279,897.81

134,660.79

1,487,000.00

525,000.00

$

56,551,291.45

294,862.65

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

56,846,154.10

University System Office
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

UNIVERSITY SYSTEM OFFICE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Carry-Over "Per State Accounting Office" Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$ 10,545,237.48 4,241,706.08
1,815,501.84 3,865.12
$ 16,606,310.52

$

5,899,929.29

$

5,899,929.29

$

1,499,082.58

314,500.72

6,208,249.93

39,716.59

2,610,521.28

34,310.13

$ 10,706,381.23

$ 16,606,310.52

UNIVERSITY SYSTEM OFFICE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Tobacco Funds

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Georgia Military College

$

Georgia Public Telecommunications

MCG Hospitals and Clinics

Public Libraries

Regents Central Office

Research Consortium

Special Funding Initiative

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
to Office of Treasury and Fiscal Services Year Ended June 30, 2005
Other Additions(Deletions)

FUND BALANCE JUNE 30

ORIGINAL BUDGET
137,899,878.00 $ 750,000.00
11,967,096.00 31,624,422.00
182,241,396.00 $
2,500,092.00 $ 31,178,349.00 31,703,580.00 38,257,751.00 7,264,505.00 1,500,000.00 6,021,950.00 63,815,169.00
182,241,396.00 $
0.00 $

FINAL BUDGET
141,768,303.00 $ 0.00
15,839,748.00 38,216,694.00 195,824,745.00 $
2,896,734.00 $ 31,182,940.00 31,510,080.00 40,701,477.00 7,576,837.00
0.00 7,497,326.00 74,459,351.00 195,824,745.00 $
0.00 $
$

ACTUAL

VARIANCE

141,768,303.00 $ 0.00
14,569,711.00 23,083,615.51
179,421,629.51 $

0.00 0.00 (1,270,037.00) (15,133,078.49)
(16,403,115.49)

2,896,734.00 $ 16,958,649.00 31,510,080.00 39,739,713.95 7,557,086.75
0.00 7,492,079.67 68,992,070.31
175,146,413.68 $
4,275,215.83 $

0.00 14,224,291.00
0.00 961,763.05
19,750.25 0.00
5,246.33 5,467,280.69
20,678,331.32
(37,081,446.81)

6,400,633.86 117,837.90

29,122.85
1,663,193.64 (1,781,031.54)
1,408.69 10,706,381.23

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Carry-Over "Per State Accounting Office"
Total Reserved
Unreserved Surplus

$

1,499,082.58

314,500.72

6,208,249.93

39,716.59

2,610,521.28

$

10,672,071.10

34,310.13

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

10,706,381.23

Valdosta State University
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

VALDOSTA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Payroll Withholdings Accounts Payable Benefits Payable
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

(411.29)

8,273,315.86

398,520.80 339,325.40 66,548.07 419,421.39

$

9,496,720.23

$

1,076,403.86

32,563.90

4,617,101.66

179,892.87

$

5,905,962.29

$

64,988.09

137,742.99

254,330.56

2,617,516.80

28,534.36

338,131.23

149,513.91

$

3,590,757.94

$

9,496,720.23

VALDOSTA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
47,246,267.00 $ 8,542,534.00 29,462,641.00 85,251,442.00 $
123,618.00 $ 85,127,824.00 85,251,442.00 $
0.00 $

FINAL BUDGET
47,916,536.00 $ 15,785,674.00 31,598,701.00 95,300,911.00 $
235,848.00 $ 95,065,063.00 95,300,911.00 $
0.00 $
$

ACTUAL

VARIANCE

47,916,536.00 $ 12,128,333.35 30,742,843.87
90,787,713.22 $

0.00 (3,657,340.65)
(855,857.13)
(4,513,197.78)

234,886.83 $ 91,374,313.84 91,609,200.67 $
(821,487.45) $

961.17 3,690,749.16 3,691,710.33
(8,204,908.11)

3,637,761.81 62,700.78

64,258.71 (14,659.13)
(62,700.78) 724,884.00 3,590,757.94

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

64,988.09

137,742.99

254,330.56

2,617,516.80

28,534.36

338,131.23

$

3,441,244.03

149,513.91

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

3,590,757.94

Waycross College
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

WAYCROSS COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Inventories Other Assets
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

326,462.97

98,147.59 234,107.60 12,135.66 87,775.54

$

758,629.36

$

428,006.33

151,727.13

8,960.23

$

588,693.69

$

13,723.50

6,415.67

16,886.07

121,243.13

18.17

11,307.08

342.05

$

169,935.67

$

758,629.36

WAYCROSS COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005

FUND BALANCE JUNE 30

ORIGINAL BUDGET
3,426,119.00 $ 1,200,000.00 1,331,735.00 5,957,854.00 $
6,987.00 $ 5,950,867.00 5,957,854.00 $
0.00 $

FINAL BUDGET
3,432,407.00 $ 1,091,966.00 1,530,640.00 6,055,013.00 $
6,987.00 $ 6,048,026.00 6,055,013.00 $
0.00 $
$

ACTUAL

VARIANCE

3,432,407.00 $ 1,134,500.18 1,508,246.27
6,075,153.45 $

0.00 42,534.18 (22,393.73)
20,140.45

6,987.00 $ 6,031,535.77
6,038,522.77 $
36,630.68 $

0.00 16,490.23
16,490.23
3,650.22

133,872.27 2,034.04

(567.28)
(2,034.04) 169,935.67

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

13,723.50

6,415.67

16,886.07

121,243.13

18.17

11,307.08

$

169,593.62

342.05

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

169,935.67

University of West Georgia
Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)
June 30, 2006

UNIVERSITY OF WEST GEORGIA BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND June 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Grants Payable Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Inventories
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

5,396,258.95

118,331.77 554,942.85 367,528.03 142,811.37

$

6,579,872.97

$

867.23

226,695.03

2,612,222.04

44,300.40

3,070,526.09

(48,201.45)

$

5,906,409.34

$

82,234.10

240,039.77

94,634.04

146,895.38

109,660.34

$

673,463.63

$

6,579,872.97

UNIVERSITY OF WEST GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND Year Ended June 30, 2006

REVENUES

State Appropriation

State General Funds

$

Federal Funds

Other Funds

Total Revenues

$

EXPENDITURES

Special Funding Initiative

$

Teaching

Total Expenditures

$

Excess of Funds Available over Expenditures $

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - Administrative Central Office Year Ended June 30, 2005
Non-Mandatory Transfers

FUND BALANCE JUNE 30

ORIGINAL BUDGET
42,485,853.00 $ 32,798,153.00 26,174,865.00 101,458,871.00 $
79,470.00 $ 101,379,401.00 101,458,871.00 $
0.00 $

FINAL BUDGET
42,553,804.00 $ 36,207,098.00 30,014,198.00 108,775,100.00 $
82,470.00 $ 108,692,630.00 108,775,100.00 $
0.00 $
$

ACTUAL

VARIANCE

42,553,804.00 $ 9,024,088.92 30,070,027.98
81,647,920.90 $

0.00 (27,183,009.08)
55,829.98
(27,127,179.10)

82,470.00 $ 80,975,342.43
81,057,812.43 $
590,108.47 $

0.00 27,717,287.57
27,717,287.57
(54,844,466.67)

562,990.38 11,045.29

8,371.32 (72,664.18)
(11,045.29) (415,342.36) 673,463.63

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Inventories
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

$

82,234.10

240,039.77

94,634.04

146,895.38

109,660.34

$

673,463.63